Document:

ex101to10q06113_09302008.htm

    Exhibit 10.1

     

    
      
        EMPLOYMENT
AGREEMENT

         

        This
EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as the 10th day of
November, 2008, by and among Wilhelmina  International Ltd., a New
York corporation (the “Company”), New Century Equity Holdings, Inc., a Delaware
corporation (the “Parent”), and Sean Patterson (the “Employee”), an
individual.

         

        Recitals:

         

        WHEREAS, the Employee is
currently employed pursuant to that certain employment agreement dated August 1,
2003, including Exhibits A and B thereto (the “2003 Agreement”), by and among
Employee, Wilhelmina Models, Inc., a New York corporation, Wilhelmina Artist
Management, LLC, a New York limited liability company, and the Company
(collectively, the “Wilhelmina Entities”);

         

        WHEREAS, on August 25, 2008,
the Wilhelmina Entities, certain related entities, their equity holders and
Parent entered into an Agreement covering the merger (the “Merger”) of a
wholly-owned subsidiary of Parent with the Company and the purchase (the
“Purchase”) by the Parent of the Wilhelmina Entities and certain other related
entities (the “Purchase Agreement”);

         

        WHEREAS, Parent and Company
wish that the Employee be retained as President of the Company in the event of
the consummation of the Merger and the Purchase, and the Employee desires to be
so retained;

         

        WHEREAS, the parties desire,
and have agreed, to set forth in this Agreement their entire agreement and
understanding with respect to the Employee’s employment by the Company, to
become effective in the event of the consummation of the Merger and the Purchase
and on the date of the consummation of the Merger and the Purchase (the
“Effective Date”); and

         

        NOW, THEREFORE, in
consideration of the foregoing and of the respective covenants and agreements of
the parties herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, the Company
and the Employee agree as follows:

         

        Agreement:

         

        1.           Appointment and
Duties.  The Company employs the Employee on the terms and
conditions set forth herein, and the Employee accepts such employment. The
Employee shall serve as President of the Company, and shall perform all duties
and functions reasonably appurtenant to such position and as directed by the
Chief Executive Officer, President or Board of Directors of the
Parent.  The Parent, acting through its Chief Executive Officer,
President or Board of Directors, may from time to time redefine the title and
duties of the Employee in furtherance of the business of the Company and/or its
affiliated companies. The Employee shall perform his duties in accordance with,
and shall at all times strictly adhere to, all rules, regulations and policies
as may be adopted from time to time by the Company and/or Parent, provided such
rules, regulations and policies do not violate applicable law.

         

        
          
            
            

          

          
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        2.           Full Time
Employment.  The Employee agrees that, during the term of his
employment by the Company, he will devote his full working time, attention and
energies to the diligent performance of his duties as an employee of the Company
consistent with past practice.  The Employee shall not, without the
prior written consent of the Parent, directly or indirectly, at any time during
the term of his employment with the Company: (a) accept employment with or
render services of a business, professional or commercial nature to any other
individual, corporation, partnership, governmental authority or other entity;
(b) engage in any business venture or business activity which the Company may in
good faith consider to be competitive with or adverse to the business of the
Company, whether alone, as a partner, or as an officer, director, employee or
shareholder or otherwise (except that the ownership of not more than five per
cent of the stock or other equity interest of any publicly traded corporation or
other entity shall not be deemed a violation hereof); or (c) engage in any
venture or activity which the Company may in good faith consider to interfere
with Employee’s performance of his duties hereunder; provided, however, that
Employee may, as a passive investor, invest his own assets (subject to the
limitation contained in clause (b) above) and engage in civic, community and
religious activities provided such activities do not interfere with his duties
as an employee of the Company.

         

        3.           Compensation.  All
compensation shall be payable to the Employee in accordance with the Company’s
customary payroll practices and shall be subject to withholding for federal and
state income taxes, social security payments and similar deductions, as required
by applicable law.

         

        a.           Salary.  The
Employee shall receive a salary of $475,000 per year. Such salary shall be
reviewed annually and may be increased, but not decreased, in the sole
discretion of the Board of Directors of the Parent.

         

        b.           Bonus.  The
Employee shall be entitled to an annual bonus equal in amount to 7.5% of the
excess of actual calendar year (i.e., full year 2009, 2010 or 2011, as
applicable) EBITDA (earnings before interest, taxes, depreciation and
amortization) of the Wilhelmina Entities over $4,000,000.  The timing
of the payment of the foregoing bonus shall be consistent with the Company’s
customary practices with respect to the timing of bonus payments to its
employees, provided that payment of such bonus shall be made no earlier than
following final determination of actual calendar year EBITDA based on the
Company’s annual audit. The parties understand and agree that Employee’s 2008
year bonus will be in accordance with the terms of the 2003
Agreement.

         

        4.           Other Programs and
Benefits.  The Employee shall be entitled to participate in
other programs and benefits provided by the Company (including, without
limitation, group insurance plans and profit sharing plans) to the same extent
as other employees of the Company similarly situated. Without limiting the
generality of the foregoing, the Company shall provide health insurance benefits
for the Employee comparable to those provided as of the date hereof. The Company
shall reimburse Employee for or, as permitted by applicable law, advance to the
Employee, reasonable business expenses incurred by Employee in the performance
of his duties pursuant to this Agreement consistent with past
practices.  Such reimbursement or advance shall be made upon receipt
of expense or advance report forms, in accordance with the Company’s standard
policy. Employee shall be entitled to five (5) weeks vacation per
year.

         

        5.           Term.  Except as
provided in Section 6, this Agreement shall commence on the Effective Date and
shall continue until the third anniversary of the Effective Date and thereafter
at the will of the parties (the three year period following the Effective Date,
plus any extension thereafter, the “Term”). The provisions of Section 7, 8, and
11 shall survive any expiration of this Agreement at the end of
Term.

         

        
          
            
            

          

          
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        6.           Termination.  In the
event the employment of Employee is terminated prior to the expiration of the
Term either by (i) the Company with Cause (as defined below) or without Cause or
(ii) the Employee for Good Reason (as defined below) or without Good Reason, all
provisions of this Agreement (other than the provisions of Sections 7, 8 and 11
and this Section 6) shall thereupon terminate; provided that, in the event that
the Employee is terminated by the Company without Cause or is terminated by the
Employee for Good Reason, the Employee shall continue to receive the
compensation provided for in Section 3(a) for any remaining portion of the Term.
The foregoing payments provided herein are in lieu of any and all other benefits
or claims which the Employee might assert against the Company, and may be
conditioned, at the Company’s option, upon the Employee’s execution of a full
and complete release of the Company from any and all liabilities arising in
connection with this employment by the Company or the termination thereof, other
than the Company’s applicable obligation to make the payments set forth in
Section 3(a), to the extent provided above, and other than the Company’s and the
Parent’s obligation to indemnify, defend and hold harmless the Employee in
accordance with the certificate of incorporation and by-laws of such entities
and applicable law.  Such payments shall be made to the Employee in
accordance with the Company’s customary payroll practices and shall be subject
to withholding for federal and state income taxes, social security payments and
similar deductions, as required by applicable law.  Termination of
employment pursuant to the circumstances described in the first sentence of this
Section 6 shall be effective only upon valid written notice of such by the
Company or the Employee.  All provisions of this Agreement (other than
the provisions of Sections 7, 8 and 11 and this Section 6) shall also terminate
upon the death of the Employee, Employee’s resignation without Good Reason or,
at the Company’s option, upon the disability of the Employee which disability
prevents Employee from fully performing his duties under this Agreement on a
full time basis for any ninety (90) days during a twelve (12) month
period.

         

        For
purposes of this Agreement: (a) “Cause” shall mean any of the following, as
determined in the good faith judgment of the Board of Directors of the Parent:
(i) the Employee’s conviction of, or the entry of a pleading of guilty or nolo
contendere with respect to, any felony involving moral turpitude or otherwise
materially and adversely affecting his ability to perform effectively hereunder,
(ii) the violation by the Employee of any of the provisions of Section 7 hereof
which has or is likely to have an adverse effect on the Company or the Parent,
(iii) the engagement by the Employee in any act of fraud or dishonesty resulting
or intended to result in gain or personal enrichment of the Employee at the
expense of the Company or any of its subsidiaries or affiliates or (iv) the
failure or refusal by the Employee to perform any of his other material duties
or obligations hereunder (other than any such failure resulting from the
Employee’s incapacity due to physical or mental disability or illness), which
failure is not cured within twenty (20) days after a written demand for
performance is delivered or sent to the Employee specifically identifying the
manner in which the Employee has not performed; and (b) “Good Reason” shall mean
(i) reduction in the Employee’s Base Salary during the term hereof; (ii) the
Company requiring the Employee to be based outside of New York, New York or
(iii) the Company’s material breach of any of the provisions of this Agreement
which material breach is not cured within twenty (20) days after a written
demand for performance is delivered or sent to the Company specifically
identifying the manner in which the Company has not performed.

         

        
          
            
            

          

          
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        7.           Non-Disclosure; Non-Competition;
Non-Solicitation.  The Company covenants and agrees that it
will provide to the Employee all Confidential Information (as defined below) of
the Company reasonably necessary to permit the Employee to fulfill his duties
and responsibilities hereunder. The Employee acknowledges that, as a consequence
of his employment by the Company, the Employee will be furnished and have access
to substantially all Confidential Information of the Company. The Employee
further acknowledges that (i) any public disclosure of the Confidential
Information will have an adverse effect on the Company and its business, (ii)
the Company will suffer irreparable injury if the Employee breaches any of the
terms of this Section 7, (iii) the Company will be at a substantial competitive
disadvantage if it fails to acquire and maintain exclusive ownership of the
Confidential Information or the Employee fails to abide by the restrictions
provided for in this Section 7, (iv) the scope of the protective restrictions
provided for in this Section 7 are reasonable when taking into account the
Employee’s access to Confidential Information, the importance of such
Confidential Information to the Company and the uniqueness of the services
provided by Employee, (v) the compensation being paid to the Employee pursuant
to this Agreement and the post-employment rights of the Employee hereunder are
sufficient inducement for the Employee to agree to the terms hereof, (vi)
Employee is to receive meaningful consideration as a selling stockholder of the
Wilhelmina Companies under the Purchase Agreement and accordingly such capacity
is an important consideration in determining the substance and scope of the
provisions of this Section 7, (vii) the provisions of this Section 7 are
reasonable and necessary to protect the business and interests of the Company,
to prevent the improper use or disclosure of the Confidential Information and to
provide the Company with exclusive ownership of all such Confidential
Information, (viii) the terms of this Section 7 preclude the Employee from
engaging in the conduct of the business of the Company for a reasonable period
and (ix)the Employee provides services to the Company that are
unique.

         

        a.           Non-Disclosure
Agreement.  Employee agrees that he will not (i) disclose to
any person, either directly or indirectly, any Confidential Information, unless
and solely to the extent that such Confidential Information is required to be
disclosed by law or pursuant to a final judicial order or decree, (ii) use for
his own account or use, cause, facilitate or allow any third party to use
Confidential Information in any way, or (iii) remove any Confidential
Information or any copy, summary or compilation of any kind of any Confidential
Information from the premises of the Company or the premises of any Company’s
customers, other than (in the case of (i) and (iii)) in reasonable furtherance
of the performance of Employee’s duties under this Agreement.

         

        b.           Work
Product.  All records and documents embodying any Confidential
Information or pertaining to the existing or contemplated scope of the Company’s
business, whether conceived, prepared or developed by the Employee, the Company
or otherwise, either alone or with others (“Work Product”), shall be the sole
property of the Company.

         

        c.           Return of
Materials.  Upon termination of his employment for any reason,
the Employee shall promptly deliver to the Company all materials in any medium
containing, referring to or derived from any Confidential Information or Work
Product of the Company, together with all other manuals, letters, notes,
reports, data, tables and calculations which are the property of the Company,
which are in the Employee’s possession or under his control.

         

        
          
            
            

          

          
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        d.           Non-Competition
Agreement.  The Employee covenants and agrees that during the
Term and, subject to Section 7(j), for a period of one (1) year following the
Term (notwithstanding, in either case, any earlier termination of the employment
of Employee for any reason), the Employee will not, directly or indirectly
(other than Employee’s activities as a representative of the Company solely for
the benefit of the Company) (i) own, engage in, manage, operate, join, control,
or participate in the ownership, management, operation, or control of, or be
connected as a stockholder, director, officer, employee, agent, partner, joint
venturer, member, beneficiary, or otherwise with, any “Competing Business”
(defined below) anywhere in the “Restricted Territories” (defined below); (ii)
induce any customers of the Company to patronize any Competing Business; (iii)
solicit or accept any Competing Business from any customer of the Company; (iv)
request or advise any customers of the Company to withdraw, curtail or cancel
such customer’s business with the Company; or (v) disclose to any other person,
firm or corporation engaged in any Competing Business the names or addresses of
any of the customers, models or other Talent (as defined in the Purchase
Agreement) of the Company.  For purposes of this Agreement, the term
“Competing Business” is defined to mean any activity or business that is or
would be competitive with the business conducted by the Company at the time of
termination of the Employee’s employment with the Company; provided that it is
understood that “Competing Business” shall include any “Representation Business”
(as defined in the Purchase Agreement). The term “Restricted Territories” is
defined to mean any location in which the Company conducts, or is authorized to
conduct, its business throughout the world.

         

        e.           Non-Solicitation
Agreement.  During the Term and, subject to Section 7(j), for a
period of one (1) year following the Term (notwithstanding, in either case, any
earlier termination of the employment of Employee for any reason), the Employee
will not, either on his own behalf or on behalf of any Competing Business,
directly or indirectly (i) solicit or induce, or in any manner attempt to
solicit or induce any person employed by, or an agent of, the Company to
terminate such person’s employment or agency, as the case may be, with the
Company, (ii) solicit or induce, or in any manner attempt to solicit or induce,
any models or other Talent, to terminate or modify any contract, arrangement or
relationship with the Company, or any prospective model or other Talent not to
enter into a contract, arrangement or relationship with the Company, or (iii)
solicit, divert, or attempt to solicit or divert, or otherwise accept as a
supplier or customer, any person which sells any products or services of,
furnishes products or services to, or receives products or services from the
Company, nor will the Employee attempt to induce any such supplier or customer
to cease being (or any prospective supplier or customer not to become) a
supplier or customer of the Company.

         

        f.           Modification of
Restrictions.  The Employee agrees that if an arbitrator or a
court of competent jurisdiction determines that the length of time or any other
restriction, or portion thereof, set forth in this Section 7 is overly
restrictive and unenforceable, the arbitrator or court shall reduce or modify
such restrictions to those which it deems reasonable and enforceable under the
circumstances, and as so reduced or modified, the parties hereto agree that the
restrictions of this Section 7 shall remain in full force and effect. The
Employee further agrees that if an arbitrator or court of competent jurisdiction
determines that any provision of this Section 7 is invalid or against public
policy, the remaining provisions of this Section 7 and the remainder of this
Agreement shall not be affected thereby, and shall remain in full force and
effect.

         

        
          
            
            

          

          
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        g.           Injunctive
Relief.  In the event of any pending, threatened or actual
breach of any of the covenants or provisions of this Section 7, as determined by
an arbitrator or a court of competent jurisdiction, it is understood and agreed
by the Employee that the remedy at law for a breach of any of the covenants or
provisions of this Section 7 may be inadequate and, therefore, the Company shall
be entitled to a restraining order or injunctive relief in addition to any other
remedies at law and in equity, as determined by an arbitrator or a court of
competent jurisdiction. The Employee waives any bond, surety, or other security
that might be required of the Company as a condition of any such restraining
order or injunctive relief.

         

        h.           Confidential Information
Defined.  For purposes of this Agreement, “Confidential
Information” means any proprietary information, and any information which the
Company reasonably considers to be proprietary, pertaining to the Company’s
past, present or prospective business secrets, methods or policies, earnings,
finances, security holders, lenders, key employees, nature of services performed
by sales personnel or bookers, procedures, standards and methods, information
relating to arrangements with suppliers, the identity and requirements of
arrangements with customers, models or other Talent, the type, volume or
profitability of services or products for customers, drawings, records, reports,
documents, manuals, techniques, information, data, statistics, trade secrets and
all other information of any kind or character relating to the Company, whether
or not reduced to writing; provided, however, that Confidential Information does
not include information which is generally available to the public (other than
as a result of (a) Employee’s breach of this Agreement or (b) any third party’s
breach of any confidentiality obligation or duty to the Company, which
obligation or duty Employee was or reasonably should have been aware
of).

         

        i.           Affiliates.  Any
reference to the Company in this Section 7 shall be deemed to include the
Company, its parent corporation, its subsidiaries and any other entity
controlled by or under common control with such parent or
subsidiaries.

         

        j.           Application Following the
Term.  Following the Term, except in the event Employee’s
employment was earlier terminated for “Cause” (by the Company) or without “Good
Reason” (by the Employee)), the covenants set forth in Section 7(d) and Section
7(e) shall terminate and have no effect as of the Payment End
Date.  For purposes of the foregoing, the “Payment End Date” shall
mean the date during the one (1) year period following the Term when the Company
ceases paying the Employee compensation at the same base salary rate and upon on
the same pay schedule as if the Employee continued to be employed by the Company
under this Agreement during such period.

         

        8.           Applicable Law and
Venue.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. ALL OBLIGATIONS OF THE PARTIES CREATED
HEREUNDER ARE DEEMED PERFORMABLE IN NEW YORK, AND ANY ACTION TO ENFORCE OR
CONSTRUE THE TERMS OF THIS AGREEMENT SHALL BE BROUGHT IN A STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN NEW YORK.

         

        
          
            
            

          

          
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        9.           Attorney Fees.  If
any action at law or in equity, including an action for injunction or
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, each party shall pay their own legal fees and all of their costs and
expenses of litigation.

         

        10.           Non-Waiver.  The
failure by the Company or Parent to complain of any act or omission on the part
of the Employee, no matter how long the same may continue, shall not be deemed
to be a waiver by the Company or Parent of any of its rights under this
Agreement. The waiver by the Company or Parent at any time, expressed or
implied, of any breach or attempted breach of this Agreement shall not be deemed
a waiver or a consent to any subsequent breach or attempted breach of the same
or any other type. If any action by the Employee shall require the consent or
approval of the Company or Parent, such consent to or approval of the Company or
Parent to such action on any one occasion shall not be deemed a consent to or
approval of any other action on the same or any subsequent
occasion.

         

        11.           Provisions
Severable.  Should any term or provision of this Agreement for
any reason be held to be or declared illegal, invalid, void or unenforceable
either in its entirety or in a particular application, the remainder of this
Agreement shall nonetheless remain in full force and effect and, if the subject,
term or provision is deemed to be illegal, invalid, void or unenforceable only
with respect to a particular application, such term or provision shall remain in
full force and effect with respect to all other applications. In the event that
any of the terms or provisions of this Agreement shall be held to be or declared
illegal, invalid, void or unenforceable solely by virtue of the fact that such
term or provision exceeds the permissible bounds of applicable law with respect
to its scope or duration, this Agreement shall be deemed amended, modified and
reformed to the extent necessary to reduce the scope or duration of such term or
provision to that permissible under applicable law, and the parties request that
any court examining such issue employ great latitude in reforming this Agreement
so as to make this Agreement, as reformed, valid and enforceable.

         

        12.           Entire
Agreement.  This Agreement constitutes the entire understanding
of the parties and supersedes all prior understanding or agreements, whether
written or oral, between the parties with respect to the subject matter of this
Agreement. Except as provided herein, no amendment, modification or alteration
of the terms of this Agreement shall be binding unless in writing, dated
subsequent to the date of this Agreement, and executed by all parties
hereto.

         

        13.           Binding Effect and
Assignment.  Each and all of the covenants, terms and
provisions contained herein shall be binding upon and inure to the benefit of
the respective successors, heirs, and legal representatives of the Company and
the Employee. This Agreement may not be assigned by either party without the
prior written consent of the other party.

         

        14.           Notice.  All
notices, requests, demands or other communications required or permitted to be
given or made under this Agreement shall be deemed to have been duly given
immediately upon personal delivery or mailing by first class, certified mail,
postage prepaid. Any party may change the address to which notices, requests,
demands or other communications to such party shall be mailed or sent by giving
notice to the other parties in the manner provided herein. The addresses of the
parties for purposes of this Agreement are as set forth on the signature page
hereof.

         

        
          
            
            

          

          
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        15.           Headings.  No
heading or caption contained in this Agreement shall be considered in
interpreting any of its terms or provisions.

         

        16.           Execution in
Counterparts.  This Agreement and any amendment may be executed
in any number of counterparts, either by the parties or their duly authorized
attorney-in fact, with the same effect as if all parties had signed the same
document.

         

        17.           Effectiveness.  Notwithstanding
anything to the contrary, the terms and provisions of this Agreement shall
become effective upon the consummation of the Purchase, and, if not earlier
expired or terminated, the 2003 Agreement (including any extension thereof)
shall thereupon terminate in its entirety, and the parties shall no longer have
any obligations thereunder.  In the event that the Purchase Agreement
is terminated, this Agreement shall terminate in its entirety and shall no
longer have any force and effect.

         

        [Signature
Page Follows]

         

        
          
            
            

          

          
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        IN
WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be
executed to be effective as of the Effective Date hereinabove set
forth.

         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      PARENT:

                                    
	 
      
	
                                      New
      Century Equity Holdings, Inc.

                                    
	 
      
	 
      
	
                                      
                                        /s/
      Mark E. Schwarz

                                      

                                    
	
                                      Mark
      E. Schwarz

                                    
	 
      
	 
      
	
                                      Notice Address:

                                    
	 
      
	
                                      New
      Century Equity Holdings, Inc.

                                    
	
                                      200
      Crescent Court

                                    
	
                                      Suite
      1400

                                    
	
                                      Dallas,
      Texas 75201

                                    
	
                                      Attn:
      CEO

                                    
	 
      
	 
      
	
                                      COMPANY:

                                    
	 
      
	
                                      Wilhelmina
      International Ltd.

                                    
	 
      
	 
      
	
                                      
                                        /s/
      Dieter Esch

                                      

                                    
	 
      
	 
      
	
                                      Notice Address:

                                    
	 
      
	
                                      Wilhelmina
      International Ltd.

                                    
	
                                      300
      Park Avenue South

                                    
	
                                      New
      York, New York 10010

                                    
	 
      
	 
      
	
                                      EMPLOYEE:

                                    
	 
      
	
                                      
                                        /s/
      Sean Patterson

                                      

                                    
	
                                      Sean
      Patterson

                                    
	 
      
	 
      
	
                                      Notice Address:

                                    
	 
      
	
                                       

                                    

                            

                          

                        

                      

                    

                  

                

              

            

          

        

        

         

        
          
            
            

          

          
            9ex10-15.htm

    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.

     

     

    
      
        	 	 	EXECUTIVE	 
	 	 	 	 	 
	
                ATTEST:

              	 	
                By:
      

              	/s/ 	 
	 	 	 	John
      Howerton	 
	 	 	 	 	 
	 	 	 	 	 

      

    

     

    
      
        
          	 	 	COMMUNITY
      FINANCIAL CORPORATION	 
	 	 	 	 	 
	
                  ATTEST:

                	 	
                  By:
      

                	/s/

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