CHANGE OF CONTROL
AGREEMENT




THIS
AGREEMENT is entered into as of the 24th day of
September, 2008 (the "Effective Date") by and between Community Financial
Corporation ("CFC"), a Virginia corporation, and JOHN HOWERTON (the
"Executive").




WITNESSETH:




WHEREAS,
CFC owns 100% of the outstanding stock of Community Bank (the "Bank"), a
federally chartered savings bank;




WHEREAS,
Executive is the Senior Vice President/Director of Retail Banking of the Bank,
and as such is a key officer whose continued dedication, availability, advice
and counsel to the Bank is deemed important to the Boards of Directors of CFC
and the Bank and to their respective stockholders;




WHEREAS,
CFC and the Bank wish to retain the services of Executive free from any
distractions or conflicts that could arise as a result of a change in control of
CFC or the Bank.




NOW,
THEREFORE, to assure the Bank and CFC of Executive's continued dedication, the
availability of his advice and counsel to the Board of Directors of the Bank and
CFC free of any distractions resulting from a change of control, and for other
good and valuable consideration, the receipt and adequacy whereof each party
hereby acknowledges, CFC and Executive hereby agree as follows:




1.           TERM OF AGREEMENT:
This Agreement shall remain in effect until cancelled by either party hereto,
upon not less than 24 months prior written notice to the other party. The
execution of this Agreement shall automatically cancel and void any severance
agreement which otherwise might be in effect between Executive and
Bank.




2.           CHANGE OF CONTROL: If
there is a Change of Control of the Bank or of CFC during the term of this
Agreement, Executive shall be entitled to a severance payment in the event the
Executive suffers an Involuntary Termination within six (6) months preceding or
24 months after the Change in Control, unless such termination is for Cause. The
amount of such severance payment shall equal twenty-four (24) months of
Executive's then current salary.




3.           LIMITATION OF
BENEFITS: It is the intention of the parties that no payment be made or
benefit provided to the Executive that would constitute an "excess parachute
payment" within the meaning of Section 280G of the Code and any regulations
thereunder, thereby resulting in a loss of an income tax deduction by CFC or the
imposition of an excise tax on the Executive under Section 4999 of the Code. If
the independent accountants serving as auditors for CFC immediately prior to the
date of a Change of Control determine that some or all of the payments or
benefits scheduled under this Agreement, when combined with any other payments
or benefits provided to the Executive on a Change of Control by CFC, the Bank
and any affiliate of CFC or the Bank required to be aggregated with CFC or the
Bank under Section 280G of the Code, would constitute nondeductible excess
parachute payments by CFC under Section 280G of the Code, then the payments or
benefits scheduled under this Agreement will be reduced to one dollar less than
the maximum amount which may be paid or provided without causing any such
payments or benefits scheduled under this Agreement or otherwise provided on a
Change of Control to be nondeductible. The determination made as to the
reduction of benefits or payments required hereunder by the independent
accountants shall be binding on the parties. The Executive shall have the right
to designate within a reasonable period which payments or benefits scheduled
under this Agreement will be reduced; provided, however, that if no direction is
received from the Executive, CFC shall implement the reductions under this
Agreement in its discretion.







4.           LITIGATION - OBLIGATIONS -
SUCCESSORS:




(a)           If
litigation shall be brought or arbitration commenced to challenge, enforce or
interpret any provision of this Agreement, and such litigation or arbitration
does not end with judgment in favor of CFC, CFC hereby agrees to indemnify the
Executive for his reasonable attorney's fees and disbursements incurred in such
litigation or arbitration.




(b)           CFC's
obligation to pay the Executive the compensation and benefits and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which CFC may have against him
or anyone else. All amounts payable by CFC hereunder shall be paid without
notice or demand. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise.




(c)           CFC
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of CFC, by agreement in form and substance satisfactory to the Executive,
to expressly assume and agree to perform this Agreement in its entirety. Failure
of CFC to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to the compensation described in Section 2. As used in this Agreement, "CFC"
shall mean Community Financial Corporation and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 4 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.




5.           NOTICES: For the
purposes of this Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:




If
      to the Executive:
              
              
              
              If
      to CFC:
            John
      Howerton
              3384
      Cesford Grange
              Keswick,
      VA 22947
              
              Community
      Financial Corporation
              38
      N. Central Avenue
              P.O.
      Box 1209
              Staunton,
      VA 24402-1209





or at
such other address as any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.




6.           MODIFICATION - WAIVERS -
APPLICABLE LAW: No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing, signed by the Executive and on behalf of CFC by such officer as may be
specifically designated by the Board of Directors of CFC. No waiver by either
party hereto at any time of any breach by the other party hereto of, or in
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia.







7.           INVALIDITY -
ENFORCEABILITY: The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. Any
provision in this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating or affecting the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.




8.           SUCCESSOR RIGHTS:
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to his executor or, if there is no such executor, to his
estate.




9.           HEADINGS: Descriptive
headings contained in this Agreement are for convenience only and shall not
control or affect the meaning or construction of any provision in this
Agreement.




10.           ARBITRATION: Any
dispute, controversy or claim arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Staunton, Virginia (or as close
thereto as feasible) in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. CFC shall pay all
administrative fees associated with such arbitration. Judgment maybe entered on
the arbitrator's award in any court having jurisdiction. Subject to Section
4(a), unless otherwise provided in the rules of the American Arbitration
Association, the arbitrators shall, in their award, allocate between the parties
the costs of arbitration, which shall include reasonable attorneys' fees and
expenses of the parties, as well as the arbitrator's fees and expenses, in such
proportions as the arbitrators deem just.




11.           CONFIDENTIALITY -
NONSOLICITATION:




(a)           The
Executive acknowledges that CFC may disclose certain confidential information to
the Executive during the term of this Agreement to enable him to perform his
duties hereunder. The Executive hereby covenants and agrees that he will not,
without the prior written consent of CFC, during the term of this Agreement or
at any time thereafter, disclose or permit to be disclosed to any third party by
any method whatsoever any of the confidential information of CFC or its
affiliates. For purposes of this Agreement, "confidential information" shall
include, but not be limited to, any and all records, notes, memoranda, data,
ideas, processes, methods, techniques, systems, formulas, patents, models,
devices, programs, computer software, writings, research, personnel information,
customer information, CFC's or the Bank's financial information, plans, or any
other information of whatever nature in the possession or control of CFC or its
affiliates which has not been published or disclosed to the general public, or
which gives to CFC or its affiliates an opportunity to obtain an advantage over
competitors who do not know of or use it. The Executive further agrees that if
his employment is terminated for any reason, he will leave with CFC or the Bank
and will not take originals or copies of any records, papers, programs, computer
software and documents and all matter of whatever nature which bears secret or
confidential information of CFC or its affiliates.




(b)           The
foregoing paragraph shall not be applicable if and to the extent the Executive
is required to testify in a judicial or regulatory proceeding pursuant to an
order of a judge or administrative law judge issued after the Executive and his
legal counsel urge that the aforementioned confidentiality be
preserved.




(c)           The
foregoing covenants will not prohibit the Executive from disclosing confidential
or other information to other employees of CFC or its affiliates or any third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.







12.           COMPLIANCE WITH SECTION 409A
OF THE CODE: Notwithstanding anything herein to the contrary, any
payments to be made in accordance with this Agreement shall not be made prior to
the date that is 185 calendar days from the date of termination of employment of
the Executive if it is determined by CFC in good faith that such payments are
subject to the limitations set forth at Section 409A of the Code and regulations
promulgated thereunder, and payments made in advance of such date would result
in the requirement that Executive pay additional interest and taxes in
accordance with Section 409A(a)(1)(B) of the Code.




13.           DEFINITIONS: The term
"Cause" shall mean the Executive's personal dishonesty, incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and desist order, or material breach of any provision of this Agreement.
No act or failure to act by the Executive shall be considered willful unless the
Executive acted or failed to act with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best interest of
CFC or its affiliates.




The term
"Involuntary Termination" shall mean (i) termination of employment of the
Executive without Cause such that the Executive is no longer employed by the
Bank or any affiliate thereof; (ii) a reduction in the amount of the Executive's
base salary compared to the amount of Executive's base salary as of March 31 of
the most recent calendar year; (iii) a material adverse change in the
Executive's benefits, contingent benefits or vacation, other than as part of an
overall program applied uniformly and with equitable effect on all senior
officers of the Bank; (iv) a requirement that the Executive perform services
principally at a location more than 50 miles from Staunton, Virginia; or (v) a
material demotion of the Executive, including, but not limited to, a material
diminution of the Executive 's title, duties or responsibilities.




The term
"Change of Control" shall mean any of the following events occurring: (i) the
acquisition by any "person" or "group" (as defined in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("Exchange Act")), other than CFC, any
subsidiary of CFC or their employee benefit plans, directly or indirectly, as
"beneficial owner" (as defined in Rule 13d-3, under the Exchange Act) of
securities of CFC representing twenty percent (20%) or more of either the then
outstanding shares or the combined voting power of the then outstanding
securities of CFC; (ii) either a majority of the directors of CFC elected at
CFC's annual stockholders meeting shall have been nominated for election other
than by or at the direction of the "incumbent directors" of CFC, or the
"incumbent directors" shall cease to constitute a majority of the directors of
CFC. The term "incumbent director" shall mean any director who was a director of
CFC on the Effective Date and any individual who becomes a director of CFC
subsequent to the Effective Date and who is elected or nominated by or at the
direction of at least two-thirds of the then incumbent directors; (iii) the
shareholders of CFC approve (x) a merger, consolidation or other business
combination of CFC with any other "person" or "group" (as defined in Sections
13(d) and 14(d) of the Exchange Act) or affiliate thereof, other than a merger
or consolidation that would result in the outstanding common stock of CFC
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into common stock of the surviving entity or a
parent or affiliate thereof) at least fifty percent (50%) of the outstanding
common stock of CFC or such surviving entity or a parent or affiliate thereof
outstanding immediately after such merger, consolidation or other business
combination, or (y) a plan of complete liquidation of CFC or an agreement for
the sale or disposition by CFC of all or substantially all of CFC's assets; or
(iv) any other event or circumstance which is not covered by the foregoing
subsections but which the Board of Directors of CFC determines to affect control
of CFC and with respect to which the Board of Directors adopts a resolution that
the event or circumstance constitutes a Change of Control for purposes of the
Agreement.




The
Change of Control Date is the date on which an event described in (i), (ii),
(iii) or (iv) occurs.







IN
WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date referred to above.






EXECUTIVEATTEST:
              
              By:
              /s/John
      Howerton





COMMUNITY
      FINANCIAL CORPORATIONATTEST:
                
                By:
                /s/