ex10-2.htm


    EXHIBIT 10.2

    


    COMPENSATION
MODIFICATION AGREEMENT

    


    THIS AGREEMENT (“Agreement”),
made this 11th day of December, 2008, by and between Community Financial
Corporation, Community Bank, its wholly owned subsidiary, (together, the
“Corporation”) and __________________, a senior executive officer of the
Corporation (“Executive”).

    


    WHEREAS, the Corporation has
determined that it is in the best interests of the Corporation and its
stockholders to participate in the Treasury TARP CPP program (“CPP”), under
which the Corporation will issue preferred stock and warrants to purchase
Corporation common stock to the United States Treasury (“UST”) in return for
cash; and

    


    WHEREAS, in order for the
Corporation to participate in the CPP, the Corporation and its senior executive
officers subject to the Compensation Guidelines (“SEOs”) must comply with
Section 111(b) of the Emergency Economic Stabilization Act of 2008 (“EESA”)
regarding executive compensation and corporate governance and the related UST
interim final regulations (31 CFR Part 30) published in the Federal Register on
October 20, 2008 (the “Compensation Guidelines”); and

    


    WHEREAS, the Corporation is
required to deliver a certificate to the UST at the closing of the CPP
transaction that it has complied with all the Compensation Guidelines;
and

    


    WHEREAS, the board of
directors of the Corporation has authorized and directed the Compensation
Committee to take any and all the actions required under the Compensation
Guidelines in order to enable the Corporation to deliver that certificate and
authorized each member of the Compensation Committee to execute this Agreement
on behalf of the Corporation; and

    


    WHEREAS, in order to comply
with the Compensation Guidelines for so long as UST holds securities of the
Corporation acquired in the CPP, the Corporation, through the Compensation
Committee, is required to review the Corporation’s compensation plans and
policies with senior risk officers in order to identify and unilaterally
eliminate any bonus plans or other incentive compensation arrangements for SEOs
that encourage them to take unnecessary and excessive risks that threaten the
value of the financial institution; and

    


    WHEREAS, in order to comply
with the Compensation Guidelines for so long as UST holds securities of the
Corporation acquired in the CPP, the Corporation, through the Compensation
Committee, must adopt appropriate provisions for the recovery by the Corporation
of any bonus or incentive compensation paid to a senior executive officer (as
defined under the Compensation Guidelines) based on financial statements or
performance metric criteria later determined to be materially inaccurate;
and

    


    WHEREAS, in order to comply
with the Compensation Guidelines for so long as UST holds securities of the
Corporation acquired in the CPP, the Corporation is prohibited

    


    
      
        
           


        

        
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    from
making any golden parachute payment (as defined under the Compensation
Guidelines) to any SEO; and

    


    WHEREAS, the Corporation is
required to deliver to the UST in connection with the consummation of the CPP
transaction a waiver from each of its SEOs with respect to the changes in the
Corporation’s compensation plans, polices and practices as required by the
Compensation Guidelines; and

    


    WHEREAS, the Compensation
Committee has asked Executive to execute the waiver in the form attached;
and

    


    WHEREAS, the Executive
believes the requirements imposed under the Compensation Guidelines in order for
the Corporation to obtain government funds by participating in the CPP are
reasonable and in the best interests of the Corporation and its stockholders and
further the long term best interests of the Corporation and its SEOs, including
the Executive.

    


    NOW, THEREFORE, to allow the
Corporation to participate in the CPP for the mutual benefit of the Corporation,
its stockholders and Executive, and for other good and valuable consideration,
the Corporation and the Executive hereby agree as follows:

    


    1.           GENERAL
MODIFICATION OF EMPLOYMENT, COMPENSATION AND BENEFIT AGREEMENTS, PLANS AND
POLICIES:  Until such time as the UST ceases to own any debt or
equity securities of the Corporation acquired pursuant to the CPP, the
Corporation and Executive agree that, notwithstanding any contract, plan, policy
or agreement to the contrary, all employment, compensation and benefit
agreements, plans and policies with respect to Executive shall be deemed
modified to comply in all respects with Section 111(b) of EESA as implemented by
any guidance or regulation thereunder that has been issued and is in effect as
of the date the Corporation issues preferred stock and warrants to the
UST.  The Corporation and Executive further agree that the Corporation
shall not adopt any new benefit plan with respect to Executive that does not
comply with Section 111(b) of EESA as implemented by any guidance or regulation
thereunder that has been issued and is in effect as of the date the Corporation
issues preferred stock and warrants to the Treasury.  The Executive
agrees that the Corporation, through its Compensation Committee, has the sole
discretion: (a) to determine whether and to what extent any bonus or incentive
compensation with respect to the Executive encourages the Executive to take
unnecessary and excessive risks that threaten the value of the financial
institution, and (b) to eliminate any such compensation as long as UST holds any
debt or equity securities of the Corporation acquired in the CPP.

    


    2.           RECOVERY
OF INCENTIVE COMPENSATION:  Until such time as the UST ceases
to own any debt or equity securities of the Corporation acquired pursuant to the
CPP, in the event Executive receives a bonus or any other incentive compensation
from the Corporation based on financial statements or performance metric
criteria later determined by the Corporation’s Compensation Committee, in its
sole discretion, to be

    


    
      
        
           


        

        
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    materially
inaccurate, Executive agrees to repay the Corporation, in cash and within 30
days of a written demand therefore, the amount of the bonus or incentive
compensation received by Executive in excess of the amount that would have been
paid to Executive had the inaccurate statements or criteria been
accurate.

    


    3.           GOLDEN
PARACHUTE PAYMENTS:  Until such time as the UST ceases to own
any debt or equity securities of the Corporation acquired pursuant to the CPP,
Executive agrees that: (a) Executive shall not be entitled to receive any golden
parachute payment (as defined under the Compensation Guidelines) upon
Executive’s severance from employment (as defined under the Compensation
Guidelines) and (b) all applicable contacts and agreements between Executive and
the Corporation are deemed to be amended in this regard.

    


    4.           WAIVER:  Executive
hereby voluntarily waives any claim against the Corporation for any changes to
my compensation, bonus, incentive and other benefit plans, arrangements,
policies and agreements (including golden parachute agreements) that are
required to comply with the Compensation Guidelines and that are made pursuant
to this Agreement.  This waiver includes all claims Executive may have
under the laws of the United States or any state related to the requirements
imposed by the Compensation Guidelines, including, without limitation, a claim
for any compensation or other payments Executive would otherwise
receive.  Executive agrees to execute the required waiver in the form
attached hereto and deliver said waiver to the Corporation no later than the
close of business on December 16, 2008.

    


    5.           COVERED
EMPLOYMENT, COMPENSATION AND BENEFIT AGREEMENTS, PLANS AND
POLICIES:  Executive acknowledges that all employment,
compensation and benefit agreements, plans and policies applicable to Executive,
including but not limited to those listed in Annex A hereto,  are
subject to the modifications and amendments provided for in this Agreement, to
the extent applicable.

    


    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 the Corporation
by such officer as may be specifically designated by the Board of Directors of
the Corporation. No waiver by either party hereto at any time of any breach by
the other party hereto of, or 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 federal law, to the extent applicable, and otherwise by the laws of the
Commonwealth of Virginia.

     

     

    
      
        
        

      

      
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    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.           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.

    


     

    


     

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

     

    

      
        	 
      	 
      	
                EXECUTIVE

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                                                             

              
	 
      	 
      	
                Signature

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                                                              

              
	 
      	 
      	
                Print
      Name

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                COMMUNITY
      FINANCIAL CORPORATION

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	
                                                                        

              
	 
      	 
      	
                Chairman,
      Compensation Committee

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                COMMUNITY
      BANK

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	
                                                                       

              
	 
      	 
      	
                Chairman,
      Compensation
Committee

              


      




    


    
      
        
           


        

        
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    ANNEX
A

    


    


    


    


    Employment
Agreements:

    


    


    


    


    


    


    


    


    


    Severance
Agreements

    


    


    


    


    


    


    


    Other
Benefit Plans or Agreements

    


    


    


    


    


    


    


    


    Other
Employment Compensation and Benefit Plans and Policies

    


    
      
        
           


        

        
           


           


        

        
           


        

      

    

    


    ANNEX
B

    


    SEO
WAIVER

    


    


    In
consideration for the benefits I will receive as a result of my employer’s
participation in the United States Department of the Treasury’s TARP Capital
Purchase Program, I hereby voluntarily waive any claim against the United States
or my employer for any changes to my compensation or benefits that are required
to comply with the regulation issued by the Department of the Treasury as
published in the Federal Register on October 20, 2008.

     

    I
acknowledge that this regulation may require modification of the compensation,
bonus, incentive and other benefit plans, arrangements, policies and agreements
(including so-called “golden parachute” agreements) that I have with my employer
or in which I participate as they relate to the period the United States holds
any equity or debt securities of my employer acquired through the TARP Capital
Purchase Program.

     

    This
waiver includes all claims I may have under the laws of the United States or any
state related to the requirements imposed by the aforementioned regulation,
including without limitation a claim for any compensation or other payments I
would otherwise receive, any challenge to the process by which this regulation
was adopted and any tort or constitutional claim about the effect of these
regulations on my employment relationship.

     

    


     

    


     

    Date:  ______________                                 ____________________________

     

    Name

     

    Title