EXHIBIT
10.2


 


AMENDED AND RESTATED


EMPLOYMENT AGREEMENT


 


THIS AGREEMENT is made as of this 3rd day of October, 2007, between GRAYSTONE FINANCIAL CORP., a Pennsylvania
business corporation (the “Corporation”), and GRAYSTONE
BANK (“Bank”), a Pennsylvania chartered bank and JEFFREY RENNINGER, an adult individual (“Executive”).


 


WITNESSETH:


 


WHEREAS, the Bank and Executive have been
parties to an employment agreement dated November 14, 2005 relating to the
employment of the Executive by the Bank (the “Original Agreement”); and


 


WHEREAS, the Corporation and the Bank desire to
continue to employ Executive to serve in the capacity of Executive Vice
President of the Corporation and the Bank on the terms and conditions set forth
herein; and


 


WHEREAS, the Corporation, the Bank
and the Executive desire to amend and restate the Original Agreement as set
forth herein.


 


AGREEMENT


 


NOW, THEREFORE, the parties hereto,
intending to be legally bound, agree as follows:


 


1.             Employment.  The
Corporation and the Bank each hereby employs Executive and Executive hereby
accepts employment with Corporation and the Bank, on the terms and conditions
set forth in this Agreement.


 


2.             Duties of Employee.  Executive shall serve as an Executive Vice
President of the Corporation and the Bank, reporting to the Chief Executive
Officer and shall have such responsibilities, powers and duties as may from
time to time be prescribed by the Chief Executive Officer and/or the Board of
Directors of the Corporation and the Bank, provided such powers and duties are
consistent with the Executive’s position. 
Executive shall devote his full time, attention and energies to the
business of the Corporation and the Bank during the Employment Period (as
defined in Section 3 of this Agreement); provided, however, that this Section 2
shall not be construed as preventing Executive from (a) engaging in
activities incident or necessary to personal investments, (b) acting as a
member of the board of directors of any non-profit association or corporation,
or (c) being involved in any other activity with the prior approval of the
Chief Executive Officer.  The Executive
shall not engage in any business or commercial activities, duties or pursuits
which compete with the business or commercial 


 

















 


activities of the Corporation or the Bank,
nor may the Executive serve as a director or officer or in any other capacity
in a company which competes with the Corporation or the Bank.


 


3.             Term of Agreement.


 


(a)            Employment
Period.  This Agreement shall be for a
two (2) year period (the “Employment Period”) beginning on the date first
mentioned above, and if not previously terminated pursuant to the terms of this
Agreement, the Employment Period shall end two (2) years later; provided
however, that the Employment Period shall be automatically renewed one year
later on the first anniversary date of the commencement of the Employment
Period (the “Renewal Date”) for a period ending two (2) years from the
Renewal Date unless either party shall give written notice of non-renewal to
the other party at least ninety (90) days prior to the Renewal Date, in which
event this Agreement shall terminate at the end of the Employment Period.  If this Agreement is renewed on the Renewal
Date, it will be automatically renewed on the first anniversary date of the
Renewal Date and each subsequent year (the “Annual Renewal Date”) for a period
ending two (2) years from each Annual Renewal Date, unless either party
gives written notice of non-renewal to the other party at least ninety (90)
days prior to the Annual Renewal Date, in which case this Agreement will
continue in effect for a term ending two (2) years from the Annual Renewal
Date immediately following such notice.


 


(b)           Termination for Cause.  Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement may be terminated by the Corporation or the Bank
for Cause (as defined herein) upon written notice from the Board of Directors
of the Corporation to Executive.  As used
in this Agreement, “Cause” shall mean any of the following:


 


(i)            Executive’s
conviction of or plea of guilty or nolo contendere to a felony, a crime of
falsehood or a crime involving moral turpitude, or the actual incarceration of
Executive for a period of thirty (30) consecutive days or more;


 


(ii)           Executive’s
willful continuing failure to follow the lawful instructions of the Chief
Executive Officer or the Board of Directors of the Corporation or the Bank
(which instructions must be consistent with the terms of this Agreement), after
the Executive’s receipt of written notice of such instructions, other than a
failure resulting form Executive’s incapacity because of physical or mental
illness;


 


(iii)          A government
regulatory agency recommends or orders in writing that the Corporation or the
Bank terminate the employment of the Executive with the Corporation or the Bank
or relieve him of his duties as such relate to the Corporation or the Bank; or


 


(iv)          Executive’s
violation of the covenant not to compete contained in Section 8 or the
confidentiality provisions of Section 9.


 


If
this Agreement is terminated for Cause, all of Executive’s rights under this
Agreement shall cease as of the effective date of such termination, except
that:


 

















 


(i)             the Bank shall
pay to Executive the unpaid portion, if any, of his Annual Base Salary through
the date of termination; and


 


(ii)            the Bank shall
provide to Employee such post-employment benefits, if any, as may be provided
for under the terms of the employee benefit plans of the Bank then in effect.


 


(c)           Termination for
Good Reason.  Notwithstanding
the provisions of Section 3(a) of this Agreement, this Agreement
shall terminate automatically upon Executive’s termination of employment for
Good Reason.  The term “Good Reason”
shall mean (i) a reduction in salary or material reduction in benefits,
including any incentive compensation plan, except in cases of a national
financial depression or emergency when such reduction has been implemented
generally by the Board of Directors for the Corporation’s senior management, (ii) a
reassignment which assigns full-time employment duties to Executive at a
location more than fifty (50) miles from the Corporation’s principal executive
office and from the office at which the Employee spends the majority of his
time, in either case on the date of this Agreement, (iii) any other
material breach or default by the Corporation or the Bank under any term or
provision of this Agreement, including any reduction, in any material respect
and without Executive’s consent, of the authority, duties or other terms and
conditions of Executive’s employment hereunder, or (iv) any delivery by
the Corporation or the Bank to the Executive of a written notice of non-renewal
pursuant to Section 3(a) above, in all cases after notice from the
Executive to the Corporation within ninety (90) days after the initial
existence of any such condition that the condition constitutes Good Reason and
the failure of the Corporation and the Bank to cure such situation within
thirty (30) days after said notice.  If
such termination occurs for Good Reason, then Bank shall pay Executive such
benefits as are set forth in Section 7 of this Agreement.


 


(d)           Death.  Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement shall terminate automatically upon Executive’s
death and Executive’s rights under this Agreement shall cease as of the date of
such termination, except that (i) the Bank shall pay to Executive’s
spouse, personal representative, or estate the unpaid portion, if any, of his
Annual Base Salary through date of death and the balance of the payments (if
any) owing pursuant to Section 15(b) below, and (ii) the Bank
shall provide to Executive’s dependents any benefits due under the Bank’s
employee benefit plans.


 


(e)           Disability.  Executive, the Corporation and the Bank agree
that if Executive becomes eligible for employer-provided short-term and/or
long-term disability benefits, or worker’s compensation benefits, then the Bank’s
obligation to pay Executive his base salary shall be reduced by the amount of
the disability or worker’s compensation benefits received by Executive.


 


Executive, the Corporation and the Bank agree that
if, in the judgment of the Corporation’s Board of Directors, the Executive is
unable, as a result of illness or injury, to perform the essential functions of
his position on a full-time basis with or without a reasonable accommodation
and without posing a direct threat to himself or others for a period of six
months, the Corporation and the Bank will suffer an undue hardship in 


 

















 


continuing the Executive’s
employment as set forth in this agreement. 
Accordingly, this Agreement shall terminate at the end of the six-month
period, and all of Executive’s rights under this Agreement shall cease, with
the exception of those rights which Executive may have under the Bank’s benefit
plans.


 


4.             Employment Period Compensation, Benefits and Expenses.


 


(a)           Annual Base Salary.  For services performed by Executive under
this Agreement, Bank shall pay Executive an Annual Base Salary during the
Employment Period at the rate of One Hundred Forty-five Thousand, Six Hundred
dollars ($145,600) per year, minus applicable withholdings and deductions,
payable at the same times as salaries are payable to other executive employees
of the Bank.  The Annual Base Salary
shall be reviewed annually by the Board of Directors and the Board may, from
time to time, increase Executive’s Annual Base Salary, and any and all such
increases shall be deemed to constitute amendments to this Section 4(a) to
reflect the increased amounts, effective as of the date established for such
increases by the Board.  In reviewing
adjustments to Annual Base Salary, the Board of Directors shall consider
relevant market data regarding executive salaries at peer financial institutions
and the performance of the Corporation and the Bank under the Executive’s
leadership.


 


(b)           Bonus.  The Board of Directors of the Corporation and
the Bank may provide for the payment of an annual bonus to the Executive as it
deems appropriate to provide incentive to the Executive and to reward the
Executive for his performance.  Such
bonus may, but need not be, determined in accordance with any incentive bonus
programs for executive officers as approved by the Board of Directors.  The payment of any such bonuses will not
reduce or otherwise affect any other obligation of the Bank to the Executive
provided for in this Agreement.


 


(c)           Vacations, Holidays, etc.  During the term of this Agreement, Executive
shall be entitled to be paid annual vacation in accordance with the policies as
established from time to time by the Board of Directors of the Bank.  However, Executive shall not be entitled to
receive any additional compensation from Bank for failure to take a vacation,
nor shall Executive be able to accumulate unused vacation time from one year to
the next, except to the extent authorized by the Board of Directors of
Bank.  The Executive shall also be
entitled to all paid holidays, sick days and personal days provided by the Bank
to its regular full-time employees and senior executive officers.


 


(d)           Automobile.  During the term of this Agreement, the Bank
shall provide the Executive with exclusive use of an automobile mutually agreed
upon by Executive and Bank.  This
automobile shall be a mid-size car or comparable sports utility vehicle.  The Bank shall be responsible and shall pay
for all costs associated with the operation and maintenance of such automobile,
including, without limitation, insurance coverage, repairs, maintenance and
other operating and incidental expenses, including registration, fuel and oil.


 


(e)           Country Club Membership Fees.  The Bank shall pay for Executive’s membership
dues, capital fund assessments and similar items necessary or appropriate to 


 

















 


maintain a membership at a
country club within the Bank’s market area as mutually agreed upon by Bank and
Executive.


 


(f)            Stock Based Incentives.  During the term of this Agreement, Executive
shall be entitled to such stock based incentives as may be granted from time to
time by the Corporation’s Board of Directors under the Corporation’s stock
based incentive plans and as are consistent with the Executive’s
responsibilities and performance.


 


(g)           Employee Benefit Plans.  During the term of this Agreement, Executive
shall be entitled to participate in or receive the benefits of any employee
benefit plan currently in effect at the Bank, subject to the terms of said
plan, until such time that the Board of Directors authorizes a change in such
benefits.


 


(h)           Business Expenses.  During the term of this Agreement, Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him, which are properly accounted for, in accordance with the
policies and procedures established by the Board of Directors of the
Corporation or the Bank for its executive officers.


 


5.             Termination of Employment Following Change in Control.


 


(a)           If a Change in
Control (as defined in Section 5(b) of this Agreement) shall occur at
any time during the term of this Agreement, Executive may terminate his
employment for any reason or no reason by delivering a notice in writing (the “Notice
of Termination”) to the Corporation within thirty (30) days of the Change in
Control which termination shall be effective immediately upon delivery of such
Notice of Termination.


 


(b)           As used in this
Agreement, “Change in Control” shall mean the occurrence immediately of any of
the following:


 


(A)          the
consummation of (i) a merger, consolidation, division or other fundamental
transaction involving the Corporation or the Bank, (ii) a sale, exchange,
transfer or other disposition of substantially all of the assets of the
Corporation or the Bank to any entity which is not a direct or indirect
subsidiary of the Corporation, or (iii) a purchase by the Corporation or
the Bank of substantially all of the assets of another entity; unless (y) such
merger, consolidation, division, sale, exchange, transfer, purchase,
disposition or other transaction is approved in advance by eighty percent (80%)
or more of the members of the Board of Directors of the Corporation who are not
interested in the transaction and (z) a majority of the members of the
Board of Directors of the legal entity resulting from or existing after any
such transaction and a majority of the Board of Directors of such entity’s
parent corporation, if any, are former members of the Board of Directors of the
Corporation; or


 


(B)           any “person”
(as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)), other than the Corporation, a
direct or indirect subsidiary of the Corporation, or a person who is the
beneficial owner of more than twenty-five percent (25%) of the Corporation’s 


 

















 


outstanding
securities on the date of this Agreement becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing twenty-five percent (25%) or more of
the combined voting power of Corporation’s then outstanding securities; or


 


(C)           during any
period of two (2) consecutive years during the term of Executive’s
employment under this Agreement, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period; or


 


(D)          any other
change in control of the Corporation or the Bank similar in effect to any of
the foregoing.


 


6.             Rights in Event of Change in Control.


 


(a)            In the event
that Executive delivers a Notice of Termination (as defined in Section 5(a) of
this Agreement) to the Corporation, Executive shall be entitled to receive the
compensation and benefits set forth below:


 


(i)            Executive shall
be paid, within twenty (20) days following termination, a lump sum cash payment
equal to two times the sum of (1) the highest Annual Base Salary as
defined in Section 4(a) during the immediately preceding three
calendar years, (2) the highest cash bonus and other cash incentive
compensation earned by him with respect to one of the three calendar years
immediately preceding the year of termination and (3) the highest value of
stock options and other stock based incentives awarded to the Executive with
respect to one of the three calendar years immediately preceding the year of
termination, which value shall be based upon the grant-date fair value of the
award determined in accordance with SFAS 123(R) (“Share-Based Payments”).  The amount shall be subject to federal,
state, and local tax withholdings. 
Notwithstanding the foregoing, the value of restricted stock awarded to
Executive under the Bank’s 2006 Restricted Stock Plan shall not be included
under §6(a)(i)(3) above for purposes of calculating the compensation
payable to Executive.


 


(ii)           In addition,
for a period of twenty-four (24) months from the date of termination of
employment, Executive shall be permitted to continue participation in and the
Bank shall maintain the same level of contribution for Executive’s
participation in the Bank’s life, disability, medical/health insurance and
other health and welfare benefits in effect with respect to Executive during the
one (1) year prior to his termination of employment, or, if Bank is not
permitted by the insurance carriers to provide such benefits because Executive
is no longer an employee, a dollar amount equal to the cost to Executive of
obtaining such benefits (or substantially similar benefits).


 

















 


(b)           Executive shall
not be required to mitigate the amount of any payment provided for in this Section 6
by seeking other employment or otherwise, nor shall the amount of payment or
the benefit provided for in this Section 6 be reduced by any compensation
earned by Executive as the result of employment by another employer or by
reason of Executive’s receipt of or right to receive any retirement or other
benefits after the date of termination of employment or otherwise.


 


(c)           Should the
total of all amounts or benefits payable hereunder, together with any other
payments which Executive has a right to receive from the Corporation, the Bank,
any affiliates or subsidiaries of the Corporation or the Bank, or any
successors of any of the foregoing, result in the imposition of an excise tax
under Internal Revenue Code Section 4999 (or any successor thereto),
Executive shall be entitled to an additional “excise tax” adjustment payment in
an amount such that, after the payment of all federal and state income and
excise taxes, Executive will be in the same after-tax position as if no excise
tax had been imposed.  Any payment or
benefit which is required to be included under Internal Revenue Code Sections
280G or 4999 (or any successor provisions thereto) for purposes of determining
whether an excise tax is payable shall be deemed a payment “made to Executive”
or a payment “which Executive has a right to receive” for purposes of this
provision.  The Corporation or the Bank
(or its successor) shall be responsible for the costs of calculation of the
deductibility of payments and benefits and the excise tax by the Corporation’s
independent certified accountant and tax counsel and shall notify Executive of
the amount of excise tax prior to the time such excise tax is due.  If at any time it is determined that the
additional “excise tax” adjustment payment previously made to Executive was
insufficient to cover the effect of the excise tax, the gross-up payment
pursuant to this provision shall be increased to make Executive whole,
including an amount to cover the payment of any penalties resulting from any
incorrect or late payment of the excise tax resulting from the prior
calculation.  All such amounts required
to be paid hereunder shall be paid at the time any withholdings may be required
(or, if earlier, the time Executive shall be required to pay such amounts)
under applicable law, and any additional amounts to which Executive may be
entitled shall be paid or reimbursed no later than fifteen (15) days following
confirmation of such amount by the Corporation’s independent accountants;
provided however, that any payments to be made under this Section 6(c) shall
in all events be made no later than the end of the Executive’s taxable year
next following the taxable year in which the Executive remits such excise tax
payments.  In the event any amounts paid
hereunder are subsequently determined to be in error because estimates were
required or otherwise, the parties agree to reimburse each other to correct
such error, as appropriate, and to pay interest thereon at the applicable
federal rate (as determined under Internal Revenue Code Section 1274 for
the period of time such erroneous amount remained outstanding and
unreimbursed).  The parties recognize
that the actual implementation of the provisions of this subsection are complex
and agree to deal with each other in good faith to resolve any questions or
disagreements arising hereunder.


 


7.             Rights in Event of Termination
of Employment Absent Change in Control.


 


(a)           If Executive’s employment is involuntarily
terminated by the Corporation or the Bank without Cause or is terminated by
Executive for Good Reason pursuant to 


 

















 


Section 3(c),
then Bank shall pay (or cause to be paid) to Executive, within twenty (20) days
following termination, a lump sum cash payment equal to two times the sum of (1) the
highest Annual Base Salary as defined in Section 4(a) during the
immediately preceding three calendar years, (2) the highest cash bonus and
other cash incentive compensation earned by him with respect to one of the
three calendar years immediately preceding the year of termination and (3) the
highest value of stock options and other stock based incentives awarded to the
Executive with respect to one of the three calendar years immediately preceding
the year of termination, which value shall be based upon the grant-date fair
value of the award determined in accordance with SFAS 123(R) (“Share-Based
Payments”).  The amount shall be subject
to federal, state and local tax withholdings. 
In addition, for a period of two (2) years from the date of
termination of employment, Executive shall be permitted to continue
participation in, and the Bank shall maintain the same level of contribution
for, Executive’s participation in the Bank’s life, disability, medical/health
insurance and other health and welfare benefits in effect with respect to
Executive during the one (1) year prior to his termination of employment,
or, if Bank cannot provide such benefits because Executive is no longer an
employee, a dollar amount equal to the cost of Executive of obtaining such
benefits (or substantially similar benefits). 
In addition, if permitted pursuant to the terms of the plan, Executive
shall receive additional retirement benefits to which he would have been
entitled had his employment continued through the then remaining term of the
Agreement.  Notwithstanding the
foregoing, the value of restricted stock awarded to Executive under the Bank’s
2006 Restricted Stock Plan shall not be included under §7(a)(3) above for
purposes of calculating the compensation payable to Executive.


 


(b)           Executive shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise, nor shall the amount of payment or the benefit
provided for in this Section 7 be reduced by any compensation earned by
Executive as the result of employment by another employer or by reason of
Executive’s receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise.


 


(c)           In the event
that amounts or benefits payable hereunder, together with any other payments
which Executive has a right to receive from the Corporation, the Bank, any
affiliates or subsidiaries of the Corporation or the Bank, or any successors of
any of the foregoing, result in the imposition of an excise tax under Internal
Revenue Code Section 4999 (or any successor thereto), Executive shall be
entitled to an additional “excise tax” adjustment payment in an amount such
that, after the payment of all federal and state income and excise taxes,
Executive will be in the same after-tax position as if no excise tax had been
imposed.  Any payment or benefit which is
required to be included under Internal Revenue Code Sections 280G or 4999 (or
any successor provisions thereto) for purposes of determining whether an excise
tax is payable shall be deemed a payment “made to Executive” or a payment “which
Executive has a right to receive” for purposes of this provision.  The Bank (or its successor) shall be
responsible for the costs of calculation of the deductibility of payments end
benefits and the excise tax by the Bank’s independent certified accountant and
tax counsel and shall notify Executive of the amount of excise tax due prior to
the time such excise tax is due.  If at 


 

















 


any
time it is determined that the additional “excise tax” adjustment payment
previously made to Executive was insufficient to cover the effect of the excise
tax, the gross-up payment pursuant to this provision shall be increased to make
Executive whole, including an amount to cover the payment of any penalties
resulting from any incorrect or late payment of the excise tax resulting from
the prior calculation.  All such amounts required
to be paid hereunder shall be paid at the time any withholdings may be required
(or, if earlier, the time Executive shall be required to pay such amounts)
under applicable law, and any additional amounts to which Executive may be
entitled shall be paid or reimbursed no later than fifteen (15) days following
confirmation of such amount by the Corporation’s independent accountants;
provided however, that any payments to be made under this Section 6(c) shall
in all events be made no later than the end of the Executive’s taxable year
next following the taxable year in which the Executive remits such excise tax
payments.  In the event any amounts paid
hereunder are subsequently determined to be in error because estimates were
required or otherwise, the parties agree to reimburse each other to correct
such error, as appropriate, and to pay interest thereon at the applicable
federal rate (as determined under Code Section 1274 for the period of time
such erroneous amount remained outstanding and unreimbursed).  The parties recognize that the actual
implementation of the provisions of this subsection are complex and agree to
deal with each other in good faith to resolve any questions or disagreements
arising hereunder.


 


8.             Covenant Not to Compete.


 


(a)           Executive
hereby acknowledges and recognizes the highly competitive nature of the
business of the Corporation and the Bank and accordingly agrees that, during
and for the applicable period set forth in Section 8(c) hereof,
Executive shall not:


 


(i)             enter into or be
engaged (other than by the Corporation or the Bank), directly or indirectly,
either for his own account or as agent, consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of
the stock of a publicly owned company) or otherwise of any person, firm,
corporation or enterprise engaged in (1) the banking (including bank
holding company) or financial services industry, (2) starting a new bank
or (3) any other activity in which the Corporation, Bank or any of its
subsidiaries are engaged during the Employment Period, in either case within a
fifty (50) mile radius of the legal or principal executive office of the
Corporation or the Bank and the office at which the Executive spent the
majority of his time (the “Non-Competition Area”); or


 


(ii)            solicit,
directly or indirectly, current or former customers of the Corporation or the
Bank or any of their respective subsidiaries to divert their business from the
Corporation and/or the Bank; or


 


(iii)           solicit, directly
or indirectly, any person who is employed by the Corporation or the Bank or any
of their respective subsidiaries to leave the employ of the Corporation or the
Bank.


 
















 


(b)           It is expressly understood
and agreed that, although the parties consider the restrictions contained in Section 8(a) hereof
reasonable for the purpose of preserving for the Corporation, the Bank and its
subsidiaries their goodwill and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Section 8(a) hereof is an
unreasonable or otherwise unenforceable restriction against Executive, the provisions
of Section 8(a) hereof shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such other extent
as such court may judicially determine or indicate to be reasonable.


 


(c)           The provisions of this Section 8
shall be applicable commencing on the date of this Agreement and continuing for
twelve (12) months after the effective date of the termination of Executive’s
employment. Notwithstanding the above provisions, if the Executive violates the
provisions of this Section 8 and the Bank must seek enforcement of the
provisions of Section 8 and is successful in enforcing the provisions,
either pursuant to a settlement agreement, or pursuant to court order, the
covenant not to compete will remain in effect for one full year following the
date of the settlement agreement or court order.


 


(d)           Executive hereby agrees that
the provisions of this Section 8 are fully assignable by the Corporation
and the Bank to any successor.  Executive
also acknowledges that the terms and conditions of this Section 8 will not
be affected by the circumstances surrounding his termination of employment.


 


(e)           The Executive acknowledges
and agrees that any breach of the restrictions set forth in this Section 8
will result in irreparable injury to the Corporation and the Bank for which it
shall have no meaningful remedy at law, and the Corporation and the Bank shall
be entitled to injunctive relief in order to enforce provisions hereof.  Upon obtaining any such final and
nonappealable injunction, the Corporation and the Bank shall be entitled to
pursue reimbursement from the Executive and/or the Executive’s employer of
attorney’s fees and costs reasonably incurred in obtaining such final and
nonappealable injunction.  In addition,
the Corporation and the Bank shall be entitled to pursue reimbursement from the
Executive and/or the Executive’s employer of costs reasonably incurred in
securing a qualified replacement for any employee enticed away from the
Corporation and the Bank by Executive. 
Further, the Corporation and the Bank shall be entitled to set off
against or obtain reimbursement from Executive of any payments owed or made to
the Executive hereunder.


 


9.            Unauthorized Disclosure.  During the term of his employment hereunder,
or at any later time, the Executive shall not, without the written consent of
the Board of Directors of the Corporation and the Bank or a person authorized
thereby (except as may be required pursuant to a subpoena or other legal
process), knowingly disclose to any person, other than an employee of the
Corporation and the Bank or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by the executive of his
duties as an executive of the Corporation and the Bank, any material
confidential information obtained by him while in the employ of the Corporation
and the Bank with respect to any of the Corporation and the Bank’s services,
products, improvements, formulas, designs or styles, processes, customers, 


 

















 


methods of business or any business practices
the disclosure of which could be or will be damaging to the Corporation and the
Bank; provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive or any person with the assistance,
consent or direction of the Executive) or any information of a type not other
considered confidential by persons engaged in the same business or a business
similar to that conducted by the Corporation and the Bank or any information
that must be disclosed as required by law.


 


10.          Indemnification;
Liability Insurance.  The
Corporation and the Bank shall indemnify the Executive, to the fullest extent
permitted by Pennsylvania law, with respect to any threatened, pending or
contemplated action, suit or proceeding brought against him by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation and the Bank or is or was serving at the written request of the
Corporation as a director, officer, employee or agent of another person or
entity.  The Executive’s right to
indemnification provided herein is not exclusive of any other rights to which
Executive may be entitled under any bylaw, agreement, vote of shareholders or
otherwise, and shall continue beyond the term of this Agreement.


 


11.          Notices.  Except as otherwise provided in this
Agreement, any notice required or permitted to be given under this Agreement
shall be deemed properly given if in writing and if mailed by registered or
certified mail, postage prepaid with return receipt requested, to Executive’s
address, in the case of notices to Executive, and to the principal executive
office of the Corporation, in the case of notice to the Corporation or the
Bank.


 


12.          Waiver.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Executive and an executive officer
specifically designated by the Board of Directors of the Corporation.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.


 


13.           Assignment.  This Agreement shall not be assignable by any
party, except by Bank and the Corporation to any successor in interest to its
business.


 


14.            Entire Agreement.  This Agreement contains the entire agreement
of the parties relating to the subject matter of this Agreement and supersedes
and replaces any prior written or oral agreements between them respecting the
within subject matter, including, without limitation, the Original Agreement.


 


15.                               Successors;
Binding Agreement.


 


(a)            The Corporation and the Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Corporation and/or the Bank to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation and
the Bank would be required to perform it if no such succession had taken place.  As used in this Agreement, “Corporation” and “Bank”
shall mean the 


 

















 


Corporation
and the Bank, as defined previously and any successor to its respective
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.


 


(b)           This Agreement
shall inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, heirs, distributees, devisees
or legatees.  If Executive should die
after a notice of termination pursuant to Section 3(c) or 5(a) is
delivered by Executive, or following termination of Executive’s employment
without Cause, and any amounts would be payable to Executive under this
Agreement if Executive had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Executive’s devisee, legatee, or
other designee, or, if there is no such designee, to Executive’s estate.


 


16.            Arbitration.  The Corporation, the Bank and Executive
recognize that in the event a dispute should arise between them concerning the
interpretation or implementation of this Agreement, lengthy and expensive
litigation will not afford a practical resolution of the issues within a
reasonable period of time.  Consequently,
with the exception of the covenant not to compete provisions in Section 8,
which the Corporation and/or the Bank may seek to enforce in any court of
competent jurisdiction, each party agrees that all disputes, disagreements and
questions of interpretation concerning this Agreement are to be submitted to
resolution, in Harrisburg, Pennsylvania, to the American Arbitration
Association (the “Association”) in accordance with the Association’s National Rules for
the Resolution of Employment Disputes or other applicable rules then in effect
(“Rules”).  The Corporation, the Bank or
Executive may initiate an arbitration proceeding at any time by giving notice
to the other in accordance with the Rules. The Corporation, the Bank and
Executive may, as a matter or right, mutually agree on the appointment of a
particular arbitrator from the Association’s pool.  The arbitrator shall not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of Pennsylvania but
shall be bound by the substantive law applicable to this Agreement.  The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of act, shall be final and
binding upon the parties and shall be enforceable in courts of proper
jurisdiction.  Following written notice
of a request for arbitration, the Corporation, Bank and Executive shall be
entitled to an injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement, except as otherwise
provided herein.


 


17.            Legal Expenses.  Bank will pay to the Executive all reasonable
legal fees and expenses when incurred by the Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement, provided he brings the
action in good faith and is successful on the merits.


 


18.            Validity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.


 


19.            Applicable Law.  This Agreement shall be governed by and
construed in accordance with the domestic, internal laws of the Commonwealth of
Pennsylvania, without regard to its conflicts of laws principles.


 

















 


20.           Headings.  The section headings of this Agreement are
for convenience only and shall not control or affect the meaning or
construction or limit the scope or intent of any of the provisions of this
Agreement.


 


21.            409A Safe
Harbor.  The parties
hereto intend that any and all post-employment compensation under this
Agreement satisfy the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, and any regulations or guidance promulgated
thereunder (“Section 409A”) or an exception or exclusion therefrom to
avoid the imposition of any accelerated or additional taxes pursuant to Section 409A.  Accordingly, notwithstanding anything in this
Agreement to the contrary, in no event shall the Corporation or the Bank be
obligated to commence payment or distribution to the Executive of any amount
that constitutes deferred compensation within the meaning of Section 409A
earlier than the earliest permissible date under Section 409A that such
amount could be paid without any accelerated or additional taxes or interest
being imposed under Section 409A.  
The Corporation, the Bank and the Executive agree that they will execute
any and all amendments to this Agreement as they mutually agree in good faith
may be necessary to ensure compliance with the distribution provisions of Section 409A
and to cause any and all amounts due under this Agreement, the payment or
distribution of which is delayed pursuant to Section 409A, to be paid or
distributed in a single sum payment at the earliest permissible date under Section 409A.


 


IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.


 


	
  ATTEST:

  	
   

  	
  GRAYSTONE FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s Carl D. Lundblad

  	
   

  	
  By: 

  	
  /s/ Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew Samuel, President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  GRAYSTONE BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s Carl D. Lundblad

  	
   

  	
  By: 

  	
  /s/ Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew Samuel, President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Janak Amin

  	
   

  	
  /s/
  Jeffrey Renninger

  



 

















 


FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT


 


THIS FIRST AMENDMENT (this “Amendment”) is made
as of November 12, 2008, by and among GRAYSTONE FINANCIAL CORP.,
a Pennsylvania business corporation (hereinafter referred to as the “Corporation”),
GRAYSTONE BANK, a Pennsylvania state
chartered bank (hereinafter referred to as the “Bank”), and JEFFREY RENNINGER (hereinafter referred to as “Executive”).


 


W I T N E S S E T H:


 


WHEREAS, Executive is now serving as Executive Vice
President of the Corporation and the Bank; and


 


WHEREAS, the Corporation, the Bank and Executive are
parties to that certain Amended and Restated Employment Agreement dated as of October 3,
2007 (the “Employment Agreement”) pursuant to which, among other things,
Executive would be entitled to certain benefits if he terminated his employment
for any reason within 30 days after a “Change in Control” as defined therein;
and


 


WHEREAS, the Corporation and Tower Bancorp, Inc., a
Pennsylvania corporation having its principal office in Greencastle,
Pennsylvania (“Tower”), are parties to that certain Agreement and Plan of
Merger dated as of November 12, 2008 (the “Merger Agreement”) pursuant to
which the Corporation will merge with and into Tower, with Tower as the
surviving corporation (the “Merger”) and, upon the completion of the Merger,
Greencastle will merge with and into the Bank and the Bank will become a wholly-owned
subsidiary of Tower;


 


WHEREAS, the Merger will constitute a “Change in Control”
of the Corporation and the Bank under the Change in Control Agreement;


 


WHEREAS, the Corporation and the Bank consider the
continued services of Executive to be in the best interests of the Corporation
and the Bank; and


 


WHEREAS, upon consummation of the Merger, Executive is to
be employed as Executive Vice President and Chief Operating Officer of the
Corporation and the Bank; and


 


WHEREAS, the Corporation, the Bank and Executive desire to
enter into this Amendment in light of the pending Merger and to ensure that the
Agreement complies with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended.


 


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


 


1.             Upon consummation of the
Merger, Executive shall be employed as Executive Vice President and Chief
Operating Officer of the Corporation and the Bank.


 

















 


2.             Executive hereby agrees that
he shall not exercise his right pursuant to Section 5(a) of the
Employment Agreement to terminate his employment with the Bank within thirty
(30) days of the Merger.  Executive
hereby irrevocably waives any entitlement to benefits under the Employment
Agreement as a result of any such voluntary termination should he breach his
agreement in the foregoing sentence.


 


3.             Effective on the date
hereof, Section 3(e) of the Employment Agreement is amended in its
entirety, to read as follows:


 


(e)            Disability.  Executive, Corporation and Bank agree that if
Executive becomes Disabled, within the meaning of Section 409A of
the Internal Revenue Code of 1986, and the regulations thereunder, and becomes
eligible for employer-provided short-term and/or long-term disability benefits,
or worker’s compensation benefits, then Graystone Bank’s obligation to pay
Executive his Annual Base Salary shall be reduced by the amount of the
disability or worker’s compensation benefits received by Executive.


 


Executive, Corporation and Bank agree that if, in
the judgment of the Corporation’s Board of Directors, the Executive is unable,
as a result of illness or injury, to perform the essential functions of his
position on a full-time basis with or without a reasonable accommodation and
without posing a direct threat to himself or others for a period of six months,
the Corporation and the Bank will suffer an undue hardship in continuing the
Executive’s employment as set forth in this agreement.  Accordingly, this Agreement shall terminate
at the end of the six-month period, and all of Executive’s rights under this
Agreement shall cease, with the exception of those rights which Executive may
have under the Bank’s benefit plans.


 


4.             Effective on the date
hereof, Section 5(b) of the Employment Agreement defining the term “Change
in Control” is amended in its entirety, to redefine “Change in Control”, to
read as follows:


 


(b)           As used in this Agreement, “Change in Control” of
the Corporation or the Bank shall mean a change in the ownership or effective
control applicable to the Corporation or the Bank as
described in Section 409A(a)(2)(A)(v) of the Internal Revenue Code of
1986, as amended (or any successor provision thereto) and the regulations
thereunder.


 


5.             Effective on the date
hereof, the Employment Agreement is hereby amended to add a new Section 22
to read as follows:


 


22.           Specified Employee Status.  Notwithstanding anything in this Agreement to
the contrary, in the event Executive is determined to be a Specified Employee,
as that term is defined in Section 409A, payments to such Specified
Employee under paragraphs 6 or 7, other than payments qualifying as short term
deferrals or an exempt separation pay arrangement under Section 409A,
shall not begin earlier than the first day of the seventh month after the date
of termination.


 

















 


For purposes of the foregoing, the date upon which a
determination is made as to the Specified Employee status of the Executive, the
Identification Date (as defined in Section 409A) shall be December 31.


 


6.             Effective with the
consummation of the Merger, the Employment Agreement is hereby amended so that
all references therein to the Corporation shall be deemed references to Tower,
and Tower, as successor to Graystone Financial Corp., shall be responsible for
all of the obligations of the Corporation to Executive under the Employment
Agreement as specifically provided in Section 15(a) of the Employment
Agreement.


 


7.             Effective upon consummation
of the Merger, Section 8(a)(i) of the Employment Agreement is hereby
amended and restated in its entirety to revise the Non-Competition Area as
follows:


 


(i)            enter into or
be engaged (other than by the Corporation or the Bank), directly or indirectly,
either for his own account or as agent, consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of
the stock of a publicly owned company) or otherwise of any person, firm,
corporation or enterprise engaged in (1) the banking (including bank
holding company) or financial services industry, or (2) any other activity
in which Corporation or Bank or any of their subsidiaries are engaged during the
Employment Period, in any county in which, at the date of termination of
the Executive’s employment, a branch location, office, loan production office,
or trust or asset and wealth management office
of Corporation, Bank, or any of their subsidiaries are located (“Non-Competition
Area”); or


 


8.             Except as amended by this
Amendment, the Employment Agreement shall continue in full force and effect and
shall continue after consummation of the Merger.  This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.


 


9.             This Amendment shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, executors, administrators, successors and, to the extent permitted
hereunder, assigns.


 


[signatures follow on next page]


 

















 


IN WITNESS WHEREOF, the parties have executed
this First Amendment to Amended and Restated Employment Agreement as of the day
and year first above written.


 


	
  ATTEST:

  	
   

  	
  GRAYSTONE
  FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  By:
  

  	
  /s/
  Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew
  Samuel, President and CEO

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  GRAYSTONE
  BANK

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  By:
  

  	
  /s/
  Andrew Samuel

  
	
  Secretary

  	
   

  	
   

  	
  Andrew
  Samuel, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
  /s/
  Carl D. Lundblad

  	
   

  	
  /s/
  Jeffrey Renninger

  
	
   

  	
   

  	
  Jeffrey
  Renninger

  



 


Consent and Acknowledgement


 


Tower
Bancorp, Inc. (“Tower”), intending to be legally bound, hereby consents,
as of the day and year first above written, to the foregoing amendment of the
employment agreement referenced therein (the “Agreement”) and hereby agrees
that, upon consummation of the merger of Graystone Financial Corp. with and
into Tower, with Tower as the surviving corporation, Tower shall become the successor
to Graystone Financial Corp. by operation of law and shall assume and
thereafter perform all of the obligations of Graystone Financial Corp. under
the Agreement as amended to the same extent as Graystone Financial Corp. would
be required to perform it if no such succession had taken place.


 


 


	
  ATTEST:

  	
   

  	
  TOWER
  BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
  /s/
  John H. McDowell, Sr.

  	
   

  	
  By:
  

  	
  /s/
  Jeffrey B. Shank

  
	
  Secretary

  	
   

  	
   

  	
  President
  and CEO