Exhibit 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
      THIS AGREEMENT (the “Agreement”) is entered into this 20 day of April,
2007, by and between Community Bank of Tri-County, with its principal place of
business at 3035 Leonardtown Road, Waldorf, Maryland 20601 (the “Bank”), William
J. Pasenelli (the “Employee”), and Tri-County Financial Corporation (the
“Company”), solely as guarantor of the Bank’s obligations hereunder, and is
effective as of the date hereof (the “Effective Date”).
     WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship between the Bank and the Employee; and
     WHEREAS, the parties desire by this writing to set forth the current terms
and conditions of the employment relationship between the Bank and Executive;
and
     WHEREAS, this Agreement shall supersede any and all prior Employment
Agreements, by and between the Bank and the Employee, and any amendments
thereto; and any and all prior Guaranty Agreements, by and between the Company
and the Employee.
     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Bank and the Employee hereby agree as follows:
     1. EMPLOYMENT. The Employee shall serve the Bank as Executive Vice
President and Chief Financial Officer. In such position, the Employee shall have
the duties, responsibilities, functions and authority determined and designated
from time to time by the Board of Directors (the “Board”) and the Chief
Executive Officer. The Employee shall render such administrative and management
services to the Bank and its affiliates as are customarily performed by persons
in a similar executive capacity.
     2. EFFECTIVE DATE AND TERM. The Bank agrees to employ the Employee for an
initial period of three (3) years, beginning on the Effective Date and ending on
the day before the third (3rd) anniversary of the Effective Date, and during the
period of any additional extensions described below (the “Term of Employment”).
The parties intend that, at any point in time during the Employee’s employment
hereunder, the then-remaining Term of Employment shall be three (3) years. On
the day after the Effective Date and on each day thereafter, the Term of
Employment shall extend by one day, so that, on any date, the term of Employment
will expire on the day before the third (3rd) anniversary of such date. These
extensions shall continue unless (a) the Bank notifies the Employee that it has
elected to discontinue the extensions; (b) the Employee notifies the Bank of the
Employee’s election to discontinue the extensions; or (c) the Employee’s
employment with the Bank is terminated, whether by resignation, discharge or
otherwise. On the earlier of (i) the date on which such notice is given; or
(ii) the effective date of a termination of Employee’s Employment with the Bank,
the Term of Employment will convert to a fixed period of three (3) years ending
on the day before the third (3rd) anniversary of such date (provided, however,
that subject to any rights of the Employee under this Agreement, the Term of
Employment shall terminate on such earlier date as may be specifically provided
in this Agreement in the event of the Employee’s death, voluntary termination,
Disability or termination for Cause). The last day of the Agreement term, as
extended in accordance with this Section 2, is referred to in this Agreement as
the “Expiration Date.”

 

--------------------------------------------------------------------------------

 

     3. COMPENSATION AND BENEFITS.
          3.1 BASE SALARY. During the Term of Employment, the Bank agrees to pay
the Employee base salary at the rate of $170,000 per annum, subject to increase
from time to time in accordance with the usual practices of the Bank with
respect to its review of compensation for senior executives. Any increase in the
Employee’s base salary shall become the “base salary” for purposes of this
Agreement. The Employee’s base salary shall be payable in periodic installments
in accordance with the Bank’s usual practice.
          3.2 EMPLOYEE BENEFITS. The Employee shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans and other
benefit plans from time to time in effect for senior executives of the Bank.
Such participation shall be subject to (a) the terms of the applicable plan
documents, (b) generally applicable policies of the Bank and (c) the discretion
of the Board or any administrative or other committee provided for in, or
contemplated by, such plans.
          3.3 INCENTIVE COMPENSATION. The Employee shall be eligible to
participate in any incentive compensation or bonus programs sponsored by the
Bank on such terms as the Board may establish for the Employee’s participation.
          3.4 BUSINESS EXPENSES. The Bank shall pay, or reimburse, the Employee
for reasonable travel and other business expenses incurred by the Employee in
the performance of the Employee’s duties and responsibilities, subject to such
reasonable requirements with respect to substantiation and documentation as may
be specified by the Bank.
          3.5 LEAVE. The Employee shall be entitled to leave (vacation, sick and
personal) in accordance with the Bank’s standard policies for senior executives.
Further, the Board, in its discretion, may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as the Board, in its discretion, may determine.
          3.6 OTHER EMPLOYEE BENEFITS. The Employee shall be entitled to
participate in any compensatory plans, arrangements or programs the Bank makes
available to its senior executive officers, including, but not limited to, stock
compensation programs, supplemental retirement arrangements, or executive health
or life insurance programs, subject to, and on a basis consistent with, the
terms and conditions of such plans, arrangements or programs.
          3.7 GENERAL. The Employee’s participation in any plans, arrangements
or programs currently in effect or made available in the future shall not be
deemed to be in lieu of other compensation to which the Employee is entitled as
described under this Agreement.
     4. EXTENT OF SERVICE. During the Term of Employment, the Employee shall
devote his full time, best efforts and business judgment, skills and knowledge
to the advancement of the Bank’s interests and to the discharge of his
responsibilities under this Agreement; provided, however, that the Employee may:

2

--------------------------------------------------------------------------------

 

     (a) invest personal assets in such form or manner as shall not require any
material services on the Employee’s part in the operations or affairs of the
entities in which such investments are made, provided that the Employee may not
own any interest in an entity that competes with the Bank or any affiliate
(other than up to 4.9% of the outstanding voting stock of such entity that is a
publicly-traded entity); or
     (b) serve on the board of directors of any company not in competition with
the Bank or any affiliate, provided that the Employee shall not render any
material services with respect to the operations or affairs of any such company;
or
     (c) engage in religious, charitable or other community or non-profit
activities which do not impair the Employee’s ability to fulfill the Employee’s
duties and responsibilities under this Agreement.
     5. DEATH. In the event of the Employee’s death during the Term of
Employment, the Employee’s employment (and the Term of Employment) shall
terminate on the date of death. The Bank shall pay to the Employee’s
beneficiary, or estate, (a) any compensation due the Employee through the last
day of the calendar month in which death occurred, plus (b) any other
compensation or benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs of the Bank in which the
Employee participated as of the date of death.
     6. DISCHARGE FOR CAUSE.
          6.1 NOTICE AND DETERMINATION OF CAUSE. The Bank may terminate the
Employee’s employment at any time during the Term of Employment for Cause, as
defined below. Such termination shall be deemed to have occurred for Cause only
if:
     (a) The Board, by a separate affirmative vote of at least three-fourths
(3/4) of the entire membership, determines that the Employee has: (i) engaged in
acts of personal dishonesty which have resulted in loss to the Bank or one of
its affiliates; (ii) intentionally failed to perform stated duties;
(iii) committed a willful violation of any law, rule, regulation (other than
traffic violations or similar offenses); (iv) become subject to the entry of a
final cease and desist order which results in substantial loss to the Bank or
one of its affiliates; (v) been convicted of a crime or act involving moral
turpitude; (vi) willfully breached the Bank’s or the Company’s code of conduct
and business ethics; (vii) been disqualified or barred by any governmental or
self-regulatory authority from serving in the Employee’s then-current employment
capacity or (viii) willfully attempted to obstruct or failed to cooperate with
any investigation authorized by the Board or any governmental or self-regulatory
entity. No act or failure to act on the part of the Employee shall be considered
“willful” unless it is done, or omitted to be done, by the Employee in bad faith
or without reasonable belief that the Employee’s action or omission was in the
best interests of the Bank. Any act or failure to act that is based upon
authority given pursuant to a resolution duly adopted by the Board, or upon the
advice of legal counsel for the Bank, shall be conclusively presumed to be done,
or omitted to be done, by the Employee in good faith and in the best interests
of the Bank and its affiliates; and

3

--------------------------------------------------------------------------------

 

     (b) At least ten (10) days prior to the vote contemplated by
Section 6.1(a), the Bank has provided the Employee with notice of its intent to
discharge the Employee for Cause, detailing with particularity the facts and
circumstances which are alleged to constitute Cause (a “Notice of Intent to
Discharge”); and
     (c) After giving the Employee Notice of Intent to Discharge and before
taking the vote contemplated by Section 6.1(a), the Employee is afforded a
reasonable opportunity to make both written and oral presentations before the
Board for the purpose of refuting the alleged grounds for Cause for discharge;
and
     (d) After the vote contemplated by Section 6.1(a), the Bank has furnished
to the Employee a notice of termination which specifies the effective date of
the Employee’s termination of employment (which shall not be earlier than the
date on which such notice is deemed given), and include a copy of a resolution
or resolutions adopted by the Board of Directors authorizing the termination of
the Employee for Cause and stating with particularity the facts and
circumstances found to constitute Cause for discharge (the “Final Discharge
Notice”).
          6.2 SUSPENSION; FINAL DISCHARGE. Following the provision of Notice of
Intent to Discharge, the Bank may temporarily suspend the Employee’s duties and
authority and, in such event, may also suspend the payment of salary and other
cash compensation (but not participation in retirement, insurance and other
employee benefit plans). If the Employee is discharged for Cause, all payments
withheld during the suspension period shall be deemed forfeited and shall not be
payable to the Employee. If the Bank does not give a Final Discharge Notice to
the Employee within one hundred and twenty (120) days after giving the Notice of
Intent to Discharge, the Notice of Intent to Discharge shall be deemed withdrawn
and any future action to discharge the Employee for Cause shall require the Bank
to give the Employee a new Notice of Intent to Discharge.
          6.3 EFFECT OF TERMINATION FOR CAUSE. In the event of termination
pursuant to this Section 6, the Term of Employment shall terminate and the Bank
shall pay to the Employee an amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) any other
compensation or vested benefits as may be provided in accordance with the terms
and provisions of any applicable plans and programs of the Bank. All other
obligations of the Bank shall terminate as of the date of termination.
     7. DISABILITY. The Bank may terminate the Employee’s employment (and the
Term of Employment) after having established the Employee’s Disability. For
purposes of this Agreement, “Disability” means a physical or mental infirmity
that impairs the Employee’s ability to substantially perform his duties under
this Agreement and results in the Employee becoming eligible for long-term
disability benefits under the Bank’s long-term disability plan (or, if the Bank
has no such plan in effect, that impairs the Employee’s ability to substantially
perform full-time duties under this Agreement for a period of one hundred eighty
(180) consecutive days). The Employee shall be entitled to the compensation and
benefits provided for under this Agreement for (a) any period during the Term of
Employment and prior to the establishment of the Employee’s Disability during
which the Employee is

4

--------------------------------------------------------------------------------

 

unable to work due to physical or mental infirmity, or (b) any period of
Disability which is prior to the Employee’s termination of employment pursuant
to this Section 7.
     8. TERMINATION WITHOUT CAUSE. The Board may, by written notice to the
Employee, immediately terminate his employment at any time for a reason other
than Cause, in which event the Employee shall be entitled to receive the
termination payment set forth in Section 10.2 of this Agreement, payable in one
lump sum within ten (10) days of termination. The Bank shall also continue to
provide the Employee with benefit continuation as set forth in Section 10.3 of
this Agreement.
     9. VOLUNTARY TERMINATION BY EMPLOYEE. Subject to Section 11 hereof, the
Employee may voluntarily terminate employment with the Bank during the term of
this Agreement, upon at least 60 days’ prior written notice, in which case the
Term of Employment shall end and the Bank shall pay to the Employee an amount
equal to the (a) base salary or other compensation earned through the date of
termination plus (b) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable benefit plans and
programs of the Bank.
     10. CHANGE IN CONTROL.
          10.1 DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement,
a “Change in Control” shall mean the occurrence of any of the following events:
     (a) individuals who, on the date of this Agreement, constitute the Board of
Directors of the Company (the “Incumbent Directors”) cease for any reason to
constitute at least half of the Board of Directors of the Company, provided that
any person becoming a director subsequent to such time, whose election or
nomination for election was approved by a vote of at least two-thirds (2/3) of
the Incumbent Directors then on the Board of Directors of the Company (either by
a specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without written objection to
such nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board of Directors of the
Company shall be deemed to be an Incumbent Director;
     (b) any “person” (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the “Exchange Act”) and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors of the Company (the “Company
Voting Securities”); provided, however, that the event described in this
paragraph (b) shall not be deemed to be a Change in Control by virtue of any of
the following acquisitions: (A) by the Company or any subsidiary, (B) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a transaction (other than one
described in (c) below) in

5

--------------------------------------------------------------------------------

 

which Company Voting Securities are acquired from the Company, if a majority of
the Incumbent Directors approve a resolution providing expressly that the
acquisition pursuant to this clause (D) does not constitute a Change in Control
under this paragraph (b);
     (c) the consummation of a merger, consolidation, statutory share exchange
or similar form of corporate transaction involving the Company or any of its
subsidiaries that requires the approval of the Company’s stockholders, whether
for such transaction or the issuance of securities in the transaction (a
“Business Combination”), unless immediately following such Business Combination:
(A) at least 50% of the total voting power of (x) the corporation resulting from
such Business Combination (the “Surviving Corporation”), or (y) if applicable,
the ultimate parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”), is represented by the Company
Voting Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and
such voting power among (and only among) the holders thereof is in substantially
the same proportion as the voting power of such Company Voting Securities among
the holders thereof immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan (or related trust) sponsored or maintained
by the Surviving Corporation or the Parent Corporation) is or becomes the
beneficial owner, directly or indirectly, of 25% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least 50% of the members of the board of directors of
the Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors at the time of the Company Board’s approval of the execution
of the initial agreement providing for such Business Combination; or
     (d) the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or a sale of all or substantially all of the
Company’s assets.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 25% of
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company which reduces the number of Company Voting Securities
outstanding; provided, that if after such acquisition by the Company such person
becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially
owned by such person, a Change in Control of the Company shall then occur.

6

--------------------------------------------------------------------------------

 

          10.2 TERMINATION PAYMENT. Notwithstanding any provision herein to the
contrary, if the Bank (i) terminates the Employee’s employment pursuant to
Section 8 of this Agreement or (ii) terminates the Employee’s employment under
this Agreement without the Employee’s prior written consent and for a reason
other than Cause, in connection with or within twelve (12) months after a Change
in Control, then the Employee shall be paid an unreduced lump sum severance
benefit equal to the sum of the following items:
     (a) Two (2) times the Employee’s annual base salary (as provided for in
Section 3 of this Agreement) at the rate in effect on the date of the Employee’s
termination of employment (including any amount contributed by the Bank on the
Employee’s behalf pursuant to a salary reduction agreement and which is not
included in the Employee’s gross income under Sections 125, 132(f) or 402(e)(3)
of the Internal Revenue Code of 1986, as amended); and
     (b) Two (2) times the most recent annual incentive compensation payment
made to the Employee (as provided for in Section 3 of this Agreement).
     The severance benefit payment under this Section 10.2 shall be made to the
Employee in one lump sum within ten (10) days of the Employee’s termination of
employment.
          10.3 BENEFIT CONTINUATION. Employee shall also be entitled to
continuation of the medical, dental and life insurance benefits existing on the
date of termination at the level in effect, and at the same out-of-pocket
premium cost to the Employee, as on the date of termination for a period of
thirty-six (36) months following the Employee’s termination of employment. If
the benefits under any benefit plan or program continued pursuant to this
Section 10.3 may not be provided because the Employee is no longer an employee
of the Bank or an affiliate, the Bank shall pay or provide for coverage on a
comparable basis for the Employee and, where applicable, the Employee’s
dependents.

7

--------------------------------------------------------------------------------

 

          10.4 OTHER TERMINATION. Notwithstanding any other provision of this
Agreement to the contrary, the Employee may voluntarily terminate employment
under this Agreement within twelve (12) months following a Change in Control of
the Bank or Corporation, and the Employee shall be entitled to receive the
payments and benefits described in Sections 10.2 and 10.3 of this Agreement,
upon the occurrence of any of the following events, or within ninety (90) days
thereafter, which have not been consented to in advance by the Employee in
writing: (a) the requirement that the Employee move a primary personal
residence, or perform the Employee’s principal executive functions, more than
thirty-five (35) miles from the Employee’s primary office as of the date of the
Change in Control; (b) a material reduction in the Employee’s base salary as in
effect on the date of the Change in Control or as the same may be increased from
time to time; (c) the failure of the Bank to continue to provide the Employee
with compensation and benefits provided for under this Agreement, as the same
may be increased from time to time, or with benefits substantially similar to
those provided under any of the employee benefit plans in which the Employee now
or hereafter becomes a participant, or the taking of any action by the Bank
which would directly or indirectly reduce any such benefits or deprive the
Employee of any material fringe benefit provided by the Bank at the time of the
Change in Control; (d) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with the
Employee’s position as referenced in Section l; (e) a failure to elect or
reelect the Employee to the Board if the Employee is serving on the Board on the
date of the Change in Control; or (f) a material diminution or reduction in the
Employee’s responsibilities or authority (including reporting responsibilities)
in connection with his employment with the Bank.

8

--------------------------------------------------------------------------------

 

     11. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the payments and
benefits provided pursuant to Section 10 of this Agreement, either alone or
together with other payments and benefits the Employee has the right to receive
from the Bank, would constitute a “parachute payment” under Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), the payments and
benefits pursuant to Section 10 shall be reduced or revised, in the manner
determined by the Employee, by the amount, if any, which is the minimum
necessary to result in no portion of the payments and benefits under Section 10
being non-deductible to the Bank pursuant to Section 280G of the Code and
subject to the excise tax imposed under Section 4999 of the Code. The Bank’s
independent public accountants will determine any reduction in the payments and
benefits to be made pursuant to Section 10; the Bank will pay for the
accountant’s opinion. If the Bank and/or the Employee do not agree with the
accountant’s opinion, the Bank will pay to the Employee the maximum amount of
payments and benefits pursuant to Section 10, as selected by the Employee, that
the opinion indicates have a high probability of not causing any of the payments
and benefits to be non-deductible to the Bank and subject to the excise tax
imposed under Section 4999 of the Code. The Bank may also request, and the
Employee has the right to demand that the Bank request, a ruling from the IRS as
to whether the disputed payments and benefits pursuant to Section 10 have such
tax consequences. The Bank will promptly prepare and file the request for a
ruling from the IRS, but in no event will the Bank make this filing later than
thirty (30) days from the date of the accountant’s opinion referred to above.
The request will be subject to the Employee’s approval prior to filing; the
Employee shall not unreasonably withhold such approval. The Bank and the
Employee agree to be bound by any ruling received from the IRS and to make
appropriate payments to each other to reflect any IRS rulings, together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code. Nothing contained in this Agreement shall result in a reduction of any
payments or benefits to which the Employee may be entitled upon termination of
employment other than pursuant to Section 10 hereof, or a reduction in the
payments and benefits specified in Section 10, below zero.
     12. NO MITIGATION. In the event of any termination of employment under this
Agreement, the Employee shall be under no obligation to seek other employment or
to otherwise mitigate damages, and there shall be no offset against any amounts
due to the Employee under this Agreement for any reason, including, without
limitation, on account of any remuneration attributable to subsequent
employment. Any amounts due under this Agreement are in the nature of severance
payments or liquidated damages, or both, and are not in the nature of a penalty.
13. MISCELLANEOUS PROVISIONS.
          13.1 CONFLICTING AGREEMENTS. The Employee hereby represents and
warrants that the execution of this Agreement and the performance of the
Employee’s obligations hereunder will not breach or be in conflict with any
other agreement to which the Employee is a party or is bound, and that the
Employee is not now subject to any covenants against competition or similar
covenants which would affect the performance of the Employee’s obligations under
this Agreement.

9

--------------------------------------------------------------------------------

 

          13.2 WITHHOLDING. All payments made under this Agreement shall be net
of any tax or other amounts required to be withheld under applicable law.
          13.3 ARBITRATION. The Bank and the Employee agree that any claim,
dispute or controversy arising under or in connection with this Agreement
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Bank’s employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in the
County of Charles, Maryland (or at such other location as shall be mutually
agreed upon by the parties). The arbitration shall be conducted in accordance
with the Commercial Arbitration Rules (the “Rules”) of the American Arbitration
Association (the “AAA”) in effect at the time of the arbitration, except that
the arbitrator shall be selected by alternatively striking from a list of five
arbitrators supplied by the AAA. All fees and expenses of the arbitration,
excluding a transcript, shall be borne equally by the parties. Each party will
pay for the fees and expenses of its own attorneys, experts, witnesses, and
preparation and presentation of proofs and post-hearing briefs (unless the
Employee prevails on a claim for which attorney’s fees are recoverable under the
Agreement). Any action to enforce or vacate the arbitrator’s award shall be
governed by the Federal Arbitration Act, if applicable, and otherwise by
applicable state law. If either the Bank or the Employee pursues any claim,
dispute or controversy against the other in a legal proceeding, other than the
arbitration provided for herein, the responding party shall be entitled to
dismissal or injunctive relief regarding such action and recovery of all costs,
losses and attorneys’ fees related to such action. Notwithstanding the
provisions of this paragraph, either party may seek injunctive relief in a court
of competent jurisdiction, whether or not the case is then pending before the
panel of arbitrators. Following the court’s determination of the injunction
issue, the case shall continue in arbitration as provided herein.
          13.4 INDEMNIFICATION FOR ATTORNEYS’ FEES. In the event any dispute or
controversy arising under or in connection with the Employee’s termination of
employment or this Agreement is resolved in favor of the Employee, whether by
judgment, arbitration or settlement, the Employee shall be entitled to the
payment of: (i) all legal fees and expenses incurred by the Employee in
resolving such dispute or controversy, and (ii) any back-pay, including salary,
bonuses and any other cash compensation, fringe benefits and any compensation
and benefits due to the Employee under this Agreement.
          13.5 ASSIGNMENT; SUCCESSORS AND ASSIGNS, ETC.
     (a) This Agreement is personal to the Employee and shall not be assignable
by the Employee without the prior written consent of the Bank, other than by
will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee’s legal representatives.
     (b) This Agreement shall inure to the benefit of and be binding upon the
Bank and its successors and permitted assigns.

10

--------------------------------------------------------------------------------

 

     (c) The Bank may not assign this Agreement or any interest herein without
the prior written consent of the Employee and, without such consent, any
attempted transfer or assignment shall be null and void and of no effect;
provided, however, that the Bank shall 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 Bank expressly to assume
and to agree to perform this Agreement in the same manner and to the same extent
that the Bank would have been required to perform it if no such succession had
taken place. As used in this Agreement, “the Bank” shall mean both the Bank and
the Company, as defined above, and any successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
          13.6 ENFORCEABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
          13.7 REDUCTIONS; REGULATORY REQUIREMENTS. Notwithstanding anything to
the contrary contained in this Agreement, any and all payments and benefits to
be provided to the Employee under this Agreement are subject to reduction to the
extent required by applicable statutes, regulations, rules and directives of
federal, state and other governmental and regulatory bodies having jurisdiction
over the Bank and its affiliates. The Employee is aware and acknowledges that
the Federal Deposit Insurance Corporation has the power to preclude the Bank or
its affiliates from making payments to the Employee under this Agreement under
certain circumstances. The Employee agrees that neither the Bank nor its
affiliates shall be deemed to be in breach of this Agreement if it is precluded
from making a payment otherwise payable hereunder by reason of regulatory
requirements binding on the Bank or its affiliates, as the case may be.
          13.8 WAIVER. No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party. The failure of
any party to require the performance of any term or obligation of this
Agreement, or the waiver by any party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.
          13.9 NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, and
addressed to the Employee at the Employee’s last known address on the books of
the Bank or, in the case of the Bank, at its main office, attention of the Chief
Executive Officer of the Board of Directors.
          13.10 AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Employee and a duly authorized representative
of the Bank.

11

--------------------------------------------------------------------------------

 

          13.11 NO EFFECT ON LENGTH OF SERVICE. Nothing in this Agreement shall
be deemed to prohibit the Bank from terminating the Employee’s employment before
the end of the Term of Employment with or without notice for any reason. This
Agreement shall determine the relative rights and obligations of the Bank and
the Employee in the event of any such termination. In addition, nothing in this
Agreement shall require the termination of the Employee’s employment at the
expiration of the Term of Employment. Any continuation of the Employee’s
employment beyond the expiration of the Term of Employment shall be on an
“at-will” basis, unless the parties agree otherwise.
          13.12 SOURCE OF PAYMENTS. The Bank shall make in a timely manner all
payments provided for under this Agreement in cash or check from its general
funds. The Company, however, unconditionally guarantees payment and the
provision of all amounts and benefits due to the Employee under this Agreement.
If the Bank does not timely pay or provide such amounts and benefits, the
Company shall pay or provide such amounts and benefits.
          13.13 ENTIRE AGREEMENT; EFFECT ON PRIOR AGREEMENTS. This Agreement
constitutes the entire agreement between the parties pertaining to its subject
matter and supersedes all prior and contemporaneous agreements, understandings,
negotiations, prior draft agreements, and discussions of the parties, whether
oral or written.
          13.14 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each party and delivered to the other party, it being understood
that all parties need not sign the same counterpart. This Agreement may be
executed by facsimile signatures.
          13.15 GOVERNING LAW. This is a Maryland contract and shall be
construed under and be governed in all respects by the laws of the State of
Maryland, without giving effect to its conflicts of law principles.
     14. EFFECT OF CODE SECTION 409A. Notwithstanding anything in this Agreement
to the contrary, if the Bank in good faith determines, as of the effective date
of the Employee’s termination of employment, that amounts payable to the
Employee hereunder, are required to be suspended or delayed for six months in
order to satisfy the requirements of Section 409A of the Code, then the Bank
will so advise the Employee, and any such payments shall be suspended and
accrued for six months, whereupon they shall be paid to the Employee in a lump
sum (together with interest thereon at the then-prevailing prime rate). The
Employee agrees that the Bank shall be deemed to be in breach of this Agreement
if it delays making a payment otherwise payable hereunder by reason of
Section 409A.

12

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above the written.
      

ATTEST:   /s/ Diane M. Deskins   COMMUNITY BANK OF TRI-COUNTY           /s/
Michael L. Middleton         Michael L. Middleton
President

      

ATTEST:   /s/ Diane M. Deskins             TRI-COUNTY FINANCIAL
CORPORATION (As Guarantor)                   /s/ Michael L. Middleton        
Michael L. Middleton
President

      

WITNESS:   /s/ Diane M. Deskins        EMPLOYEE            /s/ William J.
Pasenelli         William J. Pasenelli