COMMUNITY FINANCIAL CORP.
1998 RELOAD STOCK OPTION PLAN
_________________
TRUST AGREEMENT
_________________
This Agreement made this _____ day of ____________, 199__,
by and between Community Financial Corp. (the "Company") and
directors __________, _________, and __________ (acting by
majority, the "Trustee").
WHEREAS, the Company maintains the Community Financial
Corp. 1998 Reload Stock Option Plan (the "Plan") and has
incurred or expects to incur liability under the terms of the
Plan with respect to the individuals participating in the Plan
("Participants"); and
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute assets to the Trust that shall be
held therein, subject to the claims of the Company's general
creditors in the event of Insolvency, as defined in Section 3(a)
hereof, until paid to Participants and their beneficiaries in
such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the Parties hereto that
this Trust shall constitute an unfunded arrangement and shall
not affect the status of the Plan as an unfunded plan maintained
for the purpose of providing compensation to a select group of
management or other highly compensated individuals for purposes
of Title I of the Employee Retirement Income Security Act of
1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to enable the Trust to fully fund its
liabilities under the Plan; and
WHEREAS, the Trust is intended to hold a number of shares
of the Company's common stock ("Common Stock") sufficient for
transfer to Participants as they exercise stock options granted
under the Plan; and
WHEREAS, the Company desires to establish a fund,
consisting of the cash dividends that have accumulated from the
shares held in the Trust, for the payment of discretionary cash
bonuses to employees of the Company and its subsidiaries.
NOW, THEREFORE, the Parties do hereby establish this Trust
and agree that the Trust shall be established and administered
as set forth herein:
Section 1. Establishment of Trust
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(a) The Company hereby deposits, or will shortly hereafter
deposit, with the Trustee in trust an amount expected to be
sufficient to permit the Trust to purchase up to 23,606 shares
of the Company's common stock ("Common Stock") either directly
from the Company or through open market purchases. Said amount
shall become the initial principal of the Trust to be held,
administered and dispersed by the Trustee as provided for in
this Trust Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of
Participants and general creditors as herein set forth.
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be unsecured contractual rights of Participants
and their beneficiaries against the Company. Any assets held by
the Trust will be subject to the claims of the Company's general
creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time,
or from time to time, make additional contributions of cash or
other assets to with the Trustee to augment the principal of the
Trust to be held, administered and dispersed by the Trustee as
provided for in this Trust Agreement. Neither the Trustee nor
any Participant or beneficiary shall have any right to compel
such additional contributions.
(f) Upon a Change in Control within the meaning of Section
13(f) hereof, the Company shall, as soon as possible but in no
event longer than ten business days after the Change in Control,
make an irrevocable contribution to this Trust in an amount that
is projected to be sufficient to pay each Participant the
benefits to which he or she is entitled pursuant to the Plan as
of the date of the Change in Control.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
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(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to the
Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available
under the Plan, and including transfers of Common Stock from the
Trust to Participants), and the date of commencement for payment
of such amounts. Except as otherwise provided herein, the
Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The
Trustee shall make provisions for the reporting and withholding
of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by the Company.
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(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such party as it may be designated under the
Plan, and any claim for such benefits shall be considered and
reviewed under the procedures set forth in the Plan.
(c) The Company may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make such payment of benefits prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall make
the balance of each such payment as due. The Trustee shall
notify the Company when principal and earnings are insufficient
under the Payment Schedule.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
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(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, and (ii) the Company becomes
subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the existence of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive Officer
of the Company shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits
to Participants or their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
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(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Company with respect to benefits due under the
Plan or otherwise.
(3) The Trustee shall resume the payment of benefits
to Participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer
Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any
payments made to Participants or their beneficiaries by the
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to the Company.
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Except as provided in Section 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before
all payment of benefits have been made to Plan Participants and
their beneficiaries pursuant to the terms of the Plan.
Section 5. Investment Authority.
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(a) The Trustee shall have the sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock; provided that the Trust shall not purchase, in the
aggregate, more than 23,606 shares of Common Stock.
(b) All rights associated with assets of the Trust shall
be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to any
Common Stock held by the Trust will be exercised in accordance
with the terms and conditions for the exercise of voting rights
of unallocated shares under the Company's Employee Stock
Ownership Plan, as in effect on the date hereof.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee determines that it is
appropriate to sell shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Participant 20 business days
within which to purchase, at fair market value, all or part of
any shares of Common Stock that the Trustee holds for the
benefit of the Participant, and (ii) to the extent purchases by
Participants are insufficient to eliminate the Trust's excess
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holdings of Common Stock, to offer to sell, and to sell, all or
any part of the excess shares held by the Trust to the following
purchasers, in order of priority: first, the Company; second,
any benefit plan maintained by the Company or Community Bank &
Trust, N.A. (the "Bank"); third, current directors of the
Company or the Bank; fourth, current officers of the Company or
the Bank; and fifth, members of the general public (through
sales on the open market).
Section 6. Disposition of Income.
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During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
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The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, of all transactions,
including such specific records as shall be agreed upon in
writing between the Company and the Trustee. Within 60 days
following the close of each December 31 and within 20 days after
the removal or resignation of the Trustee, the Trustee shall
deliver to the Company a written account of its administration
of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or
resignation, reflecting all investments, receipts, disbursements
and other transactions effected by it, including a description
of all securities and investments purchased and sold with the
cost or net proceeds of such purchases or sales (accrued
interest paid or receivable recorded separately), and reflecting
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as applicable.
Section 8. Responsibility of Trustee.
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(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like objectives, provided, however, that the
Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the
Company which is contemplated by, and in conformity with, the
terms of the Plan or this Trust Agreement and is given in
writing by the Company. In the event of a dispute between the
Company and a party, the Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have
been found by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct. If the Company
does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from
the Trust.
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(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that may accord the Trust the
authority to engage in a business and to receive the gains
therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
Section 9. Compensation and Expenses of Trustee.
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The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
Section 10. Resignation and Removal of Trustee.
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The Trustee may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the
Company receives such notice (unless the Company and the Trustee
agree otherwise). The Trustee may be removed by the Company on
30 days notice or upon shorter notice accepted by the Trustee,
but only if each Participant (and each beneficiary in pay
status) consents in writing to such removal.
If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date or resignation or removal under this section. If
no such appointment has been made, the Trustee may apply to a
court of competent jurisdiction for appointment of a successor
or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses
of the Trust. Upon resignation or removal of the Trustee and
appointment of a Successor Trustee, all assets shall
subsequently be transferred to the Successor Trustee. The
transfer shall be completed within 60 days after receipt of
notice of resignation, removal or transfer, unless the Company
extends the time for such transfer.
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Section 11. Appointment of Successor.
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If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Company or the
Successor Trustee to evidence the transfer.
Notwithstanding the foregoing, if the Trustee resigns or is
removed following a Change in Control, the Trustee that has
resigned or is being removed shall appoint as its successor a
third party financial institution that has trust powers and is
independent of and unrelated to the entity that has acquired or
otherwise obtained control of the Company.
A Successor Trustee need not examine the records and acts
of any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The Successor
Trustee shall not be responsible for, and the Company shall
indemnify and defend the Successor Trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes Successor Trustee.
Section 12. Amendment or Termination.
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(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company, provided
that no such amendment shall either conflict with the terms of
the Plan, or make the Trust revocable.
(b) The Trust shall not terminate until the date on which
no Participant or his or her beneficiaries is entitled to
benefits pursuant to the terms hereof or of the Plan. Upon
termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to the Company.
Section 13. Miscellaneous.
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(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant
to the terms of the Plan and this Trust Agreement.
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(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois,
to the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of a
majority of its then duly-appointed members.
(f) "Change in Control" is defined in Paragraph 2(e) of
the Plan, and shall be defined in the same manner for purposes
of this Trust. Any amendment to said Plan that modifies said
definition shall be deemed to apply with equal force, effect,
and timing to the definition of Change in Control for purposes
of this Trust, except that a modification that may adversely
affect a Participant shall be ineffectual as to the Participant
unless he or she consents in writing to be bound by the
modification.
Section 14. Effective Date.
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The effective date of this Trust shall be the date of
execution designated below.
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IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the undersigned Trustees have
executed this Trust Agreement, this _____ day of __________,
199__.
ATTEST: COMMUNITY FINANCIAL CORP.
____________________ By ______________________
Its President
ATTEST:
____________________ _________________________
Trustee
____________________ _________________________
Trustee
____________________ _________________________
Trustee
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