SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o
Preliminary
Proxy
Statement
o Confidential,
For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12
First
United Corporation
(Name
of
Registrant as Specified in Its Charter)
N/A
(Name
of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No fee
required.
o
Fee computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title
of
each class of securities to which transaction applies: N/A
(2) Aggregate
number of securities to which transaction applies: N/A
(3) Per
unit
price or other underlying value of transaction computed pursuant to Exchange
Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined): N/A
(4) Proposed
maximum aggregate value of transaction: N/A
(5) Total
fee
paid: N/A
o
Fee paid previously
with preliminary materials: N/A
o
Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form or schedule and
the date of its filing.
(1) Amount
previously paid:
(2) Form,
Schedule or Registration Statement no.:
(3) Filing
Party:
(4) Date
Filed:
FIRST
UNITED CORPORATION
19
South Second Street
P.O.
Box 9
Oakland,
Maryland 21550-0009
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
April
4,
2008
To
Shareholders of First United Corporation:
Notice
is
hereby given that the Annual Meeting of the Shareholders of First United
Corporation (the “Corporation”) will be held at the Wisp at Deep Creek Mountain
Resort, McHenry, Maryland 21541. The meeting is scheduled for:
THURSDAY,
MAY 8, 2008, at 10:00 a.m.
The
purposes of the meeting are:
|
1.
|
To
elect five (5) Class I Directors to serve until the 2011 Annual Meeting
and until the election and qualification of their
successors.
|
|
2.
|
To
ratify the appointment of Beard Miller Company LLP as the Corporation’s
independent auditors for fiscal year
2008.
|
|
3.
|
To
transact such other business as may be properly brought before the
meeting
or any adjournment thereof.
|
WE
HOPE THAT YOU WILL ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU CONTEMPLATE
ATTENDING THE MEETING, PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON, IF YOU SO DESIRE. ALL SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS
ON
FEBRUARY 15, 2008 ARE ENTITLED TO VOTE AT THIS MEETING.
Anyone
acting as proxy agent for a shareholder must present a proxy properly executed
by the shareholder authorizing the agent in form and substance satisfactory
to
the judges of election, and otherwise in accordance with the Corporation’s
Amended and Restated Bylaws.
By
order
of the Board of Directors
ROBERT
W.
KURTZ
Secretary
[THIS
PAGE INTENTIONALLY LEFT BLANK]
FIRST
UNITED CORPORATION
19
South
Second Street
P.O.
Box
9
Oakland,
Maryland 21550-0009
(800)
470-4356
April
4, 2008
PROXY
STATEMENT
The
enclosed proxy is solicited by the Board of Directors of First United
Corporation (the “Corporation”) in connection with the Annual Meeting of
Shareholders to be held on May 8, 2008, at 10:00 a.m. at the Wisp at Deep Creek
Mountain Resort, McHenry, Maryland 21541, and any adjournment or postponements
thereof. The cost of soliciting proxies will be borne by the Corporation. In
addition to solicitation by mail, proxies may be solicited by officers,
Directors and regular employees of the Corporation personally
or by telephone, telegraph or facsimile. No additional remuneration will be
paid
to officers, Directors or regular employees who solicit proxies. The Corporation
may reimburse brokers, banks, custodians, nominees and other fiduciaries for
their reasonable out-of-pocket expenses in forwarding proxy materials to their
principals. The approximate date on which this proxy statement and form of
proxy
will be mailed to shareholders is April 4, 2008.
OUTSTANDING
SHARES AND VOTING RIGHTS
Shareholders
of record at the close of business on February 15, 2008 (the “Record Date”) of
issued and outstanding shares of the Corporation’s common stock, par value $.01
per share (“Common Stock”), are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, the number of issued and outstanding shares
of
Common Stock entitled to vote is 6,131,874, each of which is entitled to one
vote.
The
presence, in person or by proxy, of shareholders entitled to cast a majority
of
all votes entitled to be cast at the Annual Meeting shall constitute a quorum.
All matters to be acted upon by shareholders are decided by a majority of all
votes cast at the Annual Meeting on that matter. The withholding of a vote
for a
Director nominee will constitute a vote against that nominee, but a broker
non-vote with respect to the election of Directors will have no impact on the
outcome of that vote. Abstentions and broker non-votes with respect to any
other
proposal will have no impact on the outcome of the vote. A withheld vote, an
abstention and a broker non-vote will each be counted for purposes of
determining whether a quorum is present for the transaction of business.
All
properly executed proxies received pursuant to this solicitation will be voted
as directed by the shareholder on the proxy card. If no direction is given,
the
proxy will be voted FOR
ALL NOMINEES
named in
Proposal 1, FOR
ratification of appointment of the Corporation’s independent auditors named in
Proposal 2, and in the discretion of the proxies as to any other matters that
may properly come before the meeting.
Please
complete and sign the enclosed proxy and return it promptly to our transfer
agent, BNY
Mellon Shareowner Services.
Your
proxy may be revoked at any time prior to its use by signing and delivering
another proxy bearing a later date or by delivering written notice of the
revocation to Robert W. Kurtz, Secretary, First United Corporation, P.O.
Box
9, Oakland, Maryland 21550-0009.
Should
you attend the meeting and desire to vote in person, you may withdraw your
proxy
prior to its use by written request delivered to the Secretary of the
Corporation at the meeting.
BENEFICIAL
OWNERSHIP OF COMMON STOCK BY
PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The
following table sets forth information as of the Record Date relating to the
beneficial ownership of the Common Stock by (i) each person or group known
by
the Corporation to own beneficially more than five percent (5%) of the
outstanding shares of Common Stock; (ii) each of the Corporation’s Directors,
Director nominees and named executive officers (as defined below under
“REMUNERATION OF EXECUTIVE OFFICERS”); and (iii) all Directors, Director
nominees and executive officers of the Corporation as a group. Generally,
a person “beneficially owns” shares if he or she has or shares with others the
right to vote those shares or to invest (or dispose of) those shares, or if
he
or she has the right to acquire such voting or investment rights, within 60
days
of the Record Date (such as by exercising stock options or similar rights).
Except
as
otherwise noted, the address of each person named below is the address of the
Corporation.
|
|
Common
Stock Beneficially Owned
|
|
Percent
of Outstanding Common Stock
|
|
Directors,
Nominees and Named Executive Officers:
|
|
|
|
|
|
David
J. Beachy
|
|
|
6,627
|
(1)
|
|
.11
|
%
|
M.
Kathryn Burkey
|
|
|
2,765
|
(2)
|
|
.05
|
%
|
Faye
E. Cannon
|
|
|
2,122
|
|
|
.03
|
%
|
Paul
Cox, Jr.
|
|
|
1,983
|
|
|
.03
|
%
|
William
B. Grant
|
|
|
9,600
|
(3)
|
|
.16
|
%
|
Eugene
D. Helbig, Jr.
|
|
|
2,927
|
(4)
|
|
.05
|
%
|
Raymond
F. Hinkle
|
|
|
5,684
|
(5)
|
|
.09
|
%
|
Robert
W. Kurtz
|
|
|
2,318
|
(6)
|
|
.04
|
%
|
Steven
M. Lantz
|
|
|
1,793
|
(7)
|
|
.03
|
%
|
John
W. McCullough
|
|
|
5,286
|
|
|
.09
|
%
|
Elaine
L. McDonald
|
|
|
6,477
|
(8)
|
|
.11
|
%
|
Donald
E. Moran
|
|
|
135,164
|
(9)
|
|
2.20
|
%
|
Karen
F. Myers
|
|
|
7,391
|
(10)
|
|
.12
|
%
|
Carissa
L. Rodeheaver
|
|
|
1,055
|
(11)
|
|
.02
|
%
|
Gary
R. Ruddell
|
|
|
1,449
|
|
|
.02
|
%
|
I.
Robert Rudy
|
|
|
32,345
|
(12)
|
|
.53
|
%
|
Richard
G. Stanton
|
|
|
14,215
|
(13)
|
|
.23
|
%
|
Robert
G. Stuck
|
|
|
3,529
|
|
|
.06
|
%
|
H.
Andrew Walls, III
|
|
|
50
|
|
|
.00 |
%
|
|
|
|
|
|
|
|
|
Directors
& Executive Officers as a Group (22 persons)
|
|
|
261,528
|
|
|
4.27
|
%
|
|
|
|
|
|
|
|
|
5%
Beneficial Owners:
|
|
|
|
|
|
|
|
Firstoak
& Corporation
|
|
|
373,135
|
(14)
|
|
6.09
|
%
|
P.O.
Box 557
|
|
|
|
|
|
|
|
Oakland,
Maryland 21550
|
|
|
|
|
|
|
|
|
(1)
|
Includes
21 shares owned by spouse.
|
|
(2)
|
Includes
241 shares owned by spouse.
|
|
(3)
|
Includes
6,066 shares owned jointly with spouse, 6 shares owned jointly with
daughter, 208 shares owned by son, 5 shares owned by daughter, 2,425
shares held in a 401(k) plan account, 359 shares owned by spouse’s IRA,
and 193 shares owned by spouse and
daughter.
|
|
(4)
|
Includes
390 shares owned jointly with spouse, 325 shares owned by an IRA,
and
2,212 shares held in a 401(k) plan
account.
|
|
(5)
|
Includes
5,584 shares owned jointly with
spouse.
|
|
(6)
|
Includes
2,295 shares held in a 401(k) plan
account.
|
|
(7)
|
Includes
252 shares owned jointly with spouse, 6 shares owned by son and 1,130
shares held in a 401(k) plan
account.
|
|
(8)
|
Includes
230 shares held by spouse’s IRA and includes 1,000 shares held by Grantor
Trust of which Ms. McDonald is trustee and beneficiary, which shares
are
pledged to secure a line of credit.
|
|
(9)
|
Includes
86,593 shares owned by daughters over which Mr. Moran has shared
investment discretion and 25,000 shares owned by
spouse.
|
|
(10)
|
Includes
1,000 shares held by Grantor Trust of which Ms. Myers is a beneficiary
and
trustee.
|
|
(11)
|
Includes
250 shares held jointly with spouse, 15 shares held by spouse for
benefit
of a minor child and 790 shares held in a 401(k) plan
account.
|
|
(12)
|
Includes
797 shares owned jointly with spouse, 6,003 shares owned by spouse,
3,960
shares owned by daughters, 15,575 shares owned by I.R. Rudy’s, Inc. of
which Mr. Rudy is owner.
|
|
(13)
|
Includes
9,008 shares owned jointly with spouse and 1,543 shares held in spouse’s
IRA.
|
|
(14)
|
Shares
held in the name of Firstoak & Corporation, a nominee, are
administered by the Trust Department of First United Bank & Trust in a
fiduciary capacity. Firstoak & Corporation disclaims beneficial
ownership of such shares.
|
ELECTION
OF DIRECTORS (PROPOSAL 1)
The
number of Directors constituting the Board of Directors is currently set at
16.
Directors are divided into three classes, as nearly equal in number as possible,
with respect to the time for which the Directors may hold office. Each Director
is elected to hold office for a term of three years, and the terms of one class
of Directors expire each year. The terms of Class I Directors expire this year,
the terms of Class II Directors expire in 2009, and the term of Class III
Directors expire in 2010. In all cases, Directors are elected until their
successors are duly elected and qualify.
Shareholders
are being asked to vote for a total of five (5) Director nominees at this year’s
Annual Meeting. Each of the current Class I Directors is standing for
re-election. All Class I Directors were previously elected by shareholders.
No
Director or nominee holds any directorship in any other public company. All
current Directors and Director nominees serve on the board of directors of
First
United Bank & Trust, the Corporation’s wholly-owned subsidiary (the “Bank”).
The Corporation’s Chief Executive Officer (“CEO”) is a Class I Director, and the
Corporation’s President and Chief Risk Officer (“CRO”) is a Class II Director.
The
following table provides information about the Director nominees, including
their ages as of the Record Date, their principal occupations and business
experience, and certain other information. In the event a nominee declines
or is
unable to serve as a Director, which is not anticipated, the proxies will vote
in their discretion with respect to a substitute nominee named by the Board.
Nominees
for Class I (term
expires in 2011):
|
|
|
|
Occupation
|
|
Director
|
Name
|
|
Age
|
|
During
Past Five Years
|
|
Since
|
David
J. Beachy
|
|
67
|
|
Fred
E. Beachy Lumber Co., Inc.
|
|
1985
|
|
|
|
|
Building
Supplies - Retired.
|
|
|
|
|
|
|
|
|
|
Faye
E. Cannon
|
|
58
|
|
Consultant,
Director of Dan Ryan Builders, Inc;
|
|
2004
|
|
|
|
|
Former
Chief Executive Officer and President
|
|
|
|
|
|
|
of
F & M Bancorp, Frederick, Maryland - Retired.
|
|
|
|
|
|
|
|
|
|
Paul
Cox, Jr.
|
|
68
|
|
Owner, Professional
Tax
Service. |
|
1993
|
|
|
|
|
|
|
|
William
B. Grant
|
|
54
|
|
Chairman
of the Board, CEO
|
|
1995
|
|
|
|
|
First
United Corporation and
|
|
|
|
|
|
|
First
United Bank & Trust.
|
|
|
|
|
|
|
|
|
|
John
W. McCullough
|
|
58
|
|
Certified
Public Accountant. Retired in 1999
as
Partner of Ernst & Young, LLP.
|
|
2004
|
The
Board of Directors recommends that shareholders vote FOR
all nominees named above.
Information
about the Directors whose terms do not expire in 2008, including their ages
as
of the Record Date, and their principal occupations and business experience
for
the past five years is listed in the tables below.
Class
II Directors (term
expires in 2009):
|
|
|
|
Occupation
|
|
Director
|
Name
|
|
Age
|
|
During
Past Five Years
|
|
Since
|
Raymond
F. Hinkle
|
|
71
|
|
Tax
Consultant.
|
|
1996
|
|
|
|
|
|
|
|
Robert
W. Kurtz
|
|
61
|
|
President,
CRO, Secretary, and Treasurer,
|
|
1990
|
|
|
|
|
First
United Corporation and
|
|
|
|
|
|
|
First
United Bank & Trust.
|
|
|
|
|
|
|
|
|
|
Elaine
L. McDonald
|
|
59
|
|
Realtor,
Long & Foster Realtors.
|
|
1995
|
|
|
|
|
|
|
|
Donald
E. Moran
|
|
77
|
|
Acting
President, General Manager, Secretary
|
|
1988
|
|
|
|
|
and
Treasurer, Moran Coal Corporation.
|
|
|
|
|
|
|
|
|
|
Gary
R. Ruddell
|
|
60
|
|
President,
Total Biz Fulfillment, provides
|
|
2004
|
|
|
|
|
business
services; Member, Gary R. Ruddell LLC,
|
|
|
|
|
|
|
commercial
real estate; Member, MSG
|
|
|
|
|
|
|
Glendale
Properties LLC, residential real
|
|
|
|
|
|
|
estate;
Secretary, and Treasurer Hansa Toys USA, Inc.
|
|
|
Class
III Directors (term
expires in 2010):
|
|
|
|
Occupation
|
|
Director
|
Name
|
|
Age
|
|
During
Past Five Years
|
|
Since
|
M.
Kathryn Burkey
|
|
57
|
|
Certified
Public Accountant, Owner,
|
|
2005
|
|
|
|
|
M.
Kathryn Burkey, CPA
|
|
|
|
|
|
|
|
|
|
Karen
F. Myers
|
|
56
|
|
President,
Mountaineer Log & Siding Co., Inc.
|
|
1991
|
|
|
|
|
President,
Recreational Industries Inc.;
|
|
|
|
|
|
|
Member,
DC Development LLC;
|
|
|
|
|
|
|
Vice
President, Secretary and Real Estate Broker,
|
|
|
|
|
|
|
Wisp
Resort Development, Inc.
|
|
|
|
|
|
|
|
|
|
I.
Robert Rudy
|
|
55
|
|
President,
Rudy’s Inc.,
|
|
1992
|
|
|
|
|
Retail
Apparel and Sporting Goods.
|
|
|
|
|
|
|
|
|
|
Richard
G. Stanton
|
|
68
|
|
Retired.
Served as Chairman, President
|
|
1985
|
|
|
|
|
and
Chief Executive Officer of First United
|
|
|
|
|
|
|
Corporation
and First United Bank & Trust
|
|
|
|
|
|
|
until
1996.
|
|
|
|
|
|
|
|
|
|
Robert
G. Stuck
|
|
61
|
|
Vice
President, Oakview Motors, Inc. - Retired.
|
|
1995
|
|
|
|
|
Realtor,
Long & Foster Real Estate, Inc.
|
|
|
|
|
|
|
|
|
|
H.
Andrew Walls, III
|
|
47
|
|
President,
Morgantown Printing & Binding;
|
|
2006
|
|
|
|
|
Member,
MEGBA, LLC.
|
|
|
Family
Relationships Among Directors, Nominees and Executive
Officers
Director
nominee I. Robert Rudy and Senior Vice President Jeannette R. Fitzwater are
siblings.
Committees
of the Board of Directors
The
Board
of Directors has an Audit Committee, an Asset and Liability Management
Committee, an Executive Committee, a Strategic Planning Committee, a
Compensation Committee, and a Nominating and Governance Committee (the
“Nominating Committee”). These
committees are discussed below.
Audit
Committee -
The
Audit Committee is established pursuant to Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and consists of David J.
Beachy, M. Kathryn Burkey, Faye E. Cannon, Paul Cox, Jr., Raymond F. Hinkle,
John W. McCullough, Richard G. Stanton, and Robert G. Stuck. The committee
is
responsible for the hiring, compensation and oversight of the Corporation’s
independent auditors, and it also assists the Board in monitoring the integrity
of the financial statements, in monitoring the performance of the Corporation’s
internal audit function, and in monitoring the Corporation’s compliance with
legal and regulatory requirements. The Board has determined that all audit
committee members are financially literate and that Ms. Burkey, Ms. Cannon,
and
Messrs. McCullough and Stanton each qualify as an “audit committee financial
expert” as that term is defined by Item 401(h) of the SEC’s Regulation S-K. This
committee met 11 times in 2007. The Board of Directors has adopted a written
charter for the Audit Committee, a copy of which is available on the
Corporation’s website at www.mybankfirstunited.com.
Asset
and Liability Management Committee -
The
Asset and Liability Management Committee consists of David J. Beachy, Paul
Cox,
Jr., William B. Grant, Raymond F. Hinkle, Robert W. Kurtz, John W. McCullough,
Elaine L. McDonald, Gary R. Ruddell, I. Robert Rudy, Richard G. Stanton, H.
Andrew Walls, III, and Robert G. Stuck. The committee reviews and recommends
changes to the Corporation’s Asset and Liability, Investment, Liquidity, and
Capital Plans. This committee met four times in 2007.
Executive
Committee -
The
Executive Committee consists of Paul Cox, Jr., William B. Grant, Robert W.
Kurtz, Donald E. Moran, I. Robert Rudy, Richard G. Stanton, and Robert G. Stuck.
The committee is responsible for reviewing and recommending changes to the
Corporation’s Insurance Program, overseeing compliance with the Corporation’s
Bylaws and Articles of Incorporation, monitoring the performance of the
Corporation and its subsidiaries, and recommending changes to the personnel
policies of the Corporation and of its subsidiaries. The Executive Committee
is
empowered to act on behalf of the full Board between meetings of the Board.
This
committee met two times in 2007.
Strategic
Planning Committee -
The
Strategic Planning Committee consists of Faye E. Cannon, Paul Cox, Jr., William
B. Grant, Raymond F. Hinkle, Robert W. Kurtz, Elaine L. McDonald, Donald E.
Moran, Gary R. Ruddell, I. Robert Rudy, and Richard G. Stanton. The committee
focuses on long-term planning to insure that management’s decisions take into
account the future operating environment, the development of corporate
statements of policy, and review of management’s internal and external
information and communications systems. This committee met two times in
2007.
Compensation
Committee -
The
Compensation Committee, which met eight times in 2007, consists of M. Kathryn
Burkey, Faye E. Cannon, Raymond F. Hinkle, Elaine L. McDonald, Richard G.
Stanton, and Robert G. Stuck. The committee is responsible for recommending
to
the Board a compensation policy for the executive officers and directors of
the
Corporation and its subsidiaries, overseeing the Corporation’s various
compensation plans, and recommending changes for executive and Director
compensation. The committee determines executive compensation pursuant to the
principles discussed below under “Compensation Disclosure and Analysis” and
determines Director compensation by reviewing peer group comparison reports
prepared by compensation consultants. The Board passes on and, where
appropriate, approves or ratifies all committee recommendations. The
Compensation Committee has adopted a written charter, a copy of which is
available on the Corporation’s website at www.mybankfirstunited.com.
Nominating
and Governance Committee -
The
Nominating Committee consists of David J. Beachy, M. Kathryn Burkey, Faye E.
Cannon, Paul Cox, Jr., John W. McCullough, Elaine L. McDonald, Donald E. Moran,
and Richard G. Stanton. The committee is responsible for developing
qualification criteria for Directors, reviewing Director candidates recommended
by shareholders (see “Director Recommendations and Nominations” below), actively
seeking, interviewing and screening individuals qualified to become Directors,
recommending to the Board those candidates who should be nominated to serve
as
Directors, and developing and recommending to the Board the Corporate Governance
Guidelines applicable to the Corporation and its subsidiaries. This Committee
met one time in 2007. The Nominating Committee has a written charter, a copy
of
which is available on the Corporation’s website at www.mybankfirstunited.com.
Director
Independence
Pursuant
to Rule 4350(c)(1) of The Nasdaq Stock Market’s listing standards (the “Nasdaq
Listing Standards”), a majority of the Corporation’s Directors must be
“independent directors” as that term is defined by Nasdaq Listing Standards Rule
4200(a)(15). The Corporation’s Board of Directors has determined that David J.
Beachy, M. Kathryn Burkey, Faye E. Cannon, Paul Cox, Jr., Raymond F. Hinkle,
John W. McCullough, Elaine L. McDonald, Donald E. Moran, Karen F. Myers, Gary
R.
Ruddell, Richard G. Stanton, and Robert G. Stuck are “independent directors”,
and these independent Directors constitute a majority of the Corporation’s Board
of Directors. The members of the Compensation Committee and of the Nominating
Committee are each an “independent director”. Each member of the Audit Committee
satisfies the independence requirements of Rule 4350(d)(2) of the Nasdaq Listing
Standards. In making these independence determinations, the Board, in addition
to the transactions described below under “CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS”, considered
the following categories of transactions: for Ms. Burkey, the Bank’s purchase of
goods from an affiliated retailer; and for Ms. Myers, the Corporation’s rental
of meeting space and purchase of food products in connection with training
seminars, the 2007 Annual Meeting of Shareholders, and the Corporation’s annual
holiday party from an affiliated facility, and the purchase of phone services
from an affiliated provider.
Director
Compensation
The
following table provides information about compensation paid to or earned by
the
Corporation’s Directors during 2007 who were not named executive officers (as
defined below). Messrs. Grant and Kurtz do not receive director compensation.
DIRECTOR
COMPENSATION
|
|
Name
|
|
Fees
earned or paid in cash
($)
|
|
Change
in pension
value
and nonqualified deferred
compensation
earnings
($)
|
|
All
other compensation
($)(1)
|
|
Total
($)
|
|
David
J. Beachy
|
|
$
|
28,600
|
|
|
—
|
|
|
|
|
$
|
28,600
|
|
M.
Kathryn Burkey
|
|
|
28,000
|
|
|
|
|
$
|
375
|
|
|
28,375
|
|
Rex
W. Burton (2)
|
|
|
4,000
|
|
|
|
|
|
75
|
|
|
4,075
|
|
Faye
E. Cannon
|
|
|
33,100
|
|
|
|
|
|
670
|
|
|
33,770
|
|
Paul
Cox, Jr.
|
|
|
30,500
|
|
|
|
|
|
700
|
|
|
31,200
|
|
Raymond
F. Hinkle
|
|
|
29,300
|
|
|
|
|
|
400
|
|
|
29,700
|
|
John
W. McCullough
|
|
|
29,600
|
|
|
|
|
|
|
|
|
29,600
|
|
Elaine
L. McDonald
|
|
|
33,500
|
|
|
|
|
|
|
|
|
33,500
|
|
Donald
E. Moran
|
|
|
26,100
|
|
|
|
|
|
375
|
|
|
26,475
|
|
Karen
F. Myers
|
|
|
22,700
|
|
|
|
|
|
|
|
|
22,700
|
|
Gary
R. Ruddell
|
|
|
28,300
|
|
|
|
|
|
|
|
|
28,300
|
|
I.
Robert Rudy
|
|
|
21,100
|
|
|
|
|
|
|
|
|
21,100
|
|
Richard
G. Stanton
|
|
|
31,800
|
|
|
|
|
|
|
|
|
31,800
|
|
Robert
G. Stuck
|
|
|
32,700
|
|
|
|
|
|
|
|
|
32,700
|
|
H.
Andrew Walls, III
|
|
|
25,200
|
|
|
|
|
|
300
|
|
|
25,500
|
|
|
(1)
|
Certain
Directors are required to travel significantly greater distances
than
others to attend Board and committee meetings. The amounts shown
include a
travel allowance paid to these Directors.
|
|
(2)
|
Until
the 2007 Annual Meeting of Shareholders, Mr. Burton served as a retired
honorary director and was permitted to attend, but not vote at the
Board
meetings. Mr. Burton received a $400 fee for each meeting that he
attended.
|
Directors
who are not employees of the Corporation or the Bank receive $400 for attending
each meeting of the Corporation’s Board and $400 for attending each meeting of a
committee on which the director serves. Outside Directors also receive an annual
retainer fee of $11,000. The Chairperson of each of the Audit Committee (Mr.
McCullough), Compensation Committee (Ms. McDonald) and Nominating Committee
(Mr.
Moran) receives an additional annual retainer of $2,500. All directors also
serve on the board of directors of the Bank. Outside directors of the Bank
receive $400 for attending each meeting of the Bank’s Board and $300 for
attending each meeting of a Bank Board committee on which the director serves.
All directors of the Corporation and its subsidiaries are permitted to
participate in the Corporation’s non-qualified Executive and Director Deferred
Compensation Plan (the “Deferred Compensation Plan”). A discussion of the
material terms of the Deferred Compensation Plan follows the table entitled
“Deferred Compensation Plan” that appears below in the section entitled
“REMUNERATION OF EXECUTIVE OFFICERS”.
Attendance
at Board Meetings
The
Board
of Directors held 11 Board meetings in 2007. Each Director who served as such
during 2007 attended at least 75% of the aggregate of (i) the total number
of meetings of the Board of Directors (held during the period served) and
(ii) the total number of meetings held by all committees of the Board on
which that person served (held during the period served).
Director
Recommendations and Nominations
The
Nominating Committee will from time to time review and consider candidates
recommended by shareholders. Shareholder recommendations should be labeled
“Recommendation of Director Candidate” and be submitted in writing to: Robert W.
Kurtz, Corporate Secretary, First United Corporation, P.O. Box 9, Oakland,
Maryland 21550; and must specify (i) the recommending shareholder’s contact
information, (ii) the class and number of shares of the Corporation’s capital
stock beneficially owned by the recommending shareholder, (iii) the name,
address and credentials of the candidate for nomination, (v) the number of
shares of the Corporation’s capital stock beneficially owned by the candidate;
and (iv) the candidate’s written consent to be considered as a candidate. Such
recommendation must be received by the Corporate Secretary no less than 150
days
nor more than 180 days before the date of the Annual Meeting of Shareholders
for
which the candidate is being recommended. For purposes of this requirement,
the
date of the meeting shall be deemed to be on the same day and month as the
Annual Meeting of Shareholders for the preceding year.
Candidates
may come to the attention of the Nominating Committee from current Directors,
executive officers, shareholders, or other persons. The Nominating Committee
periodically reviews its list of candidates available to fill Board vacancies
and researches the talent, skills, expertise, and general background of these
candidates. In evaluating candidates for nomination, the Nominating Committee
uses a variety of methods and regularly assesses the size of the Board, whether
any vacancies are expected due to retirement or otherwise, and the need for
particular expertise on the Board.
In
2003,
the Corporation created an “advisory council” consisting of local business
owners in each of the geographic regions that we serve. The primary purpose
of
the advisory council is to tap the knowledge and experience of the advisory
council members to better market in, expand into and serve our market areas.
From time to time, promising Director candidates come to the attention of the
Nominating Committee through their service on the advisory council, although
such service is not a requirement of being considered for nomination. A person
is typically appointed to the advisory council by the Board after being
nominated by a Director, a member of our management team, or another advisory
council member.
Whether
recommended by a shareholder or another third party, or recommended
independently by the Nominating Committee, a candidate will be selected for
nomination based on his or her talents and the needs of the Board. The
Nominating Committee’s goal in selecting nominees is to identify persons that
possess complimentary skills and that can work well together with existing
Board
members at the highest level of integrity and effectiveness. A candidate,
whether recommended by a Corporation shareholder or otherwise, will not be
considered for nomination unless he or she maintains strong professional and
personal ethics and values, has relevant management experience, and is committed
to enhancing financial performance. Certain Board positions, such as Audit
Committee membership, may require other special skills, expertise or
independence from the Corporation.
It
should
be noted that a shareholder recommendation is not a nomination, and there is
no
guarantee that a candidate recommended by a shareholder will be approved by
the
Nominating Committee or nominated by the Board of Directors. A shareholder
who
is entitled to vote for the election of Directors and who desires to nominate
a
candidate for election to be voted on at a Meeting of Shareholders may do so
only in accordance with Article II, Section 4, of the Corporation’s Amended and
Restated Bylaws, which provides that a shareholder may nominate a Director
candidate by written notice to the Chairman of the Board or the President not
less than 150 days nor more than 180 days prior to the date of the meeting
of
shareholders called for the election of Directors which, for purposes of this
requirement, shall be deemed to be on the same day and month as the Annual
Meeting of Shareholders for the preceding year. Such notice shall contain the
following information to the extent known by the notifying shareholder: (a)
the
name and address of each proposed nominee; (b) the principal occupation of
each
proposed nominee; (c) the number of shares of capital stock of the Corporation
owned by each proposed nominee; (d) the name and residence address of the
notifying shareholder; (e) the number of shares of capital stock of the
Corporation owned by the notifying shareholder; (f) the consent in writing
of
the proposed nominee as to the proposed nominee’s name being placed in
nomination for Director; and (g) all information relating to such proposed
nominee that would be required to be disclosed by Regulation 14A under the
Exchange Act and Rule 14a-11 promulgated thereunder, assuming such provisions
would be applicable to the solicitation of proxies for such proposed nominee.
Shareholder
Communications with the Board of Directors
Shareholders
may communicate with the Board of Directors, including
the outside Directors,
by
sending a letter to First United Corporation Board of Directors, c/o Robert
W.
Kurtz, Corporate Secretary, First United Corporation, P.O. Box 9, Oakland,
Maryland, 21550. The Corporate Secretary will deliver all shareholder
communications directly to the Board of Directors.
The
Corporation believes that the Annual Meeting of Shareholders is an opportunity
for shareholders to communicate directly with Directors and, accordingly,
expects that all Directors will attend each Annual Meeting of Shareholders.
If
you would like an opportunity to discuss issues directly with our Directors,
please consider attending this year’s Annual Meeting of Shareholders. The 2007
Annual Meeting of Shareholders was attended by 13 persons who served on the
Board of Directors as of the date of that meeting.
AUDIT
COMMITTEE REPORT
The
Audit
Committee has (i) reviewed and discussed the Corporation’s consolidated audited
financial statements for the year ended December 31, 2007, with Corporation
management; (ii) discussed with Beard Miller Company LLP the Corporation’s
independent auditors, all matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU § 380), as modified or
supplemented; and (iii) received the written disclosures and the letter from
Beard Miller Company LLP required by Independence Standards Board Standard
No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as modified or supplemented, and has discussed with the
auditors the auditors’ independence. The Committee meets with the internal and
independent auditors, with and without management present, to discuss the
overall scope and plans for their respective audits, the results of their
examinations, their evaluations of the Corporation’s internal controls, and the
overall quality of the Corporation’s financial reporting. Based on these reviews
and discussions, the Audit Committee recommended to the Board of Directors
that
the consolidated audited financial statements for the year ended December 31,
2007, be included in the Corporation’s Annual Report on Form 10-K for the year
ended December 31, 2007.
|
|
|
|
By:
AUDIT
COMMITTEE
|
|
|
|
|
|
David
J. Beachy
M.
Kathryn Burkey
Faye
E. Cannon
Paul
Cox, Jr.
Raymond
F. Hinkle
John
W. McCullough
Richard
G. Stanton
Robert
G. Stuck
|
EXECUTIVE
OFFICERS
Information
about the Corporation’s executive officers is set forth below. All officers are
elected annually by the Board of Directors and hold office at its pleasure.
Unless indicated otherwise, officers serve in the same capacities for the
Corporation and the Bank.
William
B. Grant, age 54, serves as Chairman of the Board and CEO. Mr. Grant has been
Chairman of the Board and CEO since 1996. Prior to holding these positions,
he
served as Secretary and Executive Vice President.
Robert
W.
Kurtz, age 61, serves as a Director and as the President, CRO, Secretary, and
Treasurer. Mr. Kurtz has been a Director since 1990 and has served as President,
Secretary, and Treasurer since 1997. Mr. Kurtz served as Chief Financial Officer
(“CFO”) from 1997 to December 31, 2005. Prior to holding these positions, he
served as Chief Operating Officer and Executive Vice President.
Jeannette
R. Fitzwater, age 47, serves as Senior Vice President and Director of Human
Resources. Ms. Fitzwater was appointed to these positions in 1997. Prior to
this
time, she served as First Vice President, Director of Marketing, and Regional
Sales Manager of the Bank.
Eugene
D.
Helbig, Jr., age 55, serves as Senior Vice President and Senior Trust Officer.
Mr. Helbig was appointed Senior Vice President in 1997 and Senior Trust Officer
in 1993. Prior to serving in these capacities, he served as First Vice President
of the Bank.
Steven
M.
Lantz, age 50, serves as Senior Vice President and Director of Lending. Mr.
Lantz was appointed to these positions in 1997. Prior to this time, he served
as
First Vice President and Commercial Services Manager of the Bank.
Robin
M.
Murray, age 49, serves as Senior Vice President and Director of Retail Banking.
Ms. Murray was appointed to this position in 2006. From 1997 until 2006, she
served as the Bank’s Vice President & Director of Marketing and Retail Sales
and Marketing Retail Service Manager.
Carissa
L. Rodeheaver, age 41, serves as Senior Vice President and CFO. Ms. Rodeheaver,
who is a Certified Public Accountant and Certified Financial Planner, was
appointed to these positions on January 1, 2006. Prior to this time, Ms.
Rodeheaver served as Vice President and Trust Department Sales Manager of the
Bank from 2000 to 2004 and Vice President and Assistant Chief Financial Officer
of the Corporation from 2004 to December 31, 2005.
Frederick
A. Thayer, IV, age 49, serves as Senior Vice President and Director of Marketing
and Strategic Planning.
Mr.
Thayer was appointed to this position in 2006. Prior to this time, Mr. Thayer
served as Senior Vice President, Director of Sales, and CRA Officer, First
Vice
President, Regional Executive Officer and Regional Sales Manager of the
Bank.
COMPENSATION
DISCUSSION AND ANALYSIS
Both
the
Corporation and the Bank maintain various compensation plans and arrangements
for their respective employees. All of the Corporation’s executive officers are
also executive officers of the Bank. Where appropriate, these plans and
arrangements are structured to apply to employees of the consolidated group.
As
used in the discussion that follows, the terms “we”, “us”, and “our” refer to
First United Corporation and its consolidated subsidiaries unless the context
clearly requires otherwise.
Overview
of Compensation Philosophy and Objectives
The
Compensation Committee recognizes the importance of maintaining sound principles
for the development and administration of compensation and benefit programs,
and
has taken steps to significantly enhance the Compensation Committee’s ability to
effectively carry out its responsibilities as well as ensure that the Company
maintains strong links between executive pay and performance. Examples of
procedures and actions that the Compensation Committee has recently implemented
or taken include:
|
·
|
Incorporated
executive sessions (without management present) into all Compensation
Committee meetings;
|
|
·
|
Utilized
an independent compensation consultant to advise on executive compensation
issues;
|
|
·
|
Realigned
compensation structures based on targeting median competitive
pay;
|
|
·
|
Reviewed
peer group performance comparisons;
|
|
·
|
Performed
annual review for the CEO;
|
|
·
|
Performed
annual reviews of the evaluations of all other executive
officers;
|
|
·
|
Reviewed
and revised short-term incentive plan for members of executive management;
and
|
|
·
|
Established
parameters for a long-term incentive plan for members of executive
management.
|
Role
of the Compensation Committee, Management and the Compensation
Consultant
Role
of the Compensation Committee
The
Compensation Committee of the Corporation’s Board of Directors is composed of a
minimum of three independent Directors and is appointed each year by the
Corporation’s Board, considering the recommendation of the Nominating and
Governance Committee, and the views of the Chairman of the Board and the CEO,
as
appropriate. The role of the Compensation Committee is to oversee our executive
compensation and benefit plans and policies, administer our cash-based incentive
and equity-based plans, and annually review and recommend for approval by the
Board all compensation decisions relating to the executive officers, including
the Chairman and CEO, the CFO, and the other named executive officers. The
Compensation Committee submits its decisions regarding compensation to the
independent Directors of the Board for approval or ratification.
Six
members of our Board of Directors sit on the Compensation Committee, each of
whom is an independent director under the NASDAQ listing requirements. The
Compensation Committee meets throughout the year (8 times in 2007) and also
takes action by written consent. The Chair of the Compensation Committee reports
on committee actions at meetings of the Company’s Board.
The
Compensation Committee reviews all compensation components for the Company’s CEO
and other executive officers, including base salary, annual incentive awards,
long-term incentive/equity grants, benefits and other perquisites. In addition
to reviewing competitive market values, the Compensation Committee also examines
the total compensation mix, pay-for-performance relationship, and how all
elements, in the aggregate, comprise each executive’s total compensation
package.
The
Compensation Committee reviews CEO performance and makes decisions regarding
the
CEO’s compensation. The CEO makes recommendations on other executives to the
Compensation Committee who then reviews these recommendations and, if approved,
submits such recommendations to the Board for ratification. Input and data
from
the CEO, CFO, Human Resources and outside consultants and advisors are provided
as a matter of practice and as requested.
The
Compensation Committee has the authority and resources to obtain advice and
assistance from internal or external legal, human resource, accounting or other
experts, advisors, or consultants as it deems desirable or appropriate. Details
on the Compensation Committee’s function are more fully described in its
charter, which has been approved by the Board of Directors. The Compensation
Committee’s charter is located on the Corporation’s website at www.mybankfirstunited.com.
Role
of the Compensation Consultant & Management
We
utilize the services of outside advisors and consultants throughout the year
as
they relate to executive compensation. In 2007, the Compensation Committee
engaged the services of DolmatConnell
& Partners, Inc. (“DCP”) and Pearl
Meyer & Partners (“PM&P”), both of which are independent executive and
board compensation consulting firms. These consultants reported directly to
the
Compensation Committee. The Compensation Committee has direct access to any
advisors it needs for issues related to executive compensation and
benefits.
The
Compensation Committee engaged DCP to assist it with the adoption of the Omnibus
Equity Compensation Plan and the Change
in
Control Severance Plan
(the
“Severance Plan”). PM&P was engaged to conduct a comprehensive total
compensation review for executives and board of directors. The Compensation
Committee also relied on the consultant to provide ongoing advice, data and
perspectives on market and best practices on issues related to executive and
Board compensation. This advice is requested and utilized as needed to support
the Compensation Committee’s decisions and review processes.
The
Compensation Committee occasionally requests one or more members of top
management to be present at Compensation Committee meetings where executive
compensation and corporate or individual performance are discussed and
evaluated. Executives are free to provide insight, suggestions or
recommendations regarding executive compensation. However, only independent
Compensation Committee members are allowed to vote on decisions regarding
executive compensation.
The
Compensation Committee meets with the CEO to discuss his own performance and
compensation package, but ultimately decisions regarding his package are made
solely based upon the Compensation Committee’s deliberations, as well as input
from the compensation consultant, as requested. The Compensation Committee
considers recommendations from the CEO, as well as input from the compensation
consultant as requested to make decisions regarding other
executives.
Elements
of Executive Compensation
In
2007,
total annual compensation for our named executive officers consisted of base
salary, annual cash incentive awards (Executive Pay for Performance Plan) and
benefits (broad employee benefits and executive benefits). In 2007, the Bank
received shareholder approval to make equity and incentive awards under the
Corporation’s Omnibus Equity Compensation Plan. No awards were made from this
plan during 2007. The material terms and process for determining each form
of
compensation are described below.
Salary
- Executive
salaries are evaluated periodically by the Compensation Committee and are based
upon an array of qualitative factors including functional area management,
contribution to our overall financial results, and leadership development.
In
addition, a compensation review is completed each year to compare our executive
salaries to the median salaries of a peer group consisting of financial
institutions of similar size and within a designated geographic area. The
Compensation Committee also considers recommendations from the Chairman and
CEO
regarding salaries for the executives based upon his evaluation of their
performance. Management provides to the Compensation Committee historical and
prospective breakdowns of the salary history for each executive officer. It
is
the Compensation Committee’s intention to set executive salaries at levels
sufficient to attract and retain a strong motivated leadership
team.
Executive
Pay for Performance Plan (EPP) - The
EPP
is our annual cash incentive award program which rewards for our overall
performance. The EPP is designed to reward executives as a team, rather than
focusing on individual contributions. Incentive goals for the EPP are selected
each year by the Compensation Committee to reflect our core financial
objectives. For 2007, our goals were based upon Return on Equity (ROE), Earnings
per Share (EPS) and the Efficiency Ratio. Each executive has a target award
which is defined as a percentage of base salary and reflects the executive’s
management role. Actual awards are determined based on our performance relative
to the three financial goals. The incentive goals are established at the start
of each year in conjunction with the budgetary approval process by the Board
of
Directors. The Compensation Committee is responsible for selecting and
recommending the EPP goals with final approval by the Board of Directors. At
year-end, the Compensation Committee reviews our projected performance for
the
year and makes a determination as to whether awards under the EPP are payable
for the year. If so, awards are paid in the first quarter of the following
year.
For the 2007 plan, both a target goal and payout and a maximum performance
goal
(102% of target goal) and payout (125% of target payout) were established.
If we
achieved the target goal, then the target award would be paid. If we achieved
or
exceeded the maximum goal, then the maximum award would be paid. No award would
be paid for performance below target.
Equity/Incentive
Compensation - At
the
2007 Annual Meeting of Shareholders, the shareholders of the Corporation
approved the Omnibus Equity Compensation Plan. The Plan permits
the Compensation Committee, in its sole discretion, to grant various forms
of
incentive awards. The Compensation Committee has the power to grant stock
options, stock appreciation rights, stock awards, stock units, performance
units, dividend equivalents, and other stock-based awards.
The
purpose of the Plan is to align the interests of our executive team and Board
members with shareholder interests, as well as to encourage a long-term
perspective of performance and provide an effective means to attract and retain
top talent. Although no awards were granted during 2007, the Compensation
Committee reviewed alternative grant strategies with its consultant and intends
to make awards during fiscal year 2008.
401(k)
Profit Sharing Plan - Because
we believe that every employee should have the ability to accrue retirement
benefits, we adopted the 401(k) Profit Sharing Plan, which is available to
all
employees, including executive officers, on the first of the month following
completion of 30 days of
service to the Corporation and its subsidiaries.
In
addition to contributions by participants, the plan contemplates employer
matching and discretionary contributions to the accounts of participants. We
believe that matching contributions encourage employees to participate and
thereby plan for their
post-retirement financial future. During 2007, we made a contribution equal
to
50% of the amount of the salary contribution made by the employee, up to 6%.
Beginning with the 2008 plan year, we have enhanced the match formula to 100%
on
the first 1% of salary reduction and 50% on the next 5% of salary reduction.
This match is accrued for all employees, including executive officers,
immediately upon entering the plan on the first day of the month following
the
completion of 30 days of employment. We may also contribute a Qualified Matching
Employer Contribution (“QMAC”) annually. The employee must be a plan participant
and be actively employed on the last day of the plan year to share in either
the
employer matching contribution or the QMAC.
Pension
Plan - We
believe that every employee should share in our success and have the ability
to
accrue retirement benefits. All
employees are eligible to participate in the Pension Plan, which is a qualified
defined benefit plan, upon completion of one year of service and the attainment
of the age of 21. Retirement benefits are determined using
an
actuarial formula that takes into account years of service and average
compensation. Normal retirement age for the defined benefit pension plan is
65
years of age with the availability of early retirement at age 55. Pension
benefits are fully vested after 5 years of service.
Supplemental
Executive Retirement Plan (SERP) - The
Bank
adopted the SERP to
ensure
that executives reach a targeted retirement income. The SERP recognizes the
value that our executives bring to the organization and rewards them for their
long-term service commitments. The
SERP
is available only to a select group of management or highly compensated
employees, including the named executive officers. The SERP was created to
overcome qualified plan regulatory limits or the “reverse discrimination”
imposed on highly compensated executives due to IRS contribution and
compensation limits. The
SERP
benefit is equal to 2.5%
of
the executive’s Final Pay for each year of service through age 60 (up to a
maximum of 24 years) plus 1% of Final Pay for each year of service after age
60
(up to a maximum of 5 years), for a total benefit equal to 65% of Final Pay.
We
chose
this plan design to provide competitive retirement benefits and to encourage
long and faithful service. The SERP benefits are offset by any accrued benefits
payable under the Company Pension Plan and 50% of
the
social security benefits received by the participant. We
designed the SERP primarily to supplement benefits payable under the Pension
Plan and, as such, we felt that it would be most appropriate to measure SERP
benefits using an actuarial formula (i.e.,
years
of service and final pay) similar to that used under the Pension Plan.
For
purposes of the SERP, “Final Pay” means a participant’s annual salary for the
year in which a Separation from Service (as defined in the SERP) occurs plus
the
greater of (i) the maximum targeted cash bonus for that year or (ii) the actual
cash bonus paid for the year immediately preceding the year in which the
Separation from Service occurred.
Each
of
the named executive officers has been credited with 24 years of service,
regardless of actual years of service, to minimize certain income
taxes imposed
under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)
that could arise in connection with the Severance Plan that was adopted by
the
Corporation in February 2007. We
excluded the SERP benefits payable to Mr. Grant from the Internal Revenue Code
Section 280G limitation in recognition of his importance to our organization
and
the fact that the risk that he would be terminated following a change in control
is likely greater than for other executives.
If
the
participant dies prior to retirement, the SERP benefit will be reduced by the
amount of any death benefit payable to the participant’s designated
beneficiaries under the Supplemental Life Insurance benefit provided through
the
Bank Owned Life Insurance (BOLI) policies. The SERP and supplemental insurance
were designed in tandem so that in no event will the sum of the SERP benefit
paid upon death and the insurance benefits paid under the BOLI policy exceed
the
normal retirement SERP benefit earned to date of death. (See description of
BOLI
policy below).
Split
Dollar Life Insurance (through Bank Owned Life Insurance - BOLI)
-
The Bank
purchased policies of BOLI, which are insurance policies on the lives of our
officers, to help offset the costs of providing benefits under all benefit
plans
and arrangements. The Bank is the sole owner of these BOLI policies, has all
rights with respect to the cash surrender values of these BOLI policies, and
is
the sole death beneficiary under these BOLI policies. Because we believe that
it
is important to reward our officers for their loyalty and service, we have
agreed to assign a portion of the cash benefits payable under these BOLI
policies to their estates in the event they die while employed. The insurance
benefit for each of the Bank’s executive officers is the present value of the
projected SERP benefit at normal retirement age (as defined in the plan) reduced
by the participant’s projected income tax on that benefit. For
non-executive officers, the benefit is $25,000.
The
BOLI
benefits program and the SERP were adopted several years ago after consultation
with Charon Planning, a benefits and BOLI administration firm hired by the
Board
of Directors. Although management was involved in the consultative process,
major decisions with respect to these plans, including the decision to adopt
and
implement them, were made by the Board of Directors.
Deferred
Compensation Plan-Each
of
our Directors and those executives selected by the Compensation Committee are
permitted to participate in the Deferred Compensation Plan. In addition to
Director and employee deferrals, the Deferred Compensation Plan contemplates
discretionary employer contributions to a participant’s account. To date, no
discretionary contributions have been made.
Change
in Control Severance Plan—Each
of
our executive
officers participates in our Severance Plan and has entered into individual
Change in Control Severance Agreements. The
Severance Plan is administered by the Compensation Committee. Each Severance
Agreement generally provides that, if the participant’s employment is terminated
by the Corporation without “Cause” (as defined in the Severance Agreement) or by
the participant for “Good Reason” during the period commencing on the date that
is 90 days before a “Change in Control” (as defined in the Severance Plan) and
ending on the first anniversary of a Change in Control (the “Protection
Period”), he or she will be entitled to receive a lump sum cash payment equal to
two times (2.99 times for Mr. Grant) his or her Final Pay, the immediate vesting
of all equity-based compensation awards that have been granted to the
participant, continued coverage for 24 months under the Corporation’s group
health and dental plan (or, if the participant is not eligible for such
coverage, a monthly cash payment equal to the monthly premium for a similar
policy), and outplacement services for up to 12 months. For all participants
other than Mr. Grant, the Severance Agreement provides that the amount of all
severance benefits described above, plus the amount of all benefits under any
other plan or arrangement, the payment of which is deemed to be contingent
upon
a change in the ownership or effective control of the Corporation (as determined
under Section 280G of the Internal Revenue Code), may not exceed 2.99 times
the
participant’s “annualized includable compensation for the base period”. In the
event the amount of the benefits payable to Mr. Grant under his Severance
Agreement and all other arrangements the payment of which is deemed to be
contingent on a Change in Control exceeds 2.99 times his annualized includable
compensation for the base period, he will be entitled to a tax gross-up payment
from the Corporation to cover any excise tax imposed by Section 4999 of the
Internal Revenue Code or any similar state or local tax law, and any interest
or
penalties payable with respect to such taxes, on the amount of such benefits
and
the gross-up tax payment.
Perquisites
- Perquisites
are provided to executive officers at the discretion of the Compensation
Committee and are reviewed periodically. In 2007, perquisites provided to
executive officers, including the named executive officers, included the payment
of a long-term disability insurance policy premium which is paid for all
full-time employees. In addition, Mr. Grant was provided with the use of a
company-owned automobile.
2007
Compensation Decisions (Analysis and Actions)
2007
Base Salaries
Base
compensation is targeted to recognize each executive officer’s value,
performance and historical contributions to our success in light of salary
standards in the marketplace. The Bank has not traditionally increased base
salaries annually. During 2007, the Compensation Committee worked with PM&P
to conduct a comprehensive market analysis of executive compensation. The
project was not complete until late in the year and the Compensation Committee
elected to not make general base salary increases for 2007. However, two
executive officers, Carissa Rodeheaver and Robin Murray, received a salary
increase in recognition of their expanded levels of responsibility and to bring
their compensation more in line with the market. Going forward, the Committee
intends to review base salaries annually and may consider increases as
appropriate to maintain competitive position.
2007
Executive Pay for Performance Plan Awards
The
2007
targeted financial goals under our EPP were as follows:
|
|
Return
on shareholder’s equity of 12.56%
|
|
|
Earnings
per share of $2.19
|
|
|
Efficiency
ratio of 62.23%
|
These
goals were set by the Board of Directors as part of the Bank’s budget planning
process which takes into consideration strategic planning and expansion
objectives.
Each
executive has a target incentive opportunity which was defined based on the
demands of their duties and a comparison of their total compensation with
comparable total compensation packages for similar positions within our peer
group. Forty percent of the incentive award is allocable to achievement of
the
goal for return on shareholders’ equity, 40% is allocable to achievement of the
goal for earnings per share, and the remaining 20% is allocable to achievement
of the goal for efficiency ratio. Individual awards were defined as a percentage
of the executive’s base salary, and the percentage was established to reflect
each executive’s position in the Corporation. Messrs. Grant and Kurtz were
differentiated due to the broad range of responsibilities in their respective
roles. The
incentive can be paid in part or in whole, depending upon which and to what
extent goals are achieved.
The
following table shows the target and maximum incentive awards (as percentage
of
base salary) for meeting defined bank performance goals:
|
|
Target
%
|
|
Maximum
%
|
|
William
B. Grant
|
|
|
40
|
%
|
|
50
|
%
|
Robert
W. Kurtz
|
|
|
30
|
%
|
|
37.5
|
%
|
Carissa
L. Rodeheaver
|
|
|
20
|
%
|
|
25
|
%
|
Steven
M. Lantz
|
|
|
20
|
%
|
|
25
|
%
|
Eugene
D. Helbig
|
|
|
20
|
%
|
|
25
|
%
|
The
actual financial results for 2007 were as follows:
|
|
Return
on shareholders’ equity of 12.70%
|
|
|
Earnings
per share of $2.08
|
|
|
Efficiency
ratio of 63.02%
|
At
the
end of the year, the CEO provided the Compensation Committee with a summary
of
performance relative to the key financial results for the incentive plan, as
well as other key financial measures related to our performance. It was
acknowledged by the Compensation Committee that our 2007 performance was
impacted by our decision to restructure the investment portfolio in order to
enhance long-term financial performance. This restructuring resulted in a
recognized loss in the investment portfolio. While these changes should provide
long-term benefits to us, the impact of the loss impacted our short-term
performance results. We did meet all financial goals when calculated exclusive
of the non-recurring loss and the associated income and taxes.
In
addition to the financial results, the CEO summarized executive contributions
and performance, although the incentive plan rewards solely for our consolidated
results. The Compensation Committee also considered information comparing pay
and performance data reviewed in conjunction with the peer group review
conducted by PM&G (see “Competitive Review and Benchmarking” summary below).
Overall,
the Committee felt that the executive performance was strong in 2007, and
believed the securities loss was a short-term negative impact but ultimately
beneficial to the Corporation and its shareholders. In consideration of the
solid performance, and in consideration of executive total compensation relative
to peers for comparable performance, the Compensation Committee voted to award
incentives at target for 2007.
Adoption
of the Severance Plan
After
consulting with DCP, the Compensation Committee determined it was in the best
interest of the Corporation to establish severance agreements for the executive
management team. The Committee believes that the use of such severance plans
are
a best practice for organizations of similar size. When a corporation undergoes
a change in control, it often triggers a change in executive management, which
can disrupt the continuity of the corporation’s business and affairs and
adversely impact shareholder value. Severance agreements provide an effective
tool to support a smooth transition and to insure the cooperation and best
efforts of management. Section 280G of the Internal Revenue Code imposes an
excise tax on all payments that are contingent on a change in control to the
extent they exceed 2.99 times the participant’s annualized includable
compensation. Additionally, the paying corporation is not entitled to deduct
that excess as compensation expense. As this limit is inclusive of all types
of
compensation and benefits that are contingent on a change in control, the
Committee chose to limit Severance Plan payments to all but Mr. Grant to 2.00
times annualized includable compensation to minimize the possibility that the
Section 280G limit would be exceeded. In recognition of Mr. Grant’s duties as
the Chairman and CEO, the Compensation Committee elected to set Mr. Grant’s lump
sum cash payment under the Severance Agreement to 2.99 times his annualized
includable compensation and to pay any tax gross-up that might be required
for
exceeding the Section 280G limit.
Incentive/Equity
Awards
No
awards
were granted under our Omnibus Equity Compensation Plan during 2007. However,
during 2007, the Compensation Committee worked with PM&P to review equity
compensation approaches and discuss considerations for incorporating share-based
compensation in executive and Board compensation programs going forward. The
objective was to develop an equity compensation approach that supported our
philosophy to align compensation with long-term shareholder interests.
Other
2007 Decisions
Due
to
the inception of performance based incentive compensation plans for both
executive officers and employees, the Compensation Committee chose not to make
any discretionary profit sharing contributions or payments in 2007 under the
401(k) Profit Sharing Plan.
Competitive
Review and Benchmarking
As
stated
above, the Compensation Committee engaged PM&G during 2007 to conduct a
comprehensive market analysis and to provide recommendations related to the
executive compensation program going forward. In addition, the Committee
requested assistance in reviewing Board of Directors compensation as well as
determining an appropriate strategy for allocating stock under the Bank’s newly
approved Omnibus Equity Compensation Plan.
Understanding
the industry landscape is one element the Compensation Committee considers
in
setting program targets and making compensation decisions. The Compensation
Committee’s consultant defined a peer group of institutions of similar asset
size, regional location and business model. This peer group was used for both
the executive and board competitive reviews. The peer group includes 22
institutions ranging from approximately half to two times our size, and in
similar geographic regions. The objective is to position us at approximately
the
median. The 2007 peer group was as follows:
ACNB
Corporation
|
|
Franklin
Financial Services
|
American
National Bankshares
|
|
Harleysville
National Corporation
|
First
Chester County Corporation
|
|
Leesport
Financial Corporation
|
City
Holding Company
|
|
Omega
Financial Corporation
|
FNB
Corporation
|
|
Orrstown
Financial Services
|
Citizens
& Northern Corporation
|
|
Peoples
Bancorp Inc.
|
Camco
Financial Corporation
|
|
Sandy
Spring Bancorp
|
First
Mariner Bancorp
|
|
Severn
Bancorp, Inc.
|
First
Community Bancshares
|
|
Shore
Bancshares, Inc.
|
CNB
Financial Corporation
|
|
Summit
Financial Group
|
Cardinal
Financial Corporation
|
|
Univest
Corporation of Pennsylvania
|
The
comparable companies will be reviewed periodically and may change slightly
depending on changes in the market place, acquisitions, divestitures and our
business focus and/or the makeup of our peers.
In
addition to the peer group, the consultant included data from other industry
data bases and surveys including Watson Wyatt Financial Institutions Benchmark
Survey and Mercer Financial Services Survey. All data sources reflected an
appropriate scope perspective. Data and competitive perspective were assessed
relative to base salary, short term incentives, total cash compensation,
equity/long-term incentives, total direct compensation, benefits and other
compensation and total compensation. The Compensation Committee reviewed data
individually and in aggregate. Data from this analysis was used to develop base
salary, short-term and long-term incentive pay guidelines for 2008 and to serve
as a reference for ongoing pay related decisions.
Relationship
Between Our Performance and Executive Compensation
The
Compensation Committee believes that the compensation paid to executive officers
should be closely tied to our performance on both a short-term and long-term
basis. Accordingly, our goal is to structure our total compensation programs
to
provide a significant focus on enhancing our overall financial performance.
During 2007, this was accomplished through our EPP. In 2008, we will also use
long-term incentives to align our executive and Board interests’ with
shareholders and encourage a long-term perspective of performance. Overall,
we
believe that a performance-based compensation program should assist us in
attracting, motivating and retaining the quality executives critical to our
long-term success.
Equity/Security
Ownership Requirements
We
encourage our directors and officers to maintain an ownership stake in the
Corporation, but we do not require our officers to satisfy any minimum stock
ownership level. Under Maryland banking law, however, each Director must own
stock of the Corporation equal to at least $500.
Accounting
and Tax Considerations
We
have
structured our non-qualified deferred compensation arrangements so that they
comply with Section 409A of the Code. If an executive is entitled to
nonqualified deferred compensation benefits that are subject to Section 409A
and
such benefits do not comply with Section 409A, then the benefits are taxable
in
the first year they are not subject to a substantial risk of forfeiture. In
such
case, the executive is subject to regular federal income tax, interest and
an
additional federal income tax of 20% of the benefit includible in income. In
addition, as noted above, with the exception of Mr. Grant, we structured the
Severance Plan and the related Severance Agreements so as to minimize the risk
that the total compensation paid to an executive in connection with a change
in
control transaction would exceed the limit established pursuant to Internal
Revenue Code Section 280G.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis that is required by the rules established by the Securities and
Exchange Commission. Based on such review and discussion, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this proxy statement.
|
|
|
|
By: |
COMPENSATION
COMMITTEE |
|
|
|
|
|
|
|
Elaine
L. McDonald, Chairperson
M.
Kathryn Burkey
Faye
E. Cannon
Raymond
F. Hinkle
Richard
G. Stanton
Robert
G. Stuck
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
members of the Board who performed the functions of the Compensation Committee
at any time during the last completed fiscal year were: M. Kathryn Burkey,
Faye
E. Cannon, Raymond F. Hinkle, Elaine L. McDonald, Richard G. Stanton and Robert
G. Stuck. Mr. Stanton served as the Chairman of the Board, President and CEO
of
the Corporation until June 1, 1996.
REMUNERATION
OF EXECUTIVE OFFICERS
The
following table sets forth for the last two fiscal years the total remuneration
for services in all capacities awarded to, earned by, or paid to the
Corporation’s Chairman and Chief Executive Officer, its Chief Financial Officer,
and its three most highly compensated executive officers other than the CEO
and
CFO who were serving as executive officers as of December 31, 2007 and whose
total compensation (excluding changes in pension value and non-qualified
deferred compensation earnings) exceeded $100,000 during 2007 (the CEO, CFO
and
such other officers are referred to as the “named executive officers”).
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
Change
in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pension
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
incentive
|
|
deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan
|
|
compensation
|
|
All
other
|
|
|
|
Name
and
|
|
|
|
Salary
|
|
Bonus
|
|
compensation
|
|
earnings
|
|
compensation
|
|
Total
|
|
principal
position
|
|
|
|
($)
|
|
($)
(2)
|
|
($)
(2)
|
|
($)
(3)
|
|
($)
(4)(5)
|
|
($)
|
|
William
B. Grant,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman/CEO
(1)
|
|
|
2007
|
|
$
|
250,000
|
|
|
N/A
|
|
$
|
100,000
|
|
|
0
|
|
$
|
9,705
|
|
$
|
359,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
$
|
250,000
|
|
|
N/A
|
|
|
0
|
|
$
|
723,863
|
|
|
11,550
|
|
|
985,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
W. Kurtz,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President/CRO
(1)
|
|
|
2007
|
|
|
170,000
|
|
|
N/A
|
|
|
51,000
|
|
|
0
|
|
|
3,583
|
|
|
224,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
163,269
|
|
|
N/A
|
|
|
0
|
|
|
102,517
|
|
|
3,825
|
|
|
269,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carissa
L.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodeheaver,
SVP /
|
|
|
2007
|
|
|
145,796
|
|
|
N/A
|
|
|
29,500
|
|
|
36,258
|
|
|
5,360
|
|
|
216,914
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
115,579
|
|
|
N/A
|
|
|
0
|
|
|
68,079
|
|
|
4,581
|
|
|
188,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
M. Lantz,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP
/ Chief Lending
|
|
|
2007
|
|
|
162,500
|
|
|
N/A
|
|
|
32,500
|
|
|
35,576
|
|
|
7,062
|
|
|
237,638
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
162,500
|
|
|
N/A
|
|
|
0
|
|
|
37,904
|
|
|
9,193
|
|
|
209,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
D. Helbig,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP
/ Senior Trust
|
|
|
2007
|
|
|
125,000
|
|
|
N/A
|
|
|
25,000
|
|
|
51,789
|
|
|
9,140
|
|
|
210,929
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
125,000
|
|
|
N/A
|
|
|
0
|
|
|
59,307
|
|
|
10,118
|
|
|
194,425
|
|
(1) |
Messrs.
Grant and Kurtz also serve as directors of the Corporation and of
the Bank
but receive no separate remuneration for such service.
|
(2) |
The
Corporation’s only bonus plan for the named executive officers is the
Executive Pay for Performance Plan, which, for purposes of the Summary
Compensation Table, is reflected in the column entitled “Non-equity
incentive plan compensation”. The amounts shown for 2007 reflect
incentives earned for 2007, but actually paid in 2008.
|
(3)
|
Amounts
for 2007 relate to changes in the present value of the accumulated
benefit
(PVAB) of the Pension Plan and the SERP from the previous year end.
Changes in value for the Pension Plan in 2007 were: Mr. Grant, $50,828;
Mr. Kurtz, $126,461; Ms. Rodeheaver, $11,338; Mr. Lantz, $53,695;
and Mr.
Helbig, $70,169. Changes in value for the SERP in 2007 were: Mr.
Grant,
-$489,207; Mr. Kurtz, -$156,744; Ms. Rodeheaver, $24,920; Mr. Lantz,
-$18,119; and Mr. Helbig, -$18,380. The amounts in this column for
Mr.
Grant, Mr. Kurtz, Mr. Lantz and Mr. Helbig were negative due to a
decrease
in the present value in the SERP plan as a result of decreased total
compensation in 2007 as compared to 2006. Amounts in this column
for Mr.
Grant and Mr. Kurtz are shown as $0, as the combined value of these
sources of compensation for 2007 produced a negative amount which
would
have significantly reduced the resulting total compensation amount.
No
named executive officer received preferential or above-market earnings
on
any compensation that was deferred under the Deferred Compensation
Plan in
2007.
|
(4)
|
Amounts
for 2006 relate to changes in the accumulated PVAB of the Pension
Plan and
the SERP from the previous year end. Changes in value for the Pension
Plan
in 2006 were: Mr. Grant, $35,289; Mr. Kurtz, $66,409; Ms. Rodeheaver,
$8,783; Mr. Lantz, $34,050; and Mr. Helbig, $37,865. Changes in value
for
the SERP in 2006 were: Mr. Grant, $688,574; Mr. Kurtz, $36,108; Ms.
Rodeheaver, $59,296; Mr. Lantz, $3,854; and Mr. Helbig, $21,442.
No named
executive officer received preferential or above-market earnings
on any
compensation that was deferred under the Deferred Compensation Plan
in
2006.
|
(5) |
Amounts
for both 2006 and 2007 include premiums related to BOLI and group
term
life insurance available to all employees, matching contributions
to the
401(k) plan and any sold vacation. For 2007, (i) the dollar value
to the
named executive officers of premiums related to the BOLI benefits
plan and
the Corporation’s group life insurance program available to all employees
is as follows: Mr. Grant, $882; Mr. Kurtz, $3,583; Ms. Rodeheaver,
$249;
Mr. Lantz, $1,328; and Mr. Helbig, $2,204; (ii) matching contributions
made by the Corporation for each executive officer under the Corporation’s
401(k) Profit Sharing Plan as follows: Mr. Grant, $7,563; Mr. Kurtz,
$0;
Ms. Rodeheaver, $4,381; Mr. Lantz, $4,915; and Mr. Helbig, $3,888;
(iii)
discretionary matching contributions
to the 401(k) plan for all plan participants in 2007: Mr.
Grant, $1,260; Mr. Kurtz, $0; Ms. Rodeheaver, $730; Mr. Lantz, $819;
and
Mr. Helbig, $648; and (iv) $2,404 received by Mr. Helbig upon waiver
of a
week’s vacation pursuant to the Corporation’s Buy/Sell Vacation Plan.
|
The
various elements of executive compensation are summarized below and, where
an
element involves a written plan or agreement, are qualified in their entireties
by such plan or agreement. It should be noted that the Severance Plan was
adopted in February 2007, which is also summarized below.
Employment
Arrangements
All
executive officers are employed on an at-will basis and are not parties to
any
written employment agreement. Executive compensation consists of two principal
elements: (i) base salary; and (ii) incentive compensation, consisting of
amounts payable under the EPP.
Salaries
proposed to be paid in 2008 for the named executive officers are as follows:
Mr.
Grant, $257,500; Mr. Kurtz, $176,000; Ms. Rodeheaver, $182,000; Mr. Lantz,
$170,000; and Mr. Helbig,$140,000. For 2008, a long-term share-based element
will be added.
Executive
Pay for Performance Plan
As
mentioned above, the Corporation maintains an EPP that rewards executives when
the Corporation attains certain performance goals. The following table provides
information about grants that could have been earned in 2007 and paid in 2008
pursuant to those grants upon
satisfaction of the conditions set forth above.
GRANTS
OF PLAN-BASED AWARDS
|
|
|
|
Estimated
Possible Annual Payouts Under Non-Equity Incentive Plan
Award
|
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
William
B. Grant
|
|
|
2007
|
|
$
|
0
|
|
$
|
100,000
|
|
$
|
125,000
|
|
Robert
W. Kurtz
|
|
|
2007
|
|
|
0
|
|
|
51,000
|
|
|
63,750
|
|
Carissa
L. Rodeheaver
|
|
|
2007
|
|
|
0
|
|
|
29,500
|
|
|
36,875
|
|
Steven
M. Lantz
|
|
|
2007
|
|
|
0
|
|
|
32,500
|
|
|
40,625
|
|
Eugene
D. Helbig
|
|
|
2007
|
|
|
0
|
|
|
25,000
|
|
|
31,250
|
|
The
following table provides information about the actual awards earned by each
of
the executive officers in 2007, as disclosed in the Summary Compensation
Table:
|
|
Target
%
(of
Salary)
|
|
Total
Payout
|
|
ROE
Portion (40% of Award)
|
|
EPS
Portion (40% of Award)
|
|
Efficiency
Ratio
(20%
of Award)
|
|
William
B. Grant
|
|
|
40
|
%
|
$
|
100,000
|
|
$
|
40,000
|
|
$
|
40,000
|
|
$
|
20,000
|
|
Robert
W. Kurtz
|
|
|
30
|
%
|
$
|
51,000
|
|
$
|
20,400
|
|
$
|
20,400
|
|
$
|
10,200
|
|
Carissa
L. Rodeheaver
|
|
|
20
|
%
|
$
|
29,500
|
|
$
|
11,800
|
|
$
|
11,800
|
|
$
|
5,900
|
|
Steven
M. Lantz
|
|
|
20
|
%
|
$
|
32,500
|
|
$
|
13,000
|
|
$
|
13,000
|
|
$
|
6,500
|
|
Eugene
D. Helbig
|
|
|
20
|
%
|
$
|
25,000
|
|
$
|
10,000
|
|
$
|
10,000
|
|
$
|
5,000
|
|
Bank-Owned
Life Insurance
BOLI
is
insurance on the lives of the Bank’s executive and certain other officers. The
Bank purchased BOLI policies in the aggregate amounts of $18
million in 2001, $2.3 million in 2004, and $2.8 million in 2006. Participation
in the BOLI benefits program can be terminated for any reason, at any time,
by
either the Bank or the covered officer. The Bank intends to terminate each
covered officer’s participation at retirement. For
information about benefits that would be paid to each of the named executive
officers under these split-dollar arrangements, as of December 31, 2007, if
he
or she were to die while employed, see the table that is included below under
“Benefits Upon a Separation From Service”.
Pension
Benefits
All
employees are eligible to participate in the Pension Plan upon completion of
one
year of service and the attainment of the age 21. A year of service is defined
as the completion of 12 consecutive months of employment during which the
employee worked at least 1,000 hours. Full vesting occurs after 5 years of
service.
The
SERP
is available only to a select group of management or highly compensated
employees. The SERP was created to overcome qualified plan regulatory limits
or
the “reverse discrimination” imposed on highly compensated executives due to IRS
contribution and compensation limits. Information about the benefits payable
to
each of the named executive officers under the Pension Plan and the SERP is
provided in the following table.
|
|
|
|
|
|
Present
|
|
Payments
|
|
|
|
|
|
Number
of
|
|
value
of
|
|
during
|
|
|
|
|
|
years
credited
|
|
accumulated
|
|
last
fiscal
|
|
|
|
|
|
service
|
|
benefit
|
|
year
|
|
Name
|
|
Plan
Name
|
|
(#)
(1)
|
|
($)
(2) (3)
|
|
($)
|
|
William
B. Grant
|
|
|
Pension
Plan
|
|
|
29
|
|
$
|
422,412
|
|
$
|
0
|
|
|
|
|
SERP
|
|
|
29
|
|
|
642,051
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
W. Kurtz
|
|
|
Pension
Plan
|
|
|
35
|
|
|
883,605
|
|
|
0
|
|
|
|
|
SERP
|
|
|
35
|
|
|
361,709
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carissa
L. Rodeheaver
|
|
|
Pension
Plan
|
|
|
16
|
|
|
57,832
|
|
|
0
|
|
|
|
|
SERP
|
|
|
24
|
|
|
84,216
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
M. Lantz
|
|
|
Pension
Plan
|
|
|
21
|
|
|
235,504
|
|
|
0
|
|
|
|
|
SERP
|
|
|
24
|
|
|
218,325
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
D. Helbig
|
|
|
Pension
Plan
|
|
|
22
|
|
|
308,520
|
|
|
0
|
|
|
|
|
SERP
|
|
|
24
|
|
|
288,049
|
|
|
0
|
|
(1)
|
No
named executive officer’s benefits are augmented due to any credited years
of service over actual years of service.
|
(2)
|
The
amounts listed as the present accumulated benefits for SERP reflect
the
dollar for dollar offset for the accumulated benefits payable under
the
Pension Plan and 50% of the estimated social security benefits to
be
received by the participant and are based on actual years of service.
In
calculating the present value of accumulated benefits for SERP, the
following assumptions were used: Mortality - 1994 GAR; discount rate
of
6.0%; assumed retirement age of 60 or attained age if later; annuity
factor at retirement based on 5% discount.
|
(3)
|
All
employees are eligible to participate in the pension plan upon completion
of one year of service and the attainment of the age 21. A year of
service
is defined as the completion of twelve consecutive months of employment
during which the employee worked at least 1,000 hours. In calculating
the
present value of the accumulated benefits for the pension plan, the
following assumptions were used: Mortality - UP84, -3 setback; discount
rate of 6.00%; assumed retirement age of 65; normal form of benefit
- 10
year certain and continuous annuity. Compensation limits under 401(a)
(17)
are taken into account for these calculations.
|
SERP
The
SERP
provides supplemental retirement income to certain senior executives of the
Bank
designated by the Bank’s Board of Directors. The named executive officers are
also executives of the Bank and have been designated for coverage under the
SERP. As discussed above, each of the named executive officers has been credited
with 24 years of service. In the event a named executive officer voluntarily
terminates employment without good reason, his or her credited years of service
will revert to actual years of service as of the date of termination. Future
participants in the plan will be credited with actual years of service.
The
normal retirement SERP benefit is paid following Normal Retirement, which is
defined as a Separation from Service (as defined in the SERP) after attaining
age 60 and providing at least 10 years of service. Each participant is entitled
to elect, upon initial participation, whether to receive the benefit in a single
lump sum or in the form of a lifetime annuity, a 10-year guaranteed payment
lifetime annuity, a 50% joint and survivor annuity, a 75% joint and survivor
annuity, or a 100% joint and survivor annuity. Annuity payments will be made
on
a monthly basis and are subject to actuarial adjustments. Payments under a
lifetime annuity will be determined based on the expected remaining number
of
years of life for the annuitant and actuarial tables as of the time the annuity
begins. Payments under any form of annuity other than a lifetime annuity will
be
determined using the same actuarial equivalent
assumptions used for the Pension Plan. If
a
participant fails to make an election, then he or she will receive the benefit
as a lifetime annuity.
A
participant vests in his or her accrued normal retirement SERP benefit upon
ten
years of service, upon Normal Retirement, upon a Separation from Service due
to
Disability (as defined in the SERP), and upon the participant’s death. Upon a
Separation from Service following a Change in Control (as defined in the SERP)
and a subsequent Triggering Event (as defined in the SERP), a participant will
vest in the greater of (i) 60% of Final Pay or (ii) his or her accrued normal
retirement SERP benefit through the date of the Separation from Service.
Generally,
the distribution of a participant’s SERP benefit will begin following the
participant’s Normal Retirement. If the participant suffers a Separation from
Service due to death or following a Disability, then the participant or his
or
her designated beneficiaries will receive a lump sum payment equal to the
actuarial equivalent of his or her accrued SERP benefit. If the participant
suffers a Separation from Service other than due to “Cause” (as defined in the
SERP) after ten years of service but prior to Normal Retirement, then he or
she
will receive the normal retirement SERP benefit that has accrued through the
date of the Separation from Service at age 60, in the form elected. If the
participant suffers a Separation from Service following a Change in Control
and
subsequent Triggering Event, then the distribution of his or her normal
retirement SERP benefit that has accrued through the date of the Separation
from
Service will begin, in the form elected, once the participant reaches age 60.
If
the participant dies following the commencement of distributions but prior
to
the complete distribution of his or her vested and accrued SERP benefit, then
distributions will be paid to his or her beneficiaries only if he or she chose
a
joint and survivor annuity form of distribution or a 10-year guaranteed payment
lifetime annuity (and then only until the guaranteed payments have been made).
A
participant will lose all SERP benefits if he or she is terminated for Cause.
In
addition, each participant has agreed that the receipt of any SERP benefits
is
conditioned upon his or her (i) refraining from competing with the Corporation
and its subsidiaries in their market areas for a period of three years following
his or her Separation from Service, (ii) refraining from disclosing the
Corporation’s confidential information following a Separation from Service, and
(iii) remaining available to provide up to six hours of consultative services
for twelve months after his or her Separation from Service. Items (i) and (iii)
do not apply, however, if the Separation from Service results from a Change
in
Control and subsequent Triggering Event. If a participant breaches any of these
conditions, then he or she is obligated to return all SERP benefits paid to
date
plus interest on such benefits at the rate of 10% per year.
In
calculating the present value of accumulated benefits, the following assumptions
were used: Mortality - 1994 GAR; discount rate of 6.0%; assumed retirement
age
of 60 or attained age if later; annuity factor at retirement based on 5%
discount.
For
information about benefits that would be paid to each of the named executive
officers under the SERP upon a separation from service as of December 31, 2007,
see the table that is included below under “Benefits Upon a Separation From
Service”.
Deferred
Compensation Plan
Executives
selected by the Compensation Committee and directors of the Corporation and
its
subsidiaries are permitted to participate in the Deferred Compensation Plan,
which permits directors and executives to elect, each year, to defer receipt
of
up to 100% of their directors’ fees, salaries and bonuses, as applicable, to be
earned in the following year. The deferred amounts are credited to an account
maintained on behalf of the participant (a “Deferral Account”) and are deemed to
be invested in certain investment options established from time to time by
the
Plan trustee. Additionally, the Corporation may make discretionary contributions
for the benefit of a participant to an Employer Contribution Credit Account
(the
“Employer Account”), which will be deemed to be invested in the same manner as
funds credited to the Deferral Account. Each Deferral Account and Employer
Account is credited with the gain or loss generated on the investments in which
the funds in those accounts are deemed to be invested, less any applicable
expenses and taxes. All funds are held in a Rabbi Trust. There have been no
discretionary contributions made to the Employer Account.
A
participant is at all times 100% vested in his or her Deferral Account. The
Corporation is permitted to set a vesting date or event for the Employer
Account, and such date may be based on the performance by the participant of
a
specified number of completed years of service with the Corporation, may be
based on the participant’s performance of specified service goals with respect
to the Corporation, may be limited to only certain termination of employment
events (e.g.,
involuntary termination, those following a change of control, etc.), or may
be
based on any other standard, at the Corporation’s sole and absolute discretion.
Notwithstanding the foregoing, a participant will become 100% vested in his
or
her Employer Account if he or she terminates employment (or, in the case of
a
participant who is a non-employee director, terminates membership on the Board
of Directors) because of death or Total and Permanent Disability (as defined
in
the Deferred Compensation Plan). Each participant will also become 100% vested
in his or her Employer Account in the event of a Change in Control (as defined
in the Plan). To date, the Corporation has not made any contributions to the
Employer Account of any participant.
Generally,
a participant is entitled to choose, pursuant to an election form, the date
on
which his or her account balances are to be distributed, subject to any
restrictions imposed by the Corporation and the trustee under the Rabbi Trust
in
their sole and absolute discretion and applicable law. If a participant fails
to
select a distribution date, then distributions will begin on or about the date
of the participant’s termination of employment or director status with the
Corporation. The participant may choose whether his or her account balances
are
to be distributed in one lump sum or in ten equal annual installments. If a
participant fails to elect a payment date or the method of payment, then the
account balances will be distributed in one lump sum following termination
of
employment. If distributions are made in installments, then the undistributed
balance will continue to be deemed invested in the chosen investment options,
and the accounts will be credited or debited accordingly, until all amounts
are
distributed.
If
a
participant dies or experiences a Total and Permanent Disability before
terminating his or her employment or director status with the Corporation and
before the commencement of payments, then the entire balance of the
participant’s accounts will be paid to the participant or to his or her named
beneficiaries, as applicable, as soon as practicable following death or Total
and Permanent Disability. If a participant dies after the commencement of
payments but before he or she has received all payments to which he or she
is
entitled, then the remaining payments will be paid to his or her designated
beneficiaries in the manner in which such benefits were payable to the
participant. Upon a Change in Control, the entire balance of a participant’s
accounts will be paid in a single lump sum payment.
The
Deferred Compensation Plan provides for limited distributions in the event
of
certain financial hardships.
Section
409A of the Code imposes certain restrictions on the timing of distributions
to
participants who are “key employees” of the Corporation, and these restrictions
could impact the timing of distributions under the Deferred Compensation Plan.
The
following table provides information relating to amounts deferred by or for
the
benefit of the named executive officers in 2007 under the Deferred Compensation
Plan.
NON-QUALIFIED
DEFERRED COMPENSATION
|
|
Name
|
|
Executive
contributions
in
last FY
($)
|
|
Registrant
contributions
in
last FY
($)
|
|
Aggregate
earnings
in
last
FY (1)
($)
|
|
Aggregate
withdrawals/
distributions
($)
|
|
Aggregate
balance
at
last
FYE
($)
|
|
William
B. Grant
|
|
$
|
0
|
|
$
|
0
|
|
$
|
10,070
|
|
$
|
0
|
|
$
|
369,782
|
|
Robert
W. Kurtz
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Carissa
L. Rodeheaver
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Steven
M. Lantz
|
|
|
12,500
|
|
|
0
|
|
|
590
|
|
|
0
|
|
|
25,755
|
|
Eugene
D. Helbig
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
(1)
This
column represents the investment income on the aggregate account balance in
the
named officer’s account for the last fiscal year. Balances are invested in
various managed asset portfolio [MAP] accounts, selected by the named officer,
in the Trust department of First United Bank & Trust.
Severance
Plan
Each
Severance Agreement generally provides that, if the participant’s employment is
terminated by the Corporation without “Cause” (as defined in the Severance
Agreement) or by the participant for “Good Reason” during the period commencing
on the date that is 90 days before a “Change in Control” (as defined in the
Severance Plan) and ending on the first anniversary of a Change in Control
(the
“Protection Period”), he or she will be entitled to (i) receive a lump sum cash
payment equal to two times (2.99 times for Mr. Grant) his or her Final Pay,
(ii)
the immediate vesting of all equity-based compensation awards that have been
granted to the participant (that have not been exercised or paid or expired
or
lapsed pursuant to their terms), (iii) continued coverage for 24 months under
the Corporation’s group health and dental plan (or, if the participant is not
eligible for such coverage, a monthly cash payment equal to the monthly premium
for a similar policy), and (iv) outplacement services for up to 12 months.
For
purposes of the foregoing, the term “Final Pay” means the participant’s annual
base salary for the year in which the termination occurs, plus the greater
of
(x) his or her targeted cash bonus for that year or (y) the actual cash bonus
earned for the year immediately preceding the year of termination. The term
“Good Reason” is defined in each Severance Agreement, but generally includes a
material and adverse change to the participant’s employment status, position or
duties, a 10% or greater reduction to his or her base salary or targeted bonus,
the failure by the Corporation to maintain an employee benefit plan in which
the
participant was participating at the time of the Change in Control (other than
because of the expiration of its normal term) or the taking of any other action
by the Corporation that has a material and adverse impact on the participant’s
participation in or benefits under any such plan, a requirement that the
participant relocate more than 50 miles from his or her office immediately
prior
to the Change in Control, and the failure by any successor to the Corporation
to
assume the Severance Plan. In addition, Mr. Grant’s Severance Agreement provides
that “Good Cause” also includes the termination of his status as the Chief
Executive Officer of a company whose stock is traded on a national securities
exchange.
For
all
participants other than William B. Grant, the Severance Agreement provides
that
the amount of all severance benefits described above, plus the amount of all
benefits under any other plan or arrangement, the payment of which is deemed
to
be contingent upon a change in the ownership or effective control of the
Corporation (as determined under Section 280G of the Code), may not exceed
2.99
times the participant’s “annualized includable compensation for the base period”
(i.e.,
the
average annual compensation that was includable in his or her gross income
for
the last five taxable years ending before the date on which the Change in
Control occurs). In the event the amount of the benefits payable to Mr. Grant
under his Severance Agreement and all other arrangements the payment of which
is
deemed to be contingent on a Change in Control exceeds 2.99 times his annualized
includable compensation for the base period, he will be entitled to a tax
gross-up payment from the Corporation to cover any excise tax imposed by Section
4999 of the Code or any similar state or local tax law, and any interest or
penalties payable with respect to such taxes, on the amount of such benefits
and
the gross-up tax payment.
The
timing of the distribution of some or all of these severance benefits may be
subject to a six-month waiting period under Section 409A of the Code to the
extent the participant is considered to be a “key employee” of the Corporation.
Each
Severance Agreement has an initial three-year term and automatically renews
for
additional one-year terms unless the Corporation provides the participant with
six-months prior notice of its intention to not renew the Severance Agreement,
except that the Severance Agreement will automatically terminate at the
expiration of the Protection Period. Additionally, if a participant’s employment
is terminated other than for Cause during the Protection Period, the Severance
Agreement will continue until the end of the Protection Period notwithstanding
the then current term. The Severance Plan and the Severance Agreements may
be
amended by the Board of Directors at any time, except that an amendment
generally may not be made without a participating participant’s written consent
if such amendment would adversely affect the participant’s interests. Any
amendment may be made without a participant’s consent, however, if the amendment
is required to comply with applicable law.
For
information about benefits that would be paid to each of the named executive
officers under the Severance Plan upon a separation from service as of December
31, 2007, see the table that is included below under “Benefits Upon a Separation
From Service”.
Benefits
Upon a Separation from Service
The
following table shows the estimated present value of benefits (as of December
31, 2007) that could be payable under the SERP, the Deferred Compensation Plan,
and the Severance Plan. The Severance Plan contemplates a cash benefit and
employee benefit continuation. As discussed above, subject to certain
conditions, participants in the SERP are entitled to receive their vested
benefits (offset by Pension Plan benefits, 50% of social security benefits
and,
in the case of death, benefits paid under the BOLI benefits program described
above) if they suffer a separation from service other than for cause. No SERP
benefits are payable if a participant’s separation from service was for cause.
Except in the cases of a separation from service due to death or disability,
the
payment of SERP benefits does not commence until the later of normal retirement
or attainment of age 60.
|
|
|
|
Severance
|
|
Severance
Plan
|
|
|
|
BOLI
Split-
|
|
|
|
|
|
|
|
Plan
Cash
|
|
Benefit
|
|
SERP
|
|
Dollar
|
|
|
|
|
|
|
|
Benefit
|
|
Continuation
|
|
Benefit
|
|
Payments
|
|
Total
|
|
Name
|
|
Reason
for Termination
|
|
($)
|
|
($)
(3)
|
|
($)
(1) (2)
|
|
($)
|
|
($)
|
|
William
B. Grant
|
|
|
Change
in control, disability, involuntary termination other than for
cause, or
voluntary termination for good reason
|
|
|
1,046,500
|
|
|
6,744
|
|
|
642,051
|
|
|
|
|
|
1,695,295
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
|
|
192,051
|
|
|
450,000
|
|
|
237,051
|
|
|
|
|
Voluntary
termination without good reason (including retirement)
|
|
|
|
|
|
|
|
|
642,051
|
|
|
|
|
|
642,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
W. Kurtz
|
|
|
Change
in control, disability, involuntary termination other than for
cause, or
voluntary termination for good reason
|
|
|
442,000
|
|
|
6,744
|
|
|
361,709
|
|
|
|
|
|
810,453
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
66,706
|
|
|
295,000
|
|
|
361,706
|
|
|
|
|
Voluntary
termination without good reason (including retirement)
|
|
|
|
|
|
|
|
|
361,709
|
|
|
|
|
|
361,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carissa
L. Rodeheaver
|
|
|
Change
in control, disability, involuntary termination other than for
cause, or
voluntary termination for good reason
|
|
|
399,000
|
|
|
|
|
|
599,348
|
|
|
|
|
|
1,005,092
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
0
|
|
|
125,541
|
|
|
125,541
|
|
|
|
|
Voluntary
termination without good reason (including retirement)
|
|
|
|
|
|
|
|
|
84,216
|
|
|
|
|
|
84,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
M. Lantz
|
|
|
Change
in control, disability, involuntary termination other than for
cause, or
voluntary termination for good reason
|
|
|
390,000
|
|
|
|
|
|
602,118
|
|
|
|
|
|
998,862
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
335,000
|
|
|
335,000
|
|
|
|
|
Voluntary
termination without good reason (including retirement)
|
|
|
|
|
|
|
|
|
218,325
|
|
|
|
|
|
218,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
D. Helbig
|
|
|
Change
in control,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
disability,
involuntary termination other than for cause, or voluntary termination
for
good reason
|
|
|
300,000
|
|
|
|
|
|
471,371
|
|
|
|
|
|
778,115
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
290,000
|
|
|
290,000
|
|
|
|
|
Voluntary
termination without good reason (including retirement)
|
|
|
|
|
|
|
|
|
288,049
|
|
|
|
|
|
288,049
|
|
(1)
|
SERP
benefits payable upon death reflect the following death benefits
currently
payable to the beneficiaries of the named executive officers: Mr.
Grant,
$450,000; Mr. Kurtz, $295,000; Ms. Rodeheaver, $125,541; Mr. Lantz,
$335,000; and Mr. Helbig, $290,000.
|
(2)
|
The
SERP benefit payable to any named executive officer who terminates
his or
her employment without good reason is based on actual years of service
rather than 24 years of credited service. Accordingly, benefits shown
for
Ms. Rodeheaver and Messrs. Lantz and Helbig in connection with a
voluntary
termination without good reason are based on actual years of service
of
16, 21 and 22, respectively. Messrs. Grant and Kurtz have over 24
years of
service.
|
(3)
|
Change
of Control agreements provide for two years of continued coverage
under
the corporations health, dental & vision plans under the same
provisions as if they were still employees. Benefits shown are calculated
at current rates and current cost sharing formulas, as futures costs
are
unknown.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Party Transactions since January 1, 2007
During
the past year, the Bank has had banking transactions in the ordinary course
of
its business with certain Directors and officers of the Corporation and with
their associates. These transactions were on substantially the same terms,
including interest rates, collateral, and repayment terms on loans, as those
prevailing at the same time for comparable transactions with others. The
extensions of credit by the Bank to these persons have not and do not currently
involve more than the normal risk of collectability or present other unfavorable
features.
In
addition to the foregoing, Morgantown Printing & Binding (“MP&B”), a
corporation owned by H. Andrew Walls, III, and a trust established for the
benefit of his minor children, provides various printing, fulfillment, and
related services to the Corporation. Total fees paid by the Corporation to
MP&B in 2007 were $616,705. These fees relate to the printing of marketing
materials, account statements, and other routine items as well as providing
a
fulfillment service to the Corporation. The Corporation has again retained
MP&B in 2008 to provide these and other services, for which it expects to
pay approximately $650,000. Management believes that all of the foregoing
transactions with MP&B are or will be on terms that are substantially
similar to those that would be available if an unrelated third-party were
involved.
Review,
Approval and Ratification of Related Party Transactions
NASDAQ
Listing Standards Rule 4350(h) requires the Company to conduct an appropriate
review of all related party transactions for potential conflict of interest
situations on an ongoing basis and further requires all such transactions to
be
approved by the Company’s Audit Committee or another “independent body” of the
Board of Directors. The term “related party transaction” is generally defined as
any transaction (or series of related transactions) in which the Company is
a
participant and the amount involved exceeds $120,000, and in which any director,
director nominee, or executive officer of the Company, any holder of more than
5% of the outstanding voting securities of the Company, or any immediate family
member of the foregoing persons will have a direct or indirect interest. The
term includes most financial transactions and arrangements, such as loans,
guarantees and sales of property, and remuneration for services rendered (as
an
employee, consultant or otherwise) to the Company.
In
addition, federal and state banking laws impose review and approval requirements
with respect to loans made by the Bank to its directors and executive officers
and their related interests. The paragraphs that follow contain only a summary
of these laws and are qualified in their entirety by the statutory text and
the
text of any related regulations.
Under
the
Federal Reserve Board’s Regulation O, the Bank is prohibited from making any
loan to any of its directors or executive officers or the directors or executive
officers of the Corporation in amounts that exceed (i) the excess of the greater
of $25,000 or 5% of the Bank’s capital and unimpaired surplus or (ii) $500,000
(taking into account all loans to the insider and his or her related interests),
unless the loan is approved by the Bank’s board of directors (with the
interested party abstaining). Loans to the directors and executive officers
of
the Corporation’s other subsidiaries are not subject to these approval
requirements as long as the Bank’s Bylaws or its board of directors exempts such
person from participating in policymaking functions of the lending institution
and such person does not in fact participate, the subsidiary does not control
the lending institution, and the assets of the subsidiary do not constitute
more
than 10% of the consolidated assets of the Corporation (determined annually).
Section
5-512 of the Financial Institutions Article of the Maryland Code requires the
Board of Directors of the Bank to review and approve all non-commercial loans
to
Directors of the Bank and their partnerships and corporations, all loans to
Executive Officers of the Bank and their partnerships and corporations, and
all
non-consumer loans to employees of the Bank and their partnerships and
corporations. In addition, the Board of Directors semi-annually reviews the
total indebtedness of each Director and Executive Officer of the Company.
The
Corporation and the Bank have adopted written policies and procedures to ensure
compliance with the foregoing restrictions.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant
to Section 16(a) of the Exchange Act and the rules promulgated thereunder,
the
Corporation’s executive officers and Directors, and persons who beneficially own
more than 10% of the Corporation’s Common Stock, are required to file certain
reports regarding their ownership of Common Stock with the SEC. Based solely
on
a review of copies of such reports furnished to the Corporation, or written
representations that no reports were required, the Corporation believes that,
during the fiscal year ended December 31, 2007, such persons timely filed all
reports required to be filed by Section 16(a) except that I.
Robert
Rudy filed one late Form 4 (covering the purchase of stock) and one late Form
5
(covering a gift of stock).
Shareholders
are also being asked to ratify the Audit Committee’s appointment of Beard Miller
Company LLP to audit the books and accounts of the Corporation for the fiscal
year ended December 31, 2008. Beard Miller Company LLP served as the
Corporation’s auditing firm since 2006. Beard Miller Company LLC has
advised
the
Corporation that neither the accounting firm nor any of its members or
associates has any direct financial interest in or any connection with the
Corporation other than as independent public auditors. A representative of
Beard
Miller Company LLP is not expected
to be present at this year’s Annual Meeting of Shareholders.
The
Board of Directors recommends that shareholders vote FOR
the ratification of the appointment of Beard Miller Company LLP as the
Corporation’s independent registered public accounting firm for
2008.
AUDIT
FEES AND SERVICES
The
following table shows the fees paid or accrued by the Corporation for the audit
and other services provided by bmc for fiscal years 2007and 2006:
|
|
FY
2007
|
|
FY
2006
|
|
Audit
Fees
|
|
$
|
251,038
|
|
$
|
212,538
|
|
Tax
Fees
|
|
|
—
|
|
|
2,000
|
|
All
Other Fees
|
|
|
1,200
|
|
|
|
|
Total
|
|
$
|
252,238
|
|
$
|
214,538
|
|
The
following table shows the fees paid or accrued by the Corporation for the audit
and other services provided by E&Y for fiscal years 2007 and
2006:
|
|
FY
2007
|
|
FY
2006
|
|
Audit
Fees
|
|
$
|
24,300
|
|
$
|
52,710
|
|
Tax
Fees
|
|
|
—
|
|
|
2,762
|
|
All
Other Fees
|
|
|
1,500
|
|
|
15,400
|
|
Total
|
|
$
|
25,800
|
|
$
|
70,872
|
|
Fees
for
audit services include fees associated with the annual audit, the reviews of
the
Corporation’s quarterly reports on Form 10-Q, the attestation of management’s
report on internal control over financial reporting, and accounting
consultations billed as audit services. Tax fees relate to tax compliance
services, such as tax return preparation, tax advice, tax planning and education
related to low income housing tax credit investments. For 2007, all other fees
include fees paid for services rendered in connection with the transition to
successor auditors for the annual audit, reviews of Form 10-Q and the
attestation of management’s report on internal control. All other fees for 2006
include a subscription to the E&Y Accounting & Auditing Research Tool.
The Audit Committee has reviewed summaries of the services provided by bmc
and
the related fees and has determined that the provision of non-audit services
is
compatible with maintaining the independence of bmc.
It
is the
Audit Committee’s policy to pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Corporation by its independent auditors, subject to the de
minimis
exceptions for non-audit services described in Section 10A(i)(l)(B) of the
Exchange Act, which, when needed, are approved by the Audit Committee prior
to
the completion of the independent auditor’s audit. All of the 2007 and 2006
services described above were pre-approved by the Audit Committee.
SUBMISSION
OF SHAREHOLDER PROPOSALS FOR 2009 ANNUAL MEETING
A
shareholder who desires to present a proposal pursuant to Rule 14a-8 under
the
Exchange Act to be included in the proxy statement and voted on by the
shareholders at the 2009 Annual Meeting of Shareholders must submit such
proposal in writing, including all supporting materials, to the Corporation
at
its principal office no later than November 23, 2008 (120 days before the date
of mailing based on this year’s proxy statement date) and meet all other
requirements for inclusion in the proxy statement. Additionally, pursuant to
Rule 14a-4(c)(1) under the Exchange Act, if a shareholder intends to present
a
proposal for business to be considered at the 2009 Annual Meeting of
Shareholders but does not seek inclusion of the proposal in the Corporation’s
proxy statement for such meeting, then the Corporation must receive the proposal
by February 15, 2009 (45 days before the date of mailing based on this year’s
proxy statement date) for it to be considered timely received. If notice of
a
shareholder proposal is not timely received, then the proxies will be authorized
to exercise discretionary authority with respect to the proposal.
OTHER
MATTERS
As
of the
date of this proxy statement, the Board is not aware of any matters, other
than
those stated above, that may properly be brought before the meeting. If other
matters should properly come before the meeting or any adjournment thereof,
persons named in the enclosed proxy or their substitutes will vote with respect
to such matters in accordance with their best judgment.
By
order
of the Board of Directors
ROBERT
W.
KURTZ
Secretary
APPENDIX
A
FORM
OF PROXY
FIRST
UNITED CORPORATION
P.O.
Box
9, Oakland, MD 21550-0009
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Helen M. Bittinger and Rex W. Burton, and each
of
them, as Proxies, with the powers the undersigned would possess if personally
present, and with full power of substitution, and hereby authorizes them
to
represent and to vote as designated on the reverse side, all the shares of
Common Stock of First United Corporation held of record by the undersigned
on
February 15, 2008 at the Annual Meeting of Shareholders to be held on May
8,
2008 and any adjournment or
postponement thereof, for the purposes identified on this proxy and with
discretionary authority as to any other matters that may properly come before
the Annual Meeting, including substitute nominees if any of the named nominees
for director should be unavailable to serve for election in accordance with
and
as described in the Notice of Annual Meeting of Shareholders and Proxy
Statement.
.
THIS
PROXY WILL BE VOTED AS SPECIFIED. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS,
THE
PROXIES NAMED HEREIN INTEND TO VOTE THIS PROXY “FOR ALL NOMINEES” IN PROPOSAL 1,
“FOR” IN PROPOSAL 2 AND IN THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTER
THAT MAY BE PRESENTED AT THE MEETING.
(Please
sign on reverse side and return immediately)
|
Address
Change/Comments (Mark the corresponding box on the reverse
side)
|
|
|
|
|
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FOLD
AND
DETACH HERE
You
can now access your First United Corporation account
online.
Access
your First United Corporation shareholder account online via Investor
ServiceDirect® (ISD).
The
transfer agent for First United Corporation shareholders now makes it easy
and
convenient to get current information on your shareholder account.
·
View
account status
|
·
View
payment history for dividends
|
|
|
·
View
certificate history
|
·
Make
address changes
|
|
|
·
View
book-entry information
|
·
Obtain
a duplicate 1099 tax form
|
|
|
|
·
Establish/change
your PIN
|
Visit
us on the web at http://www.bnymellon.com/shareowner
For
Technical Assistance Call 1-877-978-7778 between
9am-7pm
Monday-Friday
Eastern Time
Investor
ServiceDirect® is a registered trademark of BNY Mellon Shareowner Services
|
|
|
|
|
|
|
|
|
|
Please
Mark
Here
for
Address
Change
or
Comments
SEE
REVERSE
SIDE
|
o
|
The
Board of Directors recommends a vote “FOR ALL NOMINEES” in Proposal
1.
1. Election
of five (5) Class I Directors to serve until the 2011 Annual Meeting
of
Shareholders and until their successors are duly elected and
qualify.
Class
I (term expires 2011)
01 David
J. Beachy
o FOR
ALL NOMINEES
02 Faye
E. Cannon
03 Paul
Cox, Jr.
04 William
B. Grant
o WITHHOLD
AUTHORITY
05 John
W.
McCullough FOR ALL NOMINEES
o FOR
ALL EXCEPT
(see
instruction below)
INSTRUCTION:
The withholding of a vote will be counted as a vote against a nominee.
To
withhold authority to vote for any individual nominee, mark “FOR ALL
EXCEPT” and strike a line through that nominee’s name in the list
above.
|
|
The
Board of Directors recommends a vote “FOR” in Proposal
2.
2.
Ratification of the appointment of Beard Miller Company LLP as
the
Corporation’s independent registered public accounting firm for
2008.
FOR
o AGAINST
o ABSTAIN
o
3.
In their discretion, the Proxies are authorized to vote upon such
other
business as may properly come before the meeting and any adjournments
or
postponements thereof.
|
|
THE
UNDERSIGNED ACKNOWLEDGES RECEIPT OF NOTICE OF THE AFORESAID ANNUAL
MEETING
OF SHAREHOLDERS
Date:
_______________________, 2008
_________________________________
Signature
_________________________________
Signature
NOTE:
Please sign exactly as name appears hereon. Joint holders should
each
sign. When signing as attorney, executor, administrator, trustee
or
guardian, please indicate the capacity in which you are signing.
If a
corporation or other entity, please sign in full corporate or entity
name
by authorized person.
|
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FOLD
AND
DETACH HERE
Vote
by Internet or Telephone or Mail
24
Hours a Day, 7 Days a Week
Internet
and telephone voting is available through 11:59 PM Eastern
Time
the
day prior to annual meeting day.
Your
internet or telephone vote authorizes the named proxies to vote your shares
in
the same manner as if you marked, signed and returned your proxy
card.
|
|
|
|
|
|
|
|
|
Internet
|
|
|
|
Telephone
|
|
|
|
Mail
|
http://www.proxyvoting.com/func1
|
|
OR
|
|
1-866-540-5760
|
|
OR
|
|
|
Use
the internet to vote your proxy.
|
|
|
|
|
|
|
|
Mark,
sign and date
|
Have
your proxy card in hand when
|
|
|
|
Use
any touch-tone telephone to vote
|
|
|
|
your
proxy card and
|
you
access the web site.
|
|
|
|
your
proxy. Have your proxy card
|
|
|
|
return
it in the
|
|
|
|
|
in
hand when you call.
|
|
|
|
enclosed
postage-paid
|
|
|
|
|
|
|
|
|
envelope.
|
If
you vote your proxy by Internet or by telephone,
you
do NOT need to mail back your proxy card.