Document:

Exhibit 10.1

 

LOAN AGREEMENT

 

Dated as of November 20, 2009

 

By and Between

 

FIRST CHESTER COUNTY CORPORATION

 

and

 

GRAYSTONE TOWER BANK

 

 

THIS
LOAN AGREEMENT, dated as of November 20, 2009, is entered into by and
between FIRST CHESTER COUNTY CORPORATION, a Pennsylvania business corporation
having its principal office at 9 North High Street, West Chester, Pennsylvania
19380 (the “Borrower”), and GRAYSTONE TOWER BANK, a Pennsylvania chartered bank
having an office at 112 Market Street, Harrisburg, Pennsylvania 17101 (the “Bank”).

 

WITNESSETH:

 

WHEREAS,
the Borrower has applied to the Bank for a non-revolving term loan in the
principal amount of $4,000,000; and

 

WHEREAS,
the Bank is willing to make the loan to the Borrower upon the terms and
conditions hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the premises and intending to be legally bound
hereby, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01.
Certain Definitions. In addition to the terms defined elsewhere in this
Agreement, the terms defined in this Section 1.01, whenever used and
capitalized in this Agreement, shall, unless the context otherwise requires,
have the respective meanings herein specified:

 

“Board
of Directors” shall mean the Board of Directors of the Borrower or any duly
authorized committee of the Board of Directors.

 

“Business
Day” shall mean any day except a Saturday, Sunday or other day on which
commercial banks in Pennsylvania are authorized by law to close.

 

“Change
of Control” shall mean with respect to either the Borrower or First
National, as the case may be (“Target”), the earliest to occur of any of the
following events, each of which shall be determined independently of the
others:

 

(a)          any Person becomes a “beneficial
owner,” as such term is used in Rule l3d-3 promulgated under the
Securities Exchange Act  of 1934, as amended (the “Exchange
Act”), of fifty percent (50%) or more of Target’s stock entitled to vote in the
election of directors;

 

(b)          Target is a party to
a merger, consolidation, other form of business 

 

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combination
or a sale of all or substantially all of its assets, unless the business of
Target is continued following any such transaction by a resulting entity (which
may be, but need not be, Target) and the shareholders of Target immediately
prior to such transaction hold, directly or indirectly, at least sixty-six
percent (66%) of the voting power of the resulting entity;

 

(c)          there is a change of
control of Target of a nature that would be required to be reported in response
to Item 5.01 of a Current Report on Form 8-K or Item 6(e) of Schedule
l4A of Regulation l4A  or any similar item, schedule or
form under the Exchange Act, as in effect at the time of the change, whether or
not Target is then subject to such reporting requirement; or

 

(d)          there has occurred a “change
of control” as such term (or any term of like import) is defined in any of the
following documents which is in effect with respect to Target at the time in
question: any note, evidence of indebtedness or agreement to lend funds to
Target, any option, incentive or employee benefit plan of Target or any
employment, or severance, termination or similar agreement with any person who
is then an employee of Target.

 

“Financial Holding Company Letter” shall mean that certain
letter issued by the Board of Governors of the Federal Reserve System to
Borrower dated November 9, 2009.

 

“Financial
Statements” shall mean the audited balance sheets for fiscal year end December 31,
2008, statements of income, statements of shareholder equity, and cash flows
for fiscal year end December 31, 2008, as set forth in the annual report
for fiscal year end December 31, 2008, and all other reports, proxy
statements, information statements or call reports filed or to be filed
subsequent to December 31, 2008 with the SEC.

 

“Financial
Subsidiary Letter” shall mean that certain letter issued by the Office of
the Comptroller of the Currency to First National dated November 4, 2009.

 

“First
National” shall mean First National Bank of Chester County.

 

“FRB
Letter” shall mean that certain letter issued by the Federal Reserve Bank
of Philadelphia to Borrower dated November 3, 2009 requiring that Borrower
obtain the approval of the Federal Reserve Bank prior to declaring or paying
any dividend.

 

“GAAP”
means generally accepted accounting principles in the United States of America,
consistent with those used in
the preparation of the financial statements referred to in Section 3.01.

 

“Indebtedness”
of any Person shall mean (a) all items which, in accordance with GAAP,
would be included on the liability side of a balance sheet of such Person as at
the date as of which indebtedness is to be determined, excluding capital stock,
surplus, capital and earned surplus, surplus reserves which in effect were
appropriations of surplus or offsets to asset values (other than all reserves
in respect of obligations, the amount, applicability or 

 

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validity
of which is at such date being contested in good faith by such Person) and
deferred credits, (b) all indebtedness secured by any mortgage, pledge,
security interest or lien existing on property owned subject to such mortgage,
pledge, security interest or liens whether or not the indebtedness secured
thereby shall have been assumed, (c) all proper accruals for federal and
other taxes based on or measured
by income or profits, and (d) all guarantees, endorsements and other
contingent obligations, including, without limitation, all indebtedness
guaranteed, directly or indirectly, in any manner by such Person, or in effect
guaranteed or supported, directly or indirectly, by such Person through an
agreement, contingent or otherwise, (i) to purchase the indebtedness, or (ii) to
purchase, sell, transport or lease (as lessee or lessor) property or to
purchase or sell services at prices or in amounts designed to enable the debtor
to make payment of the indebtedness or to assure the owner of the indebtedness
against loss, or (iii) to supply or advance funds to or in any other
manner invest in the debtor; provided, however, that such term shall not mean
and include any indebtedness in respect of which monies sufficient to pay and
discharge the same in full (either on the stated date of maturity thereof or on
such earlier date as such indebtedness may be duly called for redemption and
payment) shall be deposited with a depository, agency or trustee in trust for
the payment thereof.

 

“Loan”
shall mean the non-revolving term loan from the Bank to Borrower in the
principal amount of $4,000,000.

 

“Loan
Documents” shall mean, collectively, this Agreement, the Pledge Agreement,
the Letter Agreement and any related Notes.

 

“MOU”
shall mean that certain Memorandum of Understanding dated October 16,
2009, by and between the Office of the Comptroller of the Currency and First
National.

 

“OCC
Letter” shall mean that certain letter issued by the Office of the
Comptroller of the Currency to First National dated November 4, 2009
requiring that First National increase, by December 31, 2009, its Tier 1
leverage capital ratio to not less than 8%, its Tier 1 risk-based capital ratio
to not less than 10%, and its total risk-based capital ratio to not less than
12%.

 

“Note”
shall have the meaning ascribed to such term in Section 2.02.

 

“Person”
shall mean any individual, corporation, partnership, Limited Liability Company
or other entity, or government, foreign or domestic, or any agency or political
subdivision of any government.

 

“Pledge
Agreement” shall have the meaning ascribed to such term in Section 4.04.

 

“Regulatory
Letters” shall mean the MOU, the OCC Letter, the FRB Letter, the Financial
Subsidiary Letter and the Financial Holding Company Letter.

 

“Regulatory
Reports” shall mean the annual and quarterly reports of Borrower filed with
the SEC since December 31,  2008,
and the financial reports of First National and 

 

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accompanying
schedules for each calendar quarter filed with the Office of the Comptroller of
the Currency, since the year ended December 31,  2008.

 

“SEC”
shall mean the Securities and Exchange Commission.

 

“Securities
Documents” shall mean all registration statements, schedules, statements,
forms, reports, proxy materials, and other documents required to be filed under
the federal securities laws.

 

ARTICLE II

 

The Loan

 

SECTION 2.01.
Loan Commitment. Subject to the terms and conditions of, and relying
upon the representations and warranties of the Borrower contained in, this
Agreement, the Bank shall make the proceeds of the Loan available to the
Borrower on the date (the “Closing Date”) on which the Borrower executes and
delivers to the Bank the Note evidencing the Loan.  In consideration of this commitment, Borrower
shall pay to the Bank a commitment fee in the amount of one percent (1.00%) of
the face amount of the Loan (i.e., $40,000.00)

 

SECTION 2.02.
Promissory Note. The
obligation of the Borrower to repay the unpaid principal amount of the Loan,
and to pay interest thereon, shall be evidenced by a Promissory Note of even
date herewith (such Promissory Note, and any extension, refinancing or renewal
of the same, is referred to herein as the “Note”). The unpaid principal balance
of the Note, the interest, if any, accrued thereon, the interest rate
applicable to such balance, and the term of the Loan shall be determined from
the terms of the Note and the records of the Bank in the absence of manifest
error.

 

SECTION 2.03.
Optional Prepayments.  The
Borrower may, at its option, prepay the Loan, in whole or in part, at any time
and from time to time, provided that if the prepayment occurs on or before March 31,
2010, the Borrower will pay the Bank a prepayment premium equal in amount to
three percent (3.00%) of the principal balance outstanding under the Note
immediately prior to the prepayment.

 

SECTION 2.04.
Payment upon Capital Raising Event. 
Upon the completion of any capital raising event by Borrower or First
National, including, without limitation, any public offering or private
placement of Borrower common stock, preferred stock, trust preferred
securities, subordinated debt, or similar instruments or arrangements that
result in proceeds to Borrower or First National in an amount sufficient to
satisfy, after giving effect to the payment of amounts pursuant to this Section 2.04,
the additional capital requirements imposed upon First National pursuant to the
OCC Letter, all amounts then outstanding under the Note, plus any late charges,
prepayment penalties or other fees owing hereunder or thereunder, shall
immediately and without any action by the Bank become due and payable in full.
Borrower agrees that if it undertakes a public offering of its securities during the term of this
Loan Agreement, it shall use commercially reasonable efforts to raise net
proceeds in the offering 

 

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sufficient,
together with any other cash or cash equivalents on hand, to satisfy both the
additional capital requirements imposed upon First National pursuant to the OCC
Letter and the repayment of the outstanding amounts under the Note, plus any
late charges, prepayment penalties or other fees owing hereunder or thereunder
pursuant to this Section 2.04.

 

SECTION 2.05.
General Provisions as to Loan Payments and Computation of Interest. The
Borrower shall make each payment of principal of, and interest on, the Loan in
lawful money of the United States of America and in federal or other funds
immediately available to the Bank at its address referred to in Section 8.03.
The Borrower hereby irrevocably authorizes the Bank to debit any of its
accounts at the Bank for the payment of all amounts payable under the Loan
Documents on the due date for such payments. Whenever any payment of principal
of, or interest on, the Loan shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next succeeding Business
Day and interest shall continue to accrue thereon. If the date for any payment
of principal of the Loan is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.  Interest on the Loan shall be computed on the
basis of a year of 360 days, and paid for the actual number of days elapsed
(including the first day but excluding the last day).

 

ARTICLE III

 

Representations and Warranties

 

The
Borrower represents and warrants that:

 

SECTION 3.01.
Financial Statements.

 

(a)          Borrower has previously made available
to the Bank the Financial Statements filed as of the date hereof and will
deliver to the Bank within five (5) days of filing all the Financial
Statements to be filed after the date hereof. The Financial Statements have
been, or will be, prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered by such statements, except as noted
therein, and fairly present, or will fairly present, the consolidated financial
position, results of operations and cash flows of Borrower as of and for the
periods ending on the dates thereof, in accordance with GAAP applied on a consistent
basis, except as noted therein.

 

(b)          Borrower has made its Regulatory
Reports through September 30, 2009 available to the Bank and will deliver
to the Bank within five (5) days of filing all Regulatory Reports to be
filed after the date hereof. The Regulatory Reports have been, or will be,
prepared in all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods covered by such
statements, and fairly present, or will fairly present in all material
respects, the financial position, results of operations, and changes in
shareholders’ equity of Borrower or First National as the case may be, as of
and for the periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.

 

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(c)          At the date of each
balance sheet included in the Financial Statements or Regulatory Reports,
neither Borrower or First National (as the case may be) had, or will have, any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
Financial Statements or Regulatory Reports or in the footnotes thereto which
are not fully reflected or reserved against therein or disclosed in a footnote
thereto, except for liabilities, obligations or loss contingencies which are
not material in the aggregate to Borrower and which are incurred in the
ordinary course of business, consistent with past practice, and except for
liabilities, obligations or loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the
case of any unaudited statements, to normal recurring audit adjustments and the
absence of footnotes.

 

(d)          The allowance for
loan losses reflected, and to be reflected, in the Regulatory Reports, and
shown, and to be shown, on the balance sheets contained in the Financial
Statements have been, and will be, established in accordance with the
requirements of GAAP and all applicable regulatory criteria.

 

SECTION 3.02.
Business and Properties. No report, document, certificate or statement
delivered to the Bank by or on behalf of the Borrower in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements contained therein not misleading. Except with respect to the
Regulatory Letters, since December 31, 2008, there has not been any
adverse change in the business, operations, properties or assets of the
Borrower or its subsidiaries which is material to the Borrower and its
subsidiaries taken as a whole or to the Borrower alone.

 

SECTION 3.03.
No Pending Material Litigation or Proceeding. There are no actions,
suits or proceedings (whether or not purportedly on behalf of the Borrower or
any of its subsidiaries) pending or, to the knowledge and belief of the
Borrower, threatened against or affecting the Borrower or any of its
subsidiaries, or the business or properties of the Borrower or any of its
subsidiaries, at law or in equity, or before or by any governmental department,
commission board, agency or instrumentality, domestic or foreign, or any arbitrator,
which might have a material adverse effect on the financial position of the
Borrower and its subsidiaries taken as a whole or which might have any material
adverse effect on the ability of (a) the Borrower or any subsidiary to
carry on its business as now conducted or (b) the Borrower to perform any
of its obligations under the Loan Documents. Neither the Borrower nor any of
its subsidiaries is, to the knowledge and belief of the Borrower, (i) in
default in any material respect under any order, writ, injunction or decree of
any court or arbitrator, or (ii) in default in any material respect under
any order, regulation or demand of any governmental agency, where the default
specified in (i) or (ii) would have consequences that might have a
material adverse effect on the financial position of the Borrower and its
subsidiaries taken as a whole.

 

SECTION 3.04.
Valid Organization, Good Standing and Qualification of Borrower and
Subsidiaries. The Borrower and its subsidiaries are duly and validly
organized and existing 

 

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entities
in good standing under the laws of their respective jurisdictions of
organization. The Borrower and its subsidiaries are duly licensed or qualified
and in good standing as foreign entities in all other jurisdictions where the
ownership or leasing of property or the nature of business transacted makes
such qualification necessary, and are entitled to own their respective
properties and assets, and to carry on their respective businesses, all as, and
in the places where,  such properties and assets are now
owned or operated or such businesses are now conducted or presently proposed to
be conducted, except where failure to so qualify would not have a material
adverse effect on the business, properties or assets, or in the condition,
financial or otherwise, of the Borrower and its subsidiaries taken as a whole.
The Borrower and its subsidiaries have made payment of all franchise and
similar taxes in their respective jurisdictions in which they are qualified as
foreign entities, insofar as such taxes are due and payable at the date of this
agreement, except for any such taxes immaterial in amount or the validity of
which is being contested in good faith and for which proper reserves have been
set aside on the books of the Borrower or any of its subsidiaries, as the case
may be. The shares of capital stock of each subsidiary owned by the Borrower,
directly or indirectly, have been duly issued, are fully paid and
nonassessable, and are owned free and clear of any liens, charges and
encumbrances.

 

SECTION 3.05.   No Leases Affecting
Balance Sheet Values: Status of Leases. None of the assets or properties
the values of which are reflected in the latest audited consolidated balance
sheet referred to in Section 3.01 is held by the Borrower or any of its
subsidiaries as lessee under any lease (excluding capitalized lease
obligations). The Borrower and its subsidiaries enjoy peaceful and undisturbed
possession under all of the leases under which they are operating, none of
which contains any unusual or burdensome provisions that will, in the judgment
of the Borrower, materially and adversely affect or impair the operations of
the Borrower and its subsidiaries taken as a whole. All of such leases are valid,
subsisting and in full force and effect and, to the best knowledge of the
Borrower, none of such leases is in default.

 

SECTION 3.06.
No Adverse Contracts or Restrictions. Except with respect to the
Regulatory Letters, neither the Borrower or any of its subsidiaries is a party
to, or is bound by, any contract or agreement or instrument, or  subject
to any charter or other corporate restriction, which in the opinion of the
Borrower materially and adversely affects its business, property, assets,
operations or condition, financial or otherwise.

 

SECTION 3.07.
No Legal Restrictions on Performance: No Defaults.  Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated by it, nor
compliance with its terms and conditions will conflict with or result in a
breach of, or constitute a default under, any of the terms, conditions or
provisions of any corporate restriction or of any indenture, mortgage, deed of
trust, pledge, bank loan or credit agreement, corporate charter, bylaws or any
other agreement or instrument to which the Borrower or any of its subsidiaries
is now a  party or by which any of them or their respective
properties may be bound or affected, or any judgment or order, writ,
injunction, decree or demand of any court, arbitrator, or federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or result in the creation or
imposition of 

 

8

 

any
lien charge or encumbrance of any nature whatsoever upon any of the property or
assets of the Borrower or its subsidiaries under the terms or provisions of any
such agreement or instrument. Neither the Borrower or its subsidiaries is in
default in any material respect in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any indenture
or other agreement creating, evidencing or securing Indebtedness of the
Borrower or its subsidiaries or pursuant to which any such Indebtedness is
issued or other agreement or instrument to which the Borrower or its
subsidiaries is a party or by which the Borrower or its subsidiaries or its
properties may be bound or affected. No event has occurred which constitutes an
event of default or which, with notice or the lapse of time, or both, would
constitute an event of default under any agreement or instrument evidencing
Indebtedness for money borrowed of the Borrower or any of its subsidiaries
which enables the holders thereof or any Person on their behalf to declare the
same due and payable prior to the maturity thereof.

 

SECTION 3.08.
Compliance with Statutes and Regulations. Except as set forth in the
Regulatory Letters, the Borrower and its subsidiaries have complied with, and
are currently in compliance with, all applicable statutes, regulations, orders
and restrictions of the United States of America, foreign countries, states and
municipalities, and agencies and instrumentalities of the foregoing, in respect
of the conduct of their respective businesses and ownership of their respective
properties (including, without limitation, applicable statutes, regulations,
orders and restrictions relating to bank holding companies, banks, equal
employment opportunities and environmental standards or controls), where
failure to comply therewith would have a material adverse effect on the
business, properties or assets, or in the condition, financial or otherwise, of
the Borrower and its subsidiaries taken as a whole. No governmental consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement. Without limiting the generality of the foregoing,
the Borrower and its subsidiaries have complied with, and are currently in
compliance with, to the extent compliance is required as of the date hereof,
all applicable requirements imposed upon the Borrower or its subsidiaries as a
result of any formal or informal regulatory enforcement action or guidance,
including, without limitation, the Regulatory Letters.

 

SECTION 3.09.  Regulatory Actions.  Except with respect to the Regulatory
Letters, as such are currently in effect, neither Borrower nor First National
has received any notification or communication from any applicable bank
regulatory authority (i) asserting that Borrower or First National is not
in compliance with any of the statutes, regulations or ordinances which such
regulatory authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to Borrower
or First National; (iii) requiring or threatening to require Borrower or
First National, or indicating that Borrower or First National may be required,
to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of Borrower or First National,
including without limitation any restriction on the payment of dividends; or (iv) directing,
restricting or limiting, or purporting to direct, restrict or limit, in any
manner the operations of Borrower or First National, including without
limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter 

 

9

 

referred
to as a “Regulatory Agreement”). Neither Borrower nor First National has consented
to or entered into any Regulatory Agreement, except for the Regulatory Letters.

 

SECTION 3.10.
“Well-Capitalized” Status. Borrower and First National are “well
capitalized” within the meaning of applicable banking regulations as of the
date of this Agreement and will continue to be for so long as obligations
remain outstanding hereunder.

 

SECTION 3.11.  Securities Documents.  The Securities Documents filed or to be filed
by Borrower under the Securities Exchange Act of 1934, as amended, at any time since
December 31, 2008 complied with or will comply, at the time filed with the
SEC, in all material respects, with the Exchange Act, and all applicable rules and
regulations of the SEC.

 

SECTION 3.12.
Tax Status. The Borrower and its subsidiaries have filed all United
States income tax returns and all state, municipal and other tax returns which
are required to be filed, and have paid, or made provision for the payment of,
all taxes which have become due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been finally determined by the Internal Revenue Service and
satisfied for all taxable years up to and including the taxable year ended December 31,
2008.

 

SECTION 3.13.
Margin Regulation. The Borrower will not use any part of the proceeds of
the Loan (a) directly or indirectly to purchase or carry any “margin
security” as such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System, as amended, or to reduce or retire any Indebtedness
originally incurred to purchase any such security within the meaning of such
regulation, (b) so as to involve the Borrower in a violation of Regulation
X of such Board, or (c) for any other purpose not permitted by Section 7
of the Securities Exchange Act of 1934, as amended, or any of the rules and
regulations respecting the extension of credit promulgated thereunder.

 

SECTION 3.14.
Investment Company Act. The Borrower is not an “investment company”, or
a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended.

 

SECTION 3.15.
Exempt Status Of Transaction Under Securities Act. The execution and
delivery of the Note by the Borrower constitutes a transaction exempt from the
registration provisions of the Securities Act of 1933, as amended.

 

SECTION 3.16.
Authorization and Validity. The Loan Documents have been duly authorized
and delivered by the Borrower and constitute legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms.

 

10

 

ARTICLE IV

 

Conditions of Closing

 

The
Bank’s obligation to make the Loan provided for in Article II shall be
subject to the performance by the Borrower prior to or at the Closing Date of
all its agreements theretofore to be performed under this Agreement, to the
accuracy of its representations and warranties contained in this Agreement, and
to the satisfaction, prior to or concurrently with the  closing of the
Loan of the following further conditions:

 

SECTION 4.01. Opinion of Counsel. The Bank shall have received
on the Closing Date from the Borrower’s counsel, an opinion, dated the Closing
Date, in the form and substance set forth on Exhibit B hereto.

 

SECTION 4.02.
Certificate as to Representations and Warranties and No Events of Default;
Corporate Resolutions.

 

(a)           The representations
and warranties of the Borrower contained in Article III shall be true on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date, and no event shall
have occurred prior to the Closing Date which constitutes an Event of Default
or which, with notice or the lapse of time, or both, would constitute an Event
of Default, and the Borrower shall have delivered to the Bank on the Closing
Date a certificate, dated the Closing Date and signed by the President or Chief
Financial Officer of the Borrower, to such effect.

 

(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 the Loan
Documents, 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 the Loan Documents, and an acknowledgement executed by a
majority of the members of the Board of Directors of Borrower authorizing the
pledge of First National common stock pursuant to Section 2.03.

 

SECTION 4.03. Letter Agreement.  Tower Bancorp, Inc. (“Tower”) shall have
received on the Closing Date from the Borrower a letter agreement in form and
substance satisfactory to the Bank providing for Borrower’s obligation to
provide Tower with notice prior to Borrower’s or First National’s engaging in
certain fundamental transactions (the “Letter Agreement”).

 

SECTION 4.04.  Pledge
Agreement.  Borrower shall have
executed and delivered the Pledge Agreement attached hereto and marked “Exhibit A”,
and any ancillary documents to be delivered pursuant thereto, providing for the
Borrower’s pledge to the Bank of one hundred percent (100%) of the issued and
outstanding shares of First National common stock in order to secure the Loan
and the Borrower’s obligations hereunder (the “Pledge Agreement”).

 

11

 

SECTION 4.05.
Proceedings and Documents. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents incident
to such transactions shall be satisfactory in form and substance to the Bank
and the Bank’s counsel; and the Bank shall have received all documents or other
evidence which the Bank and the Bank’s counsel may reasonably have requested in
connection with such transaction and compliance with the conditions set forth
in this Article IV, in form and substance satisfactory to the Bank and the
Bank’s counsel.

 

ARTICLE V

 

Affirmative Covenants

 

The
Borrower covenants and agrees that, unless the Borrower obtains the prior
written consent of the Bank to the contrary:

 

SECTION 5.01.
Payment of Principal and Interest. The Borrower will punctually pay or
cause to be paid the principal of and interest on the Note according to the
respective terms thereof.

 

SECTION 5.02. Maintenance
of Corporate Existence. The Borrower will at all times do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights, patents and franchises and the corporate
existence, rights, patents and franchises of its subsidiaries and comply with,
and cause each subsidiary to comply with, all related laws applicable to the
Borrower or its subsidiaries in such manner as counsel shall advise; provided,
however, that nothing in this Section 5.02  shall (a) require
the Borrower or any of its subsidiaries to maintain, preserve or renew any
right, patent or franchise which is not, in the opinion of the Board of
Directors of Borrower, necessary or desirable in the conduct of the business of
the Borrower or such subsidiary, as the case may be, or (b) prevent the
termination of the corporate existence of any subsidiary (other than any of its
bank subsidiaries) if, in the opinion of the Board of Directors of Borrower,
such termination is in the best interest of the Borrower and not
disadvantageous to the Bank, or (c) require the Borrower or any of its
subsidiaries to comply with any law so long as the validity or applicability
thereof shall be contested in good faith.

 

SECTION 5.03.
Maintenance of Insurance. The Borrower will keep adequately insured, and
cause each of its subsidiaries to keep adequately insured, by financially sound
and reputable insurers, all property of a character usually insured by
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds customarily insured against by such
corporations, and carry, and cause each of its subsidiaries to carry, such
other insurance as is generally carried by corporations engaged in the same or
a similar business similarly situated.

 

SECTION 5.04. Payment
of Taxes, Assessments, Etc. The Borrower will duly and promptly pay and
discharge, and cause each of its subsidiaries duly and promptly to pay and 

 

12

 

discharge,
as the same become due and payable, all taxes, assessments and governmental and
other charges and claims lawfully levied or imposed upon the franchises,
properties, earnings and business of the Borrower or such subsidiary, as the
case may be, as well as all lawful claims for labor, materials and supplies
which, if unpaid, might become a lien or charge upon such properties or any
part thereof; provided, however, that nothing contained in this Section 5.04  shall
require the Borrower or any such subsidiary to pay any such tax, assessment,
charge or claim so long as the Borrower or such subsidiary in good faith shall
contest the validity thereof and shall set aside on its books adequate reserves
with respect thereto.

 

SECTION 5.05. Payment
of Indebtedness. The Borrower will, and will cause each of its subsidiaries
to, pay punctually or discharge when due, or renew or extend, any Indebtedness
heretofore or hereafter incurred by it or any of them, as the case may be, and
discharge, perform and observe the covenants, provisions and conditions to be
performed, discharged and observed on the part of the Borrower or such
subsidiary, as the case may be, in connection therewith, or in connection with
any agreement or other instrument relating thereto, or in connection with any
mortgage, pledge or lien existing at any time upon any of the property or
assets of the Borrower or such subsidiary, as the case may be; provided,
however, that nothing contained in this Section 5.05 shall require the
Borrower or any such subsidiary to pay or discharge or renew or extend any such
Indebtedness or to discharge, perform or observe any such covenants, provisions
and conditions so long as the Borrower or such subsidiary in good faith shall
contest any claim which may be asserted against it in respect of any such
Indebtedness or of any such covenants, provisions and conditions and shall set aside
on its books adequate reserves with respect thereto.

 

SECTION 5.06.
Keeping of Books. The Borrower will, and will cause each of its
subsidiaries to, (a) keep at all times proper books of record and account
in which full, true and correct entries will be made of its transactions in
accordance with good accounting practice; and (b) set aside on its books
from its earnings, for each fiscal year, reserves for depreciation,
obsolescence and/or amortization of its properties during such years and all
other proper reserves, which, in accordance with good accounting practice,
should be set aside from such earnings in connection with its business.

 

SECTION 5.07.  Compliance
with Law. The Borrower will, and will cause each of  its subsidiaries to, comply in all material
respects with all applicable statutes, regulations and orders of, and all
restrictions imposed by, the United States of America and all foreign countries
having jurisdiction, and any state, municipality or any other political
subdivision or any agency of any thereof, in respect of the conduct of their
respective businesses and the ownership of their respective properties
(including all applicable statutes, regulations, orders and restrictions
relating to bank holding companies, banks, equal employment opportunities and
environmental standards and controls); provided, however, that nothing
contained in this Section 5.07 shall require the Borrower or any such
subsidiary to comply with any law so long as the validity or applicability
thereof shall be contested in good faith. 
The Borrower shall, and shall cause First National to, at all times
remain in compliance with all applicable requirements imposed upon the Borrower
or its subsidiaries as a result of any formal or informal regulatory
enforcement action or guidance, including, without limitation, to the extent
compliance is 

 

13

 

required
as of a particular date, the Regulatory Letters.

 

SECTION 5.08. Borrower shall certify in writing
within 20 days after the end of each month that the Loan remains outstanding
that the following covenants are true as of such month end:

 

(a)     Other than the Regulatory Letters, Borrower
and First National are not subject to any formal regulatory enforcement action.

 

(b)     Borrower and First National have sufficient
capital to satisfy all applicable regulatory requirements in order to be
considered well capitalized by regulatory authorities, and in order to satisfy
any additional requirements imposed by formal or informal regulatory action.

 

(c)     Borrower and First National are in
compliance with all applicable requirements under any current or future formal
or informal regulatory enforcement action to the extent compliance is required
as of a particular date.

 

SECTION 5.09.
Notice of Default. If any Event of Default shall occur, the Borrower
will at once give written notice to the Bank specifying the nature of such
Event of Default and the action, if any, being taken by the Borrower to cure
such Event of Default.

 

ARTICLE VI

 

Negative Covenants

 

SECTION 6.01.
Indebtedness. The Borrower covenants and agrees that, unless the
Borrower obtains the Bank’s prior written consent to the contrary, the Borrower
will not create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness owed to
the Bank under the Loan Documents;

 

(b)          Indebtedness existing
or anticipated on the Closing Date and reflected in the Financial Statements
referred to in Section 3.01;

 

(c)           Unsecured
Indebtedness to third party creditors in an aggregate amount not to exceed
$1,000,000, or unsecured Indebtedness to one or more members of the Board of
Directors of Borrower in an aggregate amount not to exceed $2,000,000;

 

(d)          accrued salaries,
wages and benefits;

 

(e)           current accounts
payable arising out of transactions (other than borrowings) in the ordinary
course of business;

 

(f)           capitalized leases;
and

 

(g)          purchase money
obligations.

 

14

 

ARTICLE VII

 

Events of Default

 

SECTION 7.01.
Events of Default. In case one or more of the following events (“Events  of
Default”) shall have occurred and be continuing:

 

(a)     default shall be made in
the performance or observance of any of the covenants, conditions or agreements
contained in the Loan Documents and such default shall continue for a period of
30 days after written notice to
the Borrower from the Bank stating the specific default or defaults; or

 

(b)     a decree or order by a
court having jurisdiction in the premises shall have been entered adjudging the
Borrower a bankrupt or insolvent or approving as properly filed a petition
seeking reorganization, readjustment, arrangement, composition or similar
relief for the Borrower under the federal bankruptcy laws, or any other similar
applicable federal or state law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or solvency of the Borrower or
its property, or for the winding up or liquidation of its affairs, shall have
been entered, and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or any property of  the
Borrower shall be sequestered or attached and shall not be returned to the
possession of the Borrower or released from such attachment within 60 days
thereafter; or

 

(c)     the Borrower shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to
the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement,
composition or similar relief under the federal bankruptcy laws, or any other
similar applicable federal or state law, or shall consent to the filing of any
such petition, or shall consent to the appointment of a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency out or of a substantial part
of its property, or shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they become
due, or shall voluntarily suspend transaction of its usual business, or
corporate action shall be taken by the Borrower in furtherance of any of the
aforesaid purposes; or

 

(d)     final judgment for the
payment of money in excess of $500,000 (whether one judgment or several which
in the aggregate exceed $500,000) shall be rendered against the Borrower or any
of its subsidiaries and the same shall remain undischarged for a period of 60
days during which execution shall not be effectively stayed; provided, however,
if the Borrower or any subsidiary posts a bond which would satisfy the judgment
and execution on the judgment is effectively stayed thereby, such judgment
shall not constitute an Event of Default during such time; or

 

15

 

(e)     the Borrower or First
National, shall, prior to the later of the date that the Loan has been repaid
in full or November 20, 2010, enter into any agreement or take any action
which will result in a Change of Control, unless Tower and/or the Bank is a
party to such Change of Control transaction; or

 

(f)      any representation or
warranty made or deemed made by the Borrower in this Agreement or which is
contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection with  this
Agreement, or the making of the Loan shall prove to have been incorrect in any
material respect on or as of the date made or deemed made;

 

then,
and in each and every such case, the Bank by notice in writing to the Borrower
may declare the principal of the Note to be immediately due and payable, and
upon any such declaration the same shall become immediately due and payable,
anything in the Loan Documents to the contrary notwithstanding and Bank may
exercise all of its remedies as set forth in the Pledge Agreement attached
hereto as Exhibit “A”.  Without
limiting the generality of the foregoing, in the event of an Event of Default
arising under Section 7.01(e), Borrower shall pay to Bank, in addition to
any other amounts then owing under the Note, a fee in the amount of ten percent
(10.00%) of the face amount of the Loan (i.e., $400,000).

 

In
case of an Event of Default specified above in this Section 7.01 shall
have occurred and be continuing, the Bank may proceed to protect and enforce
its rights either by suit in equity or by action at law, or both, or by other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in the Loan Documents,
or in aid  of the exercise of any power granted in the Loan
Documents, or may proceed to enforce the payment of the Note or to enforce any
other legal or equitable right of the Bank. The Borrower shall pay all
reasonable expenses incurred by the Bank in connection with the enforcement of
the Loan Documents.

 

ARTICLE VIII

 

Miscellaneous

 

SECTION 8.01.
Consents, Waivers and Modifications. Any term, agreement or condition of
the Loan Documents may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), if the Borrower shall have obtained the prior written consent
of the Bank; provided, however, that any waiver shall be effective only in the
specific instance and for the purpose for which given.

 

SECTION 8.02.
Survival of Covenants: Successors and Assigns. All covenants,
agreements, representations and warranties made by the Borrower in the Loan
Documents and in certificates or other documents delivered pursuant to the Loan
Documents, regardless of any investigation made by the Bank or on its behalf,
shall survive the execution and delivery of the Loan Documents to the Bank, and
shall continue in full force and effect until the date on which the Loan is
repaid in full.  Anything to the contrary
contained herein notwithstanding, 

 

16

 

Borrower’s
obligation to pay to Bank, in addition to any other amounts then owing under
the Note, a fee in the amount of ten percent (10.00%) of the face amount of the
Loan (i.e., $400,000), upon a Change of Control transaction prior to November 20,
2010, as provided in Section 7.01(e), shall continue through the later of
repayment of the Loan in full or November 20, 2010. All such covenants,
agreements, representations and warranties shall be binding upon any successors
and assigns of the Borrower.

 

SECTION 8.03.
Notices. All notices, requests and demands to or upon the respective
parties hereto shall be deemed to have been given or made when deposited in the
mails, postage prepaid, registered or certified mail, return receipt requested,
or, in the case of telegraphic notice, when delivered to the telegraph company,
charges prepaid, or when sent by courier system providing for receipt of
delivery, addressed as follows or to such other address as may be hereafter
designated in writing by the respective parties hereto:

 

	
  To the Borrower:

  	
   

  	
  First Chester County
  Corporation

  
	
   

  	
   

  	
  9 North High Street

  
	
   

  	
   

  	
  West
  Chester, PA 19380

  
	
   

  	
   

  	
  Attn:

  
	
  To the Bank:

  	
   

  	
  Graystone Tower Bank

  
	
   

  	
   

  	
  112 Market Street

  
	
   

  	
   

  	
  Harrisburg, PA 17101

  
	
   

  	
   

  	
  Attn: Carl D. Lundblad,
  General Counsel

  

 

SECTION 8.04.
Reimbursement of Bank.  The Borrower hereby agrees, at Closing,
to reimburse the Bank for all of the reasonable out-of-pocket expenses,
including legal fees, incurred by the Bank in connection with the preparation
and execution of the Loan Documents.

 

SECTION 8.05. Successors. This
Agreement shall be binding upon and inure to the benefit of the Borrower and
the Bank and their respective successors and assigns, except that neither party
may assign or transfer its rights hereunder without the prior written consent
of the other party.

 

SECTION 8.06.
Construction. This Agreement, and the rights and obligations of the
parties hereunder, shall be governed by, and construed and interpreted in
accordance with, the domestic internal laws of the Commonwealth of Pennsylvania
without regard to its rules pertaining to conflict of laws. The Section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

 

SECTION 8.07.
Severability. Any provision contained in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

17

 

SECTION 8.08.
Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument.

 

SECTION 8.09.
Entire Agreement. The Loan Documents represent the entire agreement
between the Bank and the Borrower with respect to the financing transactions to
which they relate, and cannot be changed or amended except by an agreement in
writing signed by the party against whom
enforcement of the change or amendment is sought.

 

[remainder of page intentionally
left blank]

 

18

 

IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
and delivered 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/ Mark Merrill

  
	
   

  	
  Name:

  	
  Mark Merrill

  
	
   

  	
  Title:

  	
  EVP/CFO

  

 

19

 

EXHIBIT A

 

STOCK PLEDGE AGREEMENT

 

THIS
STOCK PLEDGE AGREEMENT (“Agreement” or “Pledge”) is made and entered into this
           day of November,
2009, by and between FIRST CHESTER COUNTY CORPORATION, a Pennsylvania business
corporation having its principal office at 9 North High Street, West Chester,
Pennsylvania 19380 (the “Pledgor”), and GRAYSTONE TOWER BANK, a Pennsylvania
chartered bank having an office at 112 Market Street, Harrisburg, Pennsylvania
(the “Pledgee”).

 

Background:

 

A.      Pursuant to that certain Loan Agreement of
even date herewith between Pledgor, as borrower, and Pledgee, as lender,
Pledgee has extended to Pledgor a non-revolving term loan in the principal sum
of Four Million Dollars ($4,000,000.00) (the “Loan”).  The Loan is evidenced by a Promissory Note of
even date herewith, as may be amended from time to time, in the face amount of
Four Million Dollars ($4,000,000.00) (the “Note”).

 

B.      To induce Pledgee to provide the Loan to
Pledgor, and as security for the payment of all of Pledgor’s obligations in
connection with and/or under the Loan and the Note, as may be amended, from
time to time, and any and all other contracts, agreements and obligations of
Pledgor to Pledgee (collectively, the “Obligations”), Pledgor desires to pledge
to Pledgee
                        
shares of common stock (“Stock”) of First National Bank of Chester County (the “Bank”).

 

NOW,
THEREFORE, for and in consideration of the matters recited above, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, Pledgor agrees
as follows:

 

1.  Security Interest.  Pledgor hereby pledges and grants to Pledgee
a security interest in and a first lien on all of the shares of Stock in the Bank
now owned or hereafter acquired by Pledgor, and all cash, securities and
property paid and/or distributed to or for the benefit of Pledgor or its
assignee as a consequence of Pledgor’s ownership of the Stock, or any portion
thereof (collectively, the “Collateral”). Pledgor hereby represents and
warrants to Pledgee that, on the date of this Agreement, Pledgor owns
                  
shares of Stock in the Bank, free and clear of any liens, claims and
encumbrances, which represents all of the issued and outstanding shares of
common stock of the Bank.

 

2.  Obligations Secured.  The Collateral and the continuing security
interest granted herein shall secure the satisfaction in full of all
Obligations and all amounts payable under the Note and Loan Agreement.

 

20

 

3.  Delivery of Stock and
Assignments.  Concurrently
with the execution of this Agreement, all original certificates and instruments
representing or evidencing
                  
shares of Stock owned in the name of Pledgor shall be delivered to and held by
or on behalf of Pledgee pursuant hereto and shall be in suitable form for
transfer by delivery, accompanied by duly executed instruments of transfer or
assignments in blank, in such form as Pledgee may request.

 

4.  Covenants.  Pledgor covenants and agrees that until all
Obligations are satisfied and the amounts due and owing under the Note have
been paid in full, Pledgor shall:

 

4.1
Sale of Collateral.  Not sell, transfer, assign or otherwise dispose
of the Collateral, or any portion thereof, without the prior written consent of
Pledgee.

 

4.2
Creation of Liens.  Not create, incur or permit to exist any
pledge, encumbrance, trust, lien, security interest or charge of any kind on
the Collateral, or any portion thereof.

 

4.3  Additional Documents and
Future Actions.  Pledgor
will take such actions and provide Pledgee, from time to time, with such
agreements, financing statements and additional instruments, documents or
information as Pledgee may reasonably deem necessary or advisable to perfect,
protect and maintain its security interests in the Collateral or any portion
thereof, to permit Pledgee to protect its interest in the Collateral or any
portion thereof, and/or to carry out the terms hereof.  Pledgor irrevocably authorizes the filing of
carbon, photographic or other copies of this Pledge, or of a financing
statement, as a financing statement, and agrees that such filing shall be
sufficient as a financing statement.

 

4.4  Requested Information.   Pledgor shall deliver to Pledgee such data and
information in respect of the financial condition and affairs of Pledgor and
the value of the Collateral as Pledgee may request, from time to time.

 

5.  Default.  The occurrence of an Event of Default as defined
under the Note or Loan Agreement and/or the failure of Pledgor to perform any
of its obligations hereunder shall constitute a default (“Default”) hereunder.

 

6.  Voting, Distribution and
Other Rights of Pledgor and Pledgee.

 

6.1     Prior to a Default.  So long as no Default shall have occurred and
is continuing, Pledgor shall be entitled to continue to exercise any and all
voting and other rights arising under the Collateral and to receive and retain
any and all dividends, distributions and interest, declared, distributed or
paid, with respect to the Collateral, or any portion thereof.

 

6.2     After a Default.  Upon a Default and at all times thereafter:

 

(a)      Voting and Dividends.  Pledgee shall be entitled to exercise any and
all voting and other consensual rights arising under the Collateral and to
receive and retain any 

 

21

 

and all dividends,
distributions and interest, declared, distributed or paid, with respect to the
Collateral, or any portion thereof.

 

(b)     Sale of Collateral.  Pledgee may exercise in respect of the
Collateral any and all of the rights and remedies of a secured party upon
default under the Pennsylvania Uniform Commercial Code. In addition to the
foregoing, Pledgee may accept and take possession and title to the Stock in
full or partial satisfaction of the Obligations then owing by Pledgor to
Pledgee under the Note.  Pledgee may also
sell the Collateral, or any part thereof, in one or more blocks at public or
private sale, at any exchange or otherwise or for future delivery, and at such
price or prices and upon such other terms as are commercially reasonable.
Notwithstanding the foregoing, Pledgee shall not be obligated to make any sale
of Collateral.

 

(c)      Application of Proceeds.  Any cash held by Pledgee as Collateral and
all cash proceeds received by Pledgee in respect of any sale of, collection
from, or other realization upon the Collateral, or any portion thereof, may be
held by Pledgee as Collateral for, and/or then or at any time after a Default
applied in whole or in part by Pledgee against all or any Obligations and sums
owing by Pledgor under the Note.  Any
surplus of such cash or cash proceeds held by Pledgee and remaining after
payment in full of the sums owing under the Note shall be returned to Pledgor.

 

7.  Reasonable Care.  Pledgee shall exercise reasonable care in the
custody and preservation of the Collateral in its possession.

 

8.  Return of Collateral.  Upon the satisfaction by the Pledgor of all
of its Obligations under the Note and the termination or full performance of
any agreement, contract or other arrangement as may exist between Pledgor and
Pledgee for the transfer or sale of any of the shares of Stock to Pledgee, this
Agreement and the security interest given in the Collateral shall be
terminated. Within ten (10) days thereof, the Pledgee shall deliver the
Collateral to Pledgor.

 

9.  Miscellaneous.

 

9.1      Communications and Notices.
Any notice given pursuant to this Agreement shall be in writing, and may be
telecopied, delivered by hand, mailed by first-class certified mail, return
receipt requested, postage prepaid, or dispatched by next-day delivery service
addressed, if to Pledgor or Pledgee, at the following addresses, or at such
other address as the addressee may designate in writing:

 

If
to Pledgor:

 

First
Chester County Corporation

9
North High Street

West
Chester, PA  19380

Attn:

 

22

 

If
to Pledgee:

 

Graystone
Tower Bank

112
Market Street

Harrisburg,
PA  17101

Attn:  Carl D. Lundblad, General Counsel

 

Any communications given by
mail in accordance herewith are deemed to have been given three (3) business
days after the date of the mailing, if a domestic mailing, or five (5) business
days after the date of the mailing, if oversees; any communications sent by
next day delivery service are deemed to have been given the day after being
sent; and communications given by any other means are deemed to have been given
when sent or delivered, as the case may be.

 

9.2  Severability.  The provisions of this Pledge are deemed to
be severable, and the invalidity or unenforceability of any provision shall not
affect or impair the remaining provisions which shall continue in full force
and effect.

 

9.3  Headings.  The headings of the Articles, Sections,
paragraphs and clauses of this Pledge are inserted for convenience only and
shall not be deemed to constitute a part of this Pledge.

 

9.4  Binding Effect.  This Pledge and all rights and powers granted
hereby will bind and inure to the benefit of the parties hereto and their
respective heirs, executors, personal representatives and permitted successors
and assigns, as applicable.

 

9.5  Amendment.  No modification of this Pledge shall be
binding or enforceable unless in writing and signed by or on behalf of the
party against whom enforcement is sought.

 

9.6  Governing Law.  This Pledge has been made, executed and
delivered in the Commonwealth of Pennsylvania, United States of America, and
shall be construed in accordance with and governed by the laws of such State.

 

9.7  No Third-Party
Beneficiaries.  The rights
and benefits of this Pledge shall not inure to the benefit of any third party.

 

9.8
Counterparts.  This Pledge may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Pledge by signing
any such counterpart.

 

9.9
No Joint Venture.  Nothing contained herein is intended to
permit or authorize Pledgee to make any contract on behalf of Pledgor, nor
shall this Pledge be construed as creating a partnership, joint venture or
making Pledgee an investor in Pledgor.

 

23

 

9.10
Jurisdiction and Venue. For the
purpose of any suit, action or proceeding arising out of or relating to this
Pledge, Pledgor hereby irrevocably consents and submits to the jurisdiction and
venue of any of the courts of the Commonwealth of Pennsylvania, United States
of America in and for the County of Dauphin and irrevocably agrees to accept
service of process by certified mail, return receipt requested, postage
prepaid, to its address set forth herein, in lieu of personal service.  Pledgor irrevocably waives any objection which
it may now or hereafter have to the venue of any such suit, action or
proceeding brought in such court and any claim that such suit, action or
proceeding brought in such court has been brought in an inconvenient forum, and
agrees that service of process in accordance with the foregoing sentence shall
be deemed in every respect effective and valid personal service of process upon
Pledgor.  The provisions of this
paragraph shall not limit or otherwise affect the right of Pledgee to institute
and conduct an action in any other appropriate manner, jurisdiction or court.

 

9.11
Waiver of Jury Trial.  Pledgor does hereby waive the right to trial
by jury in any action arising hereunder, or otherwise in connection herewith.

 

9.12  Indemnification. 
Pledgor hereby agrees to indemnify, defend and hold Pledgee harmless
from any loss, expense or damage on account of anything arising out of or in
connection with this Pledge, unless caused solely by Pledgee’s gross negligence
or willful misconduct.  This indemnity
shall survive the repayment of the Note.

 

9.13
Scrivener.  Each and every provision of this Pledge has
been mutually negotiated, prepared and drafted and, in connection with the
construction of any provision hereof, no consideration shall be given to the
issue of which party actually prepared, drafted, requested, deleted or
negotiated any provision of this Pledge.

 

[remainder of page intentionally
left blank]

 

24

 

IN
WITNESS WHEREOF, Pledgor has executed this Pledge as of the day and year first
above written.

 

	
   

  	
  PLEDGOR:

  
	
   

  	
   

  
	
   

  	
  FIRST CHESTER COUNTY
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLEDGEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  GRAYSTONE TOWER BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

25

 

EXHIBIT B

 

[FORM OF OPINION OF BORROWER’S COUNSEL]

 

26Exhibit 10.2

 

PROMISSORY NOTE

 

	
  $4,000,000

  	
   

  	
  Date: November 20, 2009

  

 

FOR VALUE RECEIVED, FIRST
CHESTER COUNTY CORPORATION, a Pennsylvania corporation (“Maker”), promises to
pay to the order of GRAYSTONE TOWER BANK (“Payee”), at Payee’s office at 112
Market Street, Harrisburg, Pennsylvania, in lawful money of the United States
of America, the principal amount of Four Million Dollars ($4,000,000), advanced
by the Payee to the Maker pursuant to the terms of that certain Loan Agreement
of even date herewith by and between Maker and Payee (the “Loan Agreement”),
the terms of which are incorporated herein by reference, together with interest
on the part of the principal amount from time to time remaining outstanding and
unpaid from the date of this Promissory Note (the “Note”) at the rate of twelve
percent (12.00%) per annum.

 

The entire unpaid principal
of this note and any accrued interest then unpaid shall be due and payable on
or before November 20, 2010.  The
interest on this Note shall be due and payable monthly as it accrues on the
first day of each month until this Note is paid in full, commencing on December 1,
2009.  The Maker shall have the right and
privilege of prepaying all or any part of this Note at any time; provided,
however, that any such prepayments occurring on or before March 31, 2010
shall result in a prepayment charge to the Maker equal to three percent (3.00%)
of the principal balance outstanding hereunder immediately prior to the
prepayment. All payments on this Note shall be applied first to late charges,
then to accrued interest and the balance, if any, to principal.

 

The highest rate of interest
provided for in this Note shall continue to apply to the debt evidenced by this
Note notwithstanding the entry of judgment on this Note. Calculations by Payee
of principal and interest due shall be conclusive absent manifest error.
Interest shall be calculated on the basis of the actual number of days in the
then current calendar year divided by 360. Both principal and interest are
payable in lawful money of the United States of America without set-off or
counterclaim.

 

As additional consideration,
Maker agrees to pay the following additional nonrefundable fees and charges
from separate funds on or before today’s date:

 

Commitment Fee.  Maker agrees to pay to the Payee a commitment
fee in the amount of one percent (1.00%) of the face amount of this Note (i.e.,
$40,000.00).

 

Legal Fees.  Maker agrees to reimburse the Payee for all
reasonable legal fees incurred in the origination of the Note.

 

This Note is referred to in,
and is entitled to the benefits of, the Loan Agreement, as the same may be
amended, modified or supplemented from time to time. Capitalized terms used in
this Note and not otherwise defined shall have the respective meanings given to
them in the Loan Agreement. The terms of the Loan Agreement, including, without
limitation, those relating to events of default, are incorporated herein by
reference.

 

 

In the event any payment due
hereunder shall become overdue for a period in excess of fifteen (15)  days
after its due date, to cover the extra expense involved in handling delinquent
payments, Maker shall pay to Payee, upon written demand therefore, a “late
charge” equal to five percent (5%)  of any overdue payment.

 

The occurrence or existence
of an Event of Default under the Loan Agreement shall constitute an Event of
Default under this Note. Should an Event of Default occur, then the entire
unpaid principal balance of this Note, together with all accrued interest and
all other sums due by Maker hereunder and any other Loan Documents shall become
due and payable immediately, and payment of the same may be enforced and
recovered in whole or in part at any time by one or more of the remedies
provided to Payee in this Note or any other Loan Document, and in such case
Payee may also recover all costs of suit and other expenses in connection
therewith.

 

The remedies of Payee as
provided in this Note and in any other Loan Document shall be cumulative and
concurrent and may be pursued singly, successively or together against Maker at
the sole discretion of Payee, and such remedies shall not be exhausted by any
exercise thereof but may be exercised as often as occasion therefore shall
occur. Payee shall not by any act of omission or commission be deemed to have
waived any of its rights or remedies hereunder unless such waiver be in writing
and signed by Payee, and then only to the extent specifically set forth
therein; a waiver on one event shall not be construed as continuing or as a bar
to or waiver of such right or remedy on a subsequent event.

 

If any provision hereof is
found by a court of competent jurisdiction to be prohibited or unenforceable,
it shall be ineffective only to the extent of such prohibition or
unenforceability, and such prohibition or unenforceability shall not invalidate
the balance of such provision to the extent it is not prohibited or
unenforceable, nor invalidate the other provisions hereof, all of which shall
be liberally construed in favor of Payee in order to effect the provisions of
this Note. As used herein, the words “Payee” and “Maker” shall be deemed and
construed to include the respective successors and assigns of Payee and Maker.
This Note shall be construed according to and governed by the internal laws of
the Commonwealth of Pennsylvania.

 

UPON AN EVENT OF DEFAULT, THE
MAKER AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD
IN THE UNITED STATES TO APPEAR ON BEHALF OF THE MAKER IN ANY COURT IN ONE OR
MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OR PROTHONOTARY OR OTHER COURT
OFFICIAL, AND TO CONFESS JUDGMENT AGAINST THE MAKER, WITHOUT PRIOR NOTICE OR
OPPORTUNITY OF THE MAKER FOR PRIOR HEARING, IN FAVOR OF THE HOLDER OF THIS NOTE
IN THE FULL AMOUNT DUE ON THIS NOTE (INCLUDING PRINCIPAL, ACCRUED INTEREST AND
ANY AND ALL PENALTIES, FEES AND COSTS) PLUS REASONABLE ATTORNEYS’ FEES AND
COURT 

 

2

 

COSTS.  THE MAKER WAIVES THE
BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE
LAWFULLY WAIVED CONFERRING UPON THE MAKER ANY RIGHT OR PRIVILEGE OF EXEMPTION,
HOMESTEAD RIGHTS, STAY OF EXECUTION OR GARNISHMENT, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. 
IF A COPY OF THIS NOTE, VERIFIED BY AN OFFICIAL OR AN OFFICER OF THE
HOLDER, SHALL BE FILED IN ANY PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE
CONFESSED, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH
VERIFIED COPIES SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF
RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST MAKER AS PROVIDED
HEREIN.  JUDGMENT MAY BE CONFESSED
FROM TIME TO TIME UNDER THE AFORESAID POWERS AND NO SINGLE EXERCISE IN THE
AFORESAID POWERS TO CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, SHALL BE DEEMED
TO EXHAUST THE POWER, WHETHER OR NOT SUCH EXERCISE SHALL BE HELD BY ANY SUCH
COURT TO BE INVALID, VOIDABLE OR VOID, BUT THE POWER SHALL CONTINUE
UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME, AND IN THE SAME OR
DIFFERENT JURISDICTIONS, AS, AFTER AND AS THE HOLDER SHALL ELECT, UNTIL SUCH
TIME AS THE HOLDER SHALL HAVE RECEIVED PAYMENT IN FULL OF ALL SUMS DUE
HEREUNDER, TOGETHER WITH INTEREST, COSTS AND FEES.

 

IN WITNESS WHEREOF, Maker,
intending to be legally bound, has duly executed this Note as of the date first
above written.

 

 

	
  WITNESS:

  	
   

  	
  FIRST CHESTER COUNTY CORPORATION:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  /s/ John A. Featherman, III

  
	
  Name:

  	
   

  	
  Name: John A. Featherman, III

  
	
  Title:

  	
   

  	
  Title: Chairman, CEO and President

  
					

 

3

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