Waiver and Second Amendment to Loan Documents

Waiver and Second Amendment
to Loan Documents

     THIS WAIVER AND SECOND AMENDMENT TO LOAN DOCUMENTS (this “Amendment”) is made as of November 12th, 2010 by and between PARKVALE FINANCIAL CORPORATION (the “Borrower”), and PNC BANK, NATIONAL ASSOCIATION (the “Bank”).

BACKGROUND

     A. The Borrower has executed and delivered to the Bank one or more promissory notes, letter agreements, loan agreements, security agreements, mortgages, pledge agreements, collateral assignments, and other agreements, instruments, certificates and documents, some or all of which are more fully described on attached Exhibit A, which is made a part of this Amendment (collectively as amended from time to time, the “Loan Documents”) which evidence or secure some or all of the Borrower’s obligations to the Bank for one or more loans or other extensions of credit (the “Obligations”).

     B. The Borrower and the Bank desire to amend the Loan Documents, and to waive certain defaults thereunder, as provided for in this Amendment.

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

          1. Certain of the Loan Documents are amended, and certain defaults under the Loan Documents are waived, as set forth in Exhibit A. Any and all references to any Loan Document in any other Loan Document shall be deemed to refer to such Loan Document as amended by this Amendment. This Amendment is deemed incorporated into each of the Loan Documents. Any initially capitalized terms used in this Amendment without definition shall have the meanings assigned to those terms in the Loan Documents. To the extent that any term or provision of this Amendment is or may be inconsistent with any term or provision in any Loan Document, the terms and provisions of this Amendment shall control.

          2. The Borrower hereby certifies that: (a) all of its representations and warranties in the Loan Documents, as amended by this Amendment, are, except as may otherwise be stated in this Amendment: (i) true and correct as of the date of this Amendment, (ii) ratified and confirmed without condition as if made anew, and (iii) incorporated into this Amendment by reference, (b) no Event of Default or event which, with the passage of time or the giving of notice or both, would constitute an Event of Default, exists under any Loan Document which will not be cured by the execution and effectiveness of this Amendment, (c) no consent, approval, order or authorization of, or registration or filing with, any third party is required in connection with the execution, delivery and carrying out of this Amendment or, if required, has been obtained, and (d) this Amendment has been duly authorized, executed and delivered so that it constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. The Borrower confirms that the Obligations remain outstanding without defense, set off, counterclaim, discount or charge of any kind as of the date of this Amendment.

          3. The Borrower hereby confirms that all collateral for the Obligations, including liens, security interests, mortgages, and pledges granted by the Borrower or third parties (if applicable),

shall continue unimpaired and in full force and effect, and shall cover and secure all of the Borrower’s existing and future Obligations to the Bank, as modified by this Amendment.

          4. As a condition precedent to the effectiveness of this Amendment, the Borrower shall comply with the terms and conditions (if any) specified in Exhibit A.

          5. To induce the Bank to enter into this Amendment, the Borrower waives and releases and forever discharges the Bank and its officers, directors, attorneys, agents, and employees from any liability, damage, claim, loss or expense of any kind that it may have against the Bank or any of them arising out of or relating to the Obligations. The Borrower further agrees to indemnify and hold the Bank and its officers, directors, attorneys, agents and employees harmless from any loss, damage, judgment, liability or expense (including attorneys’ fees) suffered by or rendered against the Bank or any of them on account of any claims arising out of or relating to the Obligations. The Borrower further states that it has carefully read the foregoing release and indemnity, knows the contents thereof and grants the same as its own free act and deed.

          6. This Amendment may be signed in any number of counterpart copies and by the parties to this Amendment on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart. Any party so executing this Amendment by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission.

          7. This Amendment will be binding upon and inure to the benefit of the Borrower and the Bank and their respective heirs, executors, administrators, successors and assigns.

          8. This Amendment has been delivered to and accepted by the Bank and will be deemed to be made in the State where the Bank’s office indicated in the Loan Documents is located. This Amendment will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State where the Bank’s office indicated in the Loan Documents is located, excluding its conflict of laws rules.

          9. Except as amended hereby, the terms and provisions of the Loan Documents remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified and confirmed. Except as expressly provided herein, this Amendment shall not constitute an amendment, waiver, consent or release with respect to any provision of any Loan Document, a waiver of any default or Event of Default under any Loan Document, or a waiver or release of any of the Bank’s rights and remedies (all of which are hereby reserved). The Borrower expressly ratifies and confirms the confession of judgment (if applicable) and waiver of jury trial provisions contained in the Loan Documents.

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     WITNESS the due execution of this Amendment as a document under seal as of the date first written above.

ATTEST:						PARKVALE FINANCIAL CORPORATION
						By:		/s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
Print Name:								(SEAL)
Title:						Print Name: ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
						Title: Chief Financial Officer
						PNC BANK, NATIONAL ASSOCIATION
						By:		/s/ ▇▇▇▇ ▇. ▇’▇▇▇▇▇▇
								(SEAL)
						Print Name: ▇▇▇▇ ▇. ▇’▇▇▇▇▇▇
						Title: Assistant Vice President

EXHIBIT A TO
WAIVER AND SECOND AMENDMENT TO LOAN DOCUMENTS
DATED AS OF NOVEMBER 12, 2010 (PARKVALE FINANCIAL CORPORATION)

A.

The “Loan Documents” that are the subject of this Amendment include the following (as any of the foregoing have been previously amended, modified or otherwise supplemented):

	1.		Letter Agreement dated December 30, 2008 (the “Letter Agreement”).
	2.		Term Note dated December 30, 2008, in the principal amount of $25,000,000, executed and delivered by the Borrower to the Bank.
	3.		Pledge Agreement dated December 30, 2008, made and delivered by the Borrower to the Bank (the “2008 Pledge Agreement”).
	4.		Pledge Agreement dated November 12, 2010, made and delivered by the Borrower to the Bank (the “2010 Pledge Agreement”).
	5.		Control Agreement dated November 12, 2010, among the Borrower, the Bank and PNC Capital Markets LLC, as custodian (the “Control Agreement”).
	6.		All other documents, instruments, agreements, and certificates executed and delivered in connection with the Loan Documents listed in this Section A.

B.		Waiver. The Borrower has acknowledged and agreed with the Bank that the Borrower failed to comply with the financial covenant set forth in clause (1) of Section B. of Exhibit A to the Letter Agreement for the periods ended June 30, 2010 and September 30, 2010. The Borrower’s failure to comply with the foregoing covenant constitutes an Event of Default under the Loan Documents. The Borrower has requested that the Bank waive such Event of Default. In reliance upon the Borrower’s representations and warranties and subject to the terms and conditions herein set forth, the Bank agrees to grant a waiver of the Borrower’s non-compliance with the above-referenced covenant and of the Event of Default that would otherwise result from a violation of such covenant, solely for the above-referenced periods. The Borrower agrees that it will hereafter comply fully with these covenants and all other provisions of the Loan Documents, which remain in full force and effect except as modified by this Amendment. Except as expressly described in this Amendment, this waiver shall not constitute (a) a modification or an alteration of the terms, conditions or covenants of the Loan Documents or (b) a waiver, release or limitation upon the Bank’s exercise of any of its rights and remedies thereunder, which are hereby expressly reserved. This waiver shall not relieve or release the Borrower in any way from any of its respective duties, obligations, covenants or agreements under the Loan Documents or from the consequences of any Event of Default thereunder, except as expressly described above. This waiver shall not obligate the Bank, or be construed to require the Bank, to waive any other Events of Default or defaults, whether now existing or which may occur after the date of this waiver.
C.		The Letter Agreement is hereby amended as follows:

1.

Section B.(l) of Exhibit A is hereby amended to read as follows:

“(1)

While the Loan is outstanding, the Borrower will maintain, measured for each fiscal quarter, as of the end of each fiscal quarter, commencing with the quarter ending March 31, 2009, a Return on Average Assets of at least: (a) 0.20% as of the end of each quarter ending in 2009; (b) 0.25% as of the end of each quarter ending in 2010; (c) 0.30% as of the end of each quarter ending in 2011; (d) 0.40% as of the end of each quarter ending in 2012; and (e) 0.50% as of the end of each quarter ending in 2013.”

2.

Section B.(5) of Exhibit A is hereby amended to read as follows:

“(5)

The Borrower will maintain at all times a minimum Holding Company Liquidity of $2,500,000 through March 30, 2011; between March 31, 2011 and June 29, 2011, the Borrower will maintain at all times a minimum Holding Company Liquidity of $3,000,000; and at June 30, 2011 and at all times thereafter while the Loan is outstanding, the Borrower will maintain at all times a minimum Holding Company Liquidity of $3,500,000.”

     3. The following definitions of “Eligible Investment Securities”, “Holding Company Liquidity” and “Return on Average Assets” are amended and restated to read in full as follows:

     “Eligible Investment Securities” means (a) U.S. denominated fixed-rate, non-amortizing, non-mortgage backed, senior debt securities of fixed maturity, issued directly by any of the Federal Home Loan Banks, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Federal Farm Credit Bank, (b) U.S. denominated fixed or floating rate, fully modified pass-through certificates in book-entry form, for which the full and timely payment of principal and interest are guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, (c) Negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity at issuance of either (i) not more than one year (bills), (ii) more than one year but not more than ten years (notes), or (iii) more than ten years (bonds), (d) U.S. denominated fixed-rate municipal bonds or notes rated at least A and with a minimum par value of $250,000 per CUSIP and (e) common stock of The PNC Financial Services Group, Inc., Bank of America Corporation and F.N.B. Corporation and of any other publicly traded corporation approved by the Bank in its sole discretion at the request of the Borrower.

     “Holding Company Liquidity” means the sum of Borrower’s unrestricted and unencumbered cash on hand plus the funds on deposit in the “Pledged Account” (as such term is defined in Section D of Exhibit A) plus the fair market value of Borrower’s unrestricted and unencumbered Eligible Investment Securities; provided, however, that, for purposes of this definition, the equity securities referred to in clause (e) of the definition of Eligible Investment Securities shall be valued at 75% of their fair market value and the aggregate value thereof (determined on such basis) shall not exceed $500,000.

     “Return on Average Assets” means, on a consolidated basis, a Return on Average Assets for each fiscal quarter, as reported in the Borrower’s SEC filings, excluding the effect of any impairment of intangible assets (including goodwill).

     4. Exhibit A is hereby amended by inserting at the end thereto a new Section D which shall read in full as follows:

D. AFFIRMATIVE COVENANT

(1) On or before November 12, 2010 (the “Second Amendment Effective Date”), the Borrower shall establish at PNC Capital Markets LLC (the “Custodian”) a securities account, account number 435001896 (the “Pledged Account”), and shall cause to be deposited therein an amount equal to at least $2,200,000. On or before the Second Amendment Effective Date, the Borrower shall (i) pursuant to a Pledge Agreement dated November 12, 2010 (the “2010 Pledge Agreement”), grant to the Bank a security interest in the Pledged Account and all funds or other assets in or credited thereto and (ii) grant the Bank “control” over the Pledged Account pursuant to a Control Agreement dated November 12, 2010 among the Borrower, the Custodian and the Bank (the “2010 Control Agreement”). On or before (x) November 26, 2010, the Borrower shall deposit additional cash into the Pledged Account such that, by November 26, 2010, the balance in the Pledged Account shall be no less than $2,500,000, (y) March 31, 2011, the Borrower shall deposit additional cash into the Pledged Account such that, by March 31, 2011, the balance in the Pledged Account shall be no less than $3,000,000 and (z) June 30, 2011, the Borrower shall deposit additional cash into the Pledged Account such that by June 30, 2011 and at all times thereafter, the balance in the Pledged Account shall be no less than $3,500,000.

D.

Conditions to Effectiveness of Amendment: The Bank’s willingness to agree to the amendments and waivers set forth in this Amendment is subject to the prior satisfaction of the following conditions:

	1.		Execution by all parties and delivery to the Bank of this Amendment.
	2.		Execution by all parties of the 2010 Pledge Agreement and the 2010 Control Agreement and the Borrower depositing in the Pledged Account an amount equal to at least $2,200,000.
	3.		Payment to the Bank by the Borrower of an amendment fee in the amount of $15,000.