Unassociated Document
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 ¨
Check the
appropriate box:
¨ Preliminary Proxy
Statement
¨ Confidential, For Use
of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy
Statement
¨ Definitive Additional
Materials
¨ 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.
¨ 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
¨ Fee paid previously
with preliminary materials: N/A
¨ 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:
March 27,
2009
To Our
Shareholders:
On behalf of the Board of Directors and
the whole First United Team, I cordially invite you to attend the Annual Meeting
of Shareholders to be held on Thursday, May 14, 2009, at 10:00 a.m., at the Wisp
at Deep Creek Mountain Resort, McHenry, Maryland 21541. The notice of
meeting and proxy statement accompanying this letter describe the specific
matters to be acted upon. In addition, there will be a report on the
progress of your Corporation.
Your vote on the matters to be acted
upon at the Annual Meeting is important, regardless of the number of shares you
own. Whether or not you plan to attend the Annual Meeting in person,
it is important that your shares be represented. To ensure that your
shares are represented, I urge you to execute and return the enclosed Proxy Card
or to submit your Proxy by telephone or Internet promptly. If you
attend the meeting, you may withdraw your Proxy and vote in person, if you so
desire.
There will be a reception with light
refreshments immediately following the meeting for all registered
shareholders. I look forward to seeing you there.
We are taking advantage of the
Securities and Exchange Commission rules that allow companies to furnish proxy
materials to their shareholders on the Internet. We believe these
rules allow us to provide you with the information you need while lowering the
costs of delivery and reducing the environmental impact of the Annual
Meeting.
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Sincerely
yours,
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WILLIAM
B. GRANT
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Chairman
of the Board &
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Chief
Executive Officer
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P.O. Box
9 Oakland, MD 21550-0009 Telephone
888-692-2654
FIRST
UNITED CORPORATION
19
South Second Street
P.O.
Box 9
Oakland,
Maryland 21550-0009
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
March 27,
2009
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 14, 2009, at 10:00 a.m.
The purposes of the meeting
are:
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1.
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To
vote on the election of the four (4) Director nominees named in the
attached Proxy Statement and form of Proxy to serve on the Board of
Directors until the 2012 Annual Meeting of Shareholders and until the
election and qualification of their
successors.
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2.
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To
ratify the appointment of Beard Miller Company LLP as the Corporation’s
independent auditors for fiscal year
2009.
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3.
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To
consider and approve a non-binding advisory vote on the Corporation’s
executive compensation program and policies;
and
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4.
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To
transact such other business as may be properly brought before the meeting
or any adjournment thereof.
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The Board of Directors has fixed
February 23, 2009 as the record date for purposes of determining shareholders
who are entitled to notice of and to vote at the Annual Meeting of
Shareholders.
Anyone acting as proxy agent for a
shareholder must present a Proxy that has been properly executed by the
shareholder, that authorizes the agent to so act, and that is in form and
substance satisfactory to the judges of election and consistent with the
Corporation’s Amended and Restated Bylaws, as amended.
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
PROXY
STATEMENT
This Proxy Statement is furnished in
connection with the solicitation by the Board of Directors of First United
Corporation (the “Corporation”) of the accompanying Proxy to be voted at the
Annual Meeting of Shareholders to be held on May 14, 2009, 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 the related Proxy Card will be sent or given
to shareholders is March 27, 2009.
OUTSTANDING
SHARES AND VOTING RIGHTS
Shareholders of record at the close of
business on February 23, 2009 (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 6,122,411, 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. Each matter to be acted
upon by shareholders is 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 shareholders in
their Proxies. If no direction is given in your Proxy, your shares
will be voted FOR ALL
NOMINEES named in Proposal 1, FOR
ratification of appointment of the Corporation’s independent auditors named in
Proposal 2, FOR
approval of the Corporation’s executive compensation as described in the
non-binding advisory Proposal 3, and in the discretion of the proxies as to any
other matters that may properly come before the meeting.
Proxies may be revoked at any time
before a vote is taken or the authority granted is otherwise
exercised. Revocation may be accomplished by: (i) the
execution of a later dated Proxy; (ii) the execution of a later casted Internet
or telephone vote with regard to the same shares; (iii) giving written notice to
Robert W. Kurtz, Secretary, First United Corporation, P.O. Box 9, Oakland,
Maryland 21550-0009; or (iv) giving written notice to the Secretary in person at
the 2009 Annual Meeting. Any shareholder who attends the 2009 Annual
Meeting and revokes his/her proxy may vote in person. However,
attendance by a shareholder at the 2009 Annual Meeting alone will not have the
effect of revoking a shareholder’s validly executed Proxy.
Methods
of Voting
Shareholders may vote on matters that
are properly presented at the 2009 Annual Meeting in four ways:
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·
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By
completing the accompanying form of Proxy and returning it in the envelope
provided;
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·
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By
submitting your vote
telephonically;
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·
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By
submitting your vote electronically via the Internet;
or
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·
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By
attending the 2009 Annual Meeting and casting your vote in
person.
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For the 2009 Annual Meeting, the
Corporation is offering registered shareholders the opportunity to vote their
shares electronically through the Internet or by telephone. Instead
of submitting the accompanying Proxy by mail, shareholders may vote by telephone
or via the Internet by following the procedures described on the enclosed Proxy
Card. To vote via telephone or the Internet, please have the
accompanying Proxy in hand, and call the number or go to the website listed on
the Proxy and follow the instructions. The telephone and Internet
voting procedures are designed to authenticate shareholders’ identities, to
allow shareholders to give their voting instructions, and to confirm that
shareholders’ instructions have been recorded properly. Shareholders
voting through the Internet should understand that they may bear certain costs
associated with Internet access, such as usage charges from their Internet
service providers.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING
TO BE HELD ON MAY 14, 2009
This Proxy Statement, the accompanying
form of Proxy, and the Corporation’s Annual Report to Shareholders (including
its Annual Report on Form 10-K for the year ended December 31, 2008) are
available at http://www.stocktrans.com/eproxy/firstunited2009. Information
on this website, other than this Proxy Statement, is not a part of this Proxy
Statement.
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.
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Common
Stock
Beneficially
Owned
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Percentage
of
Outstanding
Common
Stock
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Directors,
Nominees and Named Executive Officers:
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David
J. Beachy
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6,873 |
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.11 |
% |
M.
Kathryn Burkey
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3,890 |
(1) |
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.06 |
% |
Faye
E. Cannon
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2,477 |
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.04 |
% |
Paul
Cox, Jr.
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2,358 |
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.04 |
% |
William
B. Grant
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9,954 |
(2) |
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.16 |
% |
Robin
E. Murray.
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713 |
(3) |
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.01 |
% |
Raymond
F. Hinkle
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5,951 |
(4) |
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.10 |
% |
Robert
W. Kurtz
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2,318 |
(5) |
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.04 |
% |
Steven
M. Lantz
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1,814 |
(6) |
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.03 |
% |
John
W. McCullough
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5,830 |
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.10 |
% |
Elaine
L. McDonald
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6,900 |
(7) |
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.11 |
% |
Donald
E. Moran
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134,031 |
(8) |
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2.19 |
% |
Carissa
L. Rodeheaver
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1,068 |
(9) |
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.02 |
% |
Gary
R. Ruddell
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1,798 |
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.03 |
% |
I.
Robert Rudy
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33,353 |
(10) |
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.54 |
% |
Richard
G. Stanton
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14,745 |
(11) |
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.24 |
% |
Robert
G. Stuck
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3,981 |
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.07 |
% |
H.
Andrew Walls, III
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50 |
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.00 |
% |
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Directors
& Executive Officers as a Group (22 persons)
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260,012 |
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4.25 |
% |
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5% Beneficial
Owners:
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Firstoak
& Company
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362,222 |
(12) |
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5.92 |
% |
P.O.
Box 557
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Oakland,
Maryland 21550
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United
States Department of the Treasury
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326,323 |
(13) |
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5.33 |
% |
1500
Pennsylvania Avenue, NW
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Washington,
D.C. 20220
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Total
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948,557 |
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15.49 |
% |
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(1)
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Includes
243 shares owned by spouse.
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(2)
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Includes
6,366 shares owned jointly with spouse, 6 shares owned jointly with
daughter, 218 shares owned by son, 5 shares owned by daughter, 2,425
shares held in a 401(k) plan account, 377 shares owned by spouse’s IRA,
and 203 shares owned by spouse and
daughter.
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(3)
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Includes
139 shares owned jointly with spouse and 574 shares held in a 401(k) plan
account.
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(4)
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Includes
5,584 shares owned jointly with
spouse.
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(5)
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Includes
2,295 shares held in a 401(k) plan
account.
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(6)
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Includes
254 shares owned jointly with spouse, 6 shares owned by son and 1,130
shares held in a 401(k) plan
account.
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(7)
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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.
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(8)
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Includes
86,593 shares owned by daughters over which Mr. Moran has shared
investment discretion and 25,000 shares owned by
spouse.
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(9)
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Includes
262 shares held jointly with spouse, 16 shares held by spouse for benefit
of a minor child and 790 shares held in a 401(k) plan
account.
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(10)
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Includes
837 shares owned jointly with spouse, 6,299 shares owned by spouse, 4,058
shares owned by daughters, 15,575 shares owned by I.R. Rudy’s, Inc. of
which Mr. Rudy is owner.
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(11)
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Includes
9,008 shares owned jointly with spouse and 1,619 shares held in spouse’s
IRA.
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(12)
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Shares
held in the name of Firstoak & Company, as nominee, are administered
by the Trust Department of First United Bank & Trust in a fiduciary
capacity. Firstoak & Company disclaims beneficial ownership
of such shares.
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(13)
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Amount
represents shares subject to an immediately exercisable common stock
purchase warrant issued to Treasury in connection with the Corporation’s
participation in Treasury’s Capital Purchase
Program.
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ELECTION
OF DIRECTORS (PROPOSAL 1)
The number of Directors constituting
the Board of Directors is currently set at 15. 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 II Directors expire
this year, the terms of Class III Directors expire in 2010, and the terms of
Class I Directors expire in 2011. In all cases, Directors are elected
until their successors are duly elected and qualify.
Shareholders are being asked to vote
for a total of four (4) Director nominees at this year’s Annual
Meeting. Each of the current Class II Directors is standing for
re-election. All Class II Directors were previously elected by
shareholders.
No Director or nominee holds any
directorship in any other public company. All current Directors serve
on the board of directors of First United Bank & Trust (the “Bank”), the
Corporation’s wholly-owned subsidiary. 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 II (terms
expire in 2012):
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Occupation
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Director
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Name
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Age
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During
Past Five Years
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Since
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Robert
W. Kurtz
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62
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President,
Chief Risk Officer, Secretary, and Treasurer of the Corporation and the
Bank; director, Secretary and Treasurer of OakFirst Loan Center, Inc. and
OakFirst Loan Center, LLC.
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1990
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Elaine
L. McDonald
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60
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Realtor,
Long & Foster Realtors.
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1995
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Donald
E. Moran
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78
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Acting
President, General Manager, Secretary and Treasurer, Moran Coal
Corporation.
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1988
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Gary
R. Ruddell
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61
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President,
Total Biz Fulfillment, provides business services; Member, Gary R. Ruddell
LLC, commercial real estate; Member, MSG Glendale Properties
LLC, residential real estate.
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2004
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The Board of Directors recommends that
shareholders vote FOR all Director
nominees named above.
Information about the Directors whose
terms do not expire in 2009, 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 III Directors (term
expires in 2010):
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Occupation
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Director
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Name
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Age
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During
Past Five Years
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Since
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M.
Kathryn Burkey
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58
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Certified
Public Accountant, Owner, M. Kathryn Burkey, CPA
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2005
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I.
Robert Rudy
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56
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President,
Rudy’s Inc., Retail Apparel and Sporting Goods.
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1992
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Richard
G. Stanton
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69
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Retired. Served
as Chairman, President and Chief Executive Officer of First United
Corporation and First United Bank & Trust until 1996.
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1985
|
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Robert
G. Stuck
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62
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Vice
President, Oakview Motors, Inc. - Retired. Realtor, Long & Foster Real
Estate, Inc.
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1995
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H.
Andrew Walls, III
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48
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President,
Morgantown Printing & Binding; Member, MEGBA, LLC.
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2006
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Nominees for Class I
(term expires in 2011):
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Occupation
|
|
Director
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Name
|
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Age
|
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During
Past Five Years
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Since
|
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David
J. Beachy
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68
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Fred
E. Beachy Lumber Co., Inc. Building Supplies – Retired.
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1985
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Faye
E. Cannon
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59
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Consultant,
Director of Dan Ryan Builders, Inc; Former Chief Executive Officer and
President of F & M Bancorp, Frederick, Maryland –
Retired.
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2004
|
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Paul
Cox, Jr.
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69
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Owner,
Professional Tax Service.
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1993
|
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William
B. Grant
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55
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Chairman
of the Board, CEO First United Corporation and First United Bank
& Trust.
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1995
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John
W. McCullough
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59
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Certified
Public Accountant. Retired in 1999 as Partner of Ernst &
Young, LLP.
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|
2004
|
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 M.
Kathryn Burkey, Faye E. Cannon, Paul Cox, Jr., Raymond F. Hinkle, John W.
McCullough, Elaine L. McDonald, 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 407 of
the SEC’s Regulation S-K. This committee met five times in
2008. 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 M.
Kathryn Burkey, William B. Grant, Robert W. Kurtz, John W. McCullough, Donald E.
Moran, Gary R. Ruddell, I. Robert Rudy, Richard G. Stanton, 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 2008.
Executive Committee – The
Executive Committee consists of David J. Beachy, M. Kathryn Burkey, Faye E.
Cannon, William B. Grant, Robert W. Kurtz, Elaine L. McDonald, Gary R. Ruddell,
Robert G. Stuck, and H. Andrew Walls, III. 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 its subsidiaries. The Executive Committee is
empowered to act on behalf of the full Board between meetings of the
Board. This committee did not meet in 2008.
Strategic Planning Committee
– The Strategic Planning Committee consists of David J. Beachy, M.
Kathryn Burkey, Faye E. Cannon, Paul Cox, Jr., William B. Grant, Raymond F.
Hinkle, Robert W. Kurtz, John W. McCullough, Elaine L. McDonald, Donald E.
Moran, Gary R. Ruddell, I. Robert Rudy, Richard G. Stanton and Robert G.
Stuck. 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 2008.
Compensation Committee – The
Compensation Committee, which met seven times in 2008, consists of David J.
Beachy, M. Kathryn Burkey, Faye E. Cannon, Paul Cox, Jr., Raymond F. Hinkle,
Elaine L. McDonald, Donald E. Moran, 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, Paul Cox, Jr.,
Raymond F. Hinkle, John W. McCullough, Donald E. Moran, I. Robert Rudy, Richard
G. Stanton, and H. Andrew Walls, III. 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
2008. 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) of The NASDAQ
Stock Market Rules (the “NASDAQ Rules”), a majority of the Corporation’s
Directors must be “independent directors” as that term is defined by NASDAQ 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, 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 NASDAQ Rule
4350(d)(2). In making these independence determinations, the Board,
in addition to the transactions described below under “CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS”, considered the Bank’s
purchase of goods from a retailer affiliated with Ms. Burkey.
Director
Compensation
The following table provides
information about compensation paid to or earned by the Corporation’s Directors
during 2008 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
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Change
in
pension
value
and
nonqualified
deferred
compensation
earnings
($)
|
|
|
All
other
compensation
($)(2)
|
|
|
Total
($)
|
|
David
J. Beachy
|
|
|
32,590 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
37,580 |
|
M.
Kathryn Burkey
|
|
|
31,590 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
450 |
|
|
|
37,030 |
|
Faye
E. Cannon
|
|
|
35,190 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
700 |
|
|
|
40,880 |
|
Paul
Cox, Jr.
|
|
|
35,190 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
850 |
|
|
|
41,030 |
|
Raymond
F. Hinkle
|
|
|
32,490 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
400 |
|
|
|
37,880 |
|
John
W. McCullough
|
|
|
32,590 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
37,580 |
|
Elaine
L. McDonald
|
|
|
36,690 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
41,680 |
|
Donald
E. Moran
|
|
|
26,890 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
275 |
|
|
|
32,155 |
|
Gary
R. Ruddell
|
|
|
30,290 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
35,280 |
|
I.
Robert Rudy
|
|
|
29,040 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
34,030 |
|
Richard
G. Stanton
|
|
|
33,390 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
38,380 |
|
Robert
G. Stuck
|
|
|
34,790 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
- |
|
|
|
39,780 |
|
H.
Andrew Walls, III
|
|
|
30,990 |
|
|
|
4,990 |
|
|
|
- |
|
|
|
375 |
|
|
|
36,355 |
|
(1)
|
Amounts
relate to the grant of 267 fully-vested shares of Common Stock to each
non-employee director in 2008 and reflect the dollar amount recognized for
financial statement reporting purposes during 2008 in accordance with
Statement of Financial Accounting Standards No. 123R, “Accounting for
Share-based Payments”. See Note 1 to the consolidated audited
financial statements contained in the Corporation’s Annual Report on Form
10-K for the year ended December 31, 2008 regarding assumptions underlying
valuation of equity awards. The grant date fair value of these
awards was $68,863. No other equity awards were outstanding as
of December 31, 2008.
|
(2)
|
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.
|
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 $10,000. 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 are permitted
to participate in the Corporation’s non-qualified Executive and Director
Deferred Compensation Plan (the “Deferred Compensation Plan”). The
material terms of the Deferred Compensation Plan are discussed below under the
heading “COMPENSATION DISCUSSION AND ANALYSIS”.
Attendance
at Board Meetings
The Board
of Directors held 10 Board meetings in 2008. Each Director who served
as such during 2008 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 Section 4 of Article II 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,
Secretary, First United Corporation, P.O. Box 9, Oakland, Maryland,
21550. The Secretary will deliver all shareholder communications
directly to the Board of Directors for consideration.
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 2008 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 audited consolidated financial statements for
the year ended December 31, 2008 with the Corporation’s management; (ii)
discussed with Beard Miller Company LLP, the Corporation’s independent auditors,
all matters required to be discussed by Auditing Standards No. 61, as amended
(AICPA, Professional Standards, Vol. 1, AU § 380), as adopted by the Public
Company Accounting Oversight Board; 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 Standards No. 1, Independence
Discussions with Audit Committees), and has discussed with Beard Miller Company
LLP its 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 audited consolidated financial statements for the year ended
December 31, 2008 be included in the Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008.
|
By:
|
AUDIT
COMMITTEE
|
|
|
|
|
|
M.
Kathryn Burkey
|
|
|
Faye
E. Cannon
|
|
|
Paul
Cox, Jr.
|
|
|
Raymond
F. Hinkle
|
|
|
John
W. McCullough
|
|
|
Elaine
L. McDonald
|
|
|
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 55, 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 62, 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 48, 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 56, 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 51, 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 50, 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 42, serves
as Executive Vice President and CFO. Ms. Rodeheaver, who is a
Certified Public Accountant and Certified Financial Planner, was appointed CFO
on January 1, 2006 and Executive Vice President on March 19,
2008. 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. In addition to her service with the Corporation, Ms.
Rodeheaver owns and operates Country Treasures, an unincorporated retail seller
of home furnishings and décor, Rodeheaver Rentals, an unincorporated entity that
owns and leases commercial and residential real property, and several
residential apartments that she leases to tenants.
Jason Rush, age 37, serves as a Senior
Vice President and Director of Operations & Support. Mr. Rush has
been employed by the First United organization since October of
1993. Prior to his current position, Mr. Rush served as Vice
President, Director of Operations & Support since March 2006, and before
that as Vice President and Regional Manager/Community Office Manager from
January 2005 to February 2006; Vice President and Community Office
Manager/Manager of Cash Management from May 2004 to December 2004; Assistant
Vice President and Community Office Manager from April 2001 to April 2004;
Community Office Manager from August 1998 to April, 2001; Customer Service
Officer from March 1997 to July 1998; Assistant Compliance Officer from July
1995 to February 1997; and Management Trainee from October 1993 to July
1995. Mr. Rush also serves as the Treasurer of Rush Services, Inc., a
family-owned business in which he has no ownership interest. He also
participates with his brother in farming and land investment.
Frederick A. Thayer, IV, age 50, 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
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 utilizes include:
|
·
|
Incorporates
executive sessions (without management present) into all Compensation
Committee meetings;
|
|
·
|
Utilizes
an independent compensation consultant to advise on executive compensation
issues;
|
|
·
|
Review
and realign compensation structures based on targeting median competitive
pay;
|
|
·
|
Review
peer group performance comparisons;
|
|
·
|
Performs
annual reviews for all executive
officers;
|
|
·
|
Reviews
and revises short-term incentive plan for members of executive management
to insure payments are aligned with corporate performance;
and
|
|
·
|
Monitors
established parameters for the long-term incentive plan for members of
executive management and insures the plan is aligned with shareholder
interests.
|
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 duties of the
Compensation Committee, which are detailed in its charter, are to oversee
executive compensation and benefit plans and policies, administer 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.
Eight members of the Corporation’s
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 (seven times in 2008) 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, 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 also examines all incentive compensation plans at least
semi-annually to insure that such plans do not encourage employees to take
unnecessary or excessive risks that threaten the Corporation’s
value.
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, independent of management, advice and
assistance from internal and external legal, human resource, accounting or other
experts, advisors, or consultants as it deems desirable or
appropriate.
Role of the Compensation
Consultant & Management
The Committee, utilizes the independent
services of outside advisors and consultants throughout the year as they relate
to executive compensation. In 2008, the Compensation Committee
engaged the services of Pearl Meyer & Partners (“PM&P”), an independent
executive and board compensation consulting firm. This consultant
reported directly to the Compensation Committee. The Compensation
Committee may independently engage any advisors it needs for issues related to
executive compensation and benefits.
The Compensation Committee engaged
PM&P to conduct a comprehensive total compensation review for executives and
directors in 2007. The Compensation Committee relied on the
consultant to provide ongoing advice, data and perspectives on market and best
practices on issues related to executive and Board compensation during
2008. 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 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. Decisions regarding his package are made solely based upon
the Compensation Committee’s deliberations, as well as input from the
compensation consultant, as requested by the Committee. 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 2008,
total annual compensation for named executive officers consisted of
base salary, annual cash incentive awards (Executive Pay for Performance Plan),
equity grants (Long-Term Incentive Plan) and benefits (broad employee benefits
and executive benefits). 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 quantitative and qualitative factors including functional area
management, contribution to overall financial results, and leadership
development. In addition, a compensation study is completed
each year to compare 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 those
executives reporting directly to him. Historical and prospective
breakdowns of the salary history for each executive officer is provided to the
Compensation Committee. 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 –The Executive Pay for Performance Plan (the “EPP”) is our annual
cash incentive award program which rewards executives for our overall
performance. The EPP is designed to reward executives for team
performance. Performance goals for the EPP are established and
approved each year by the Compensation Committee in conjunction with the
budgetary approval process by the Board of Directors and are intended to
reflect core financial objectives. These goals are
functions of earnings per share, return on equity, operating income as a
percentage of net revenue, efficiency ratio and growth in Community Oriented
Business Owners (“COBO”) relationships. Each executive has a target
award which is defined as a percentage of base salary and reflects the
executive’s management role and a comparison of his or her total compensation
with comparable total compensation packages for similar positions within our
peer group. The award can be paid in part or in whole, depending upon
which and to what extent the goals are achieved. Each executive also
has a threshold goal and a stretch goal that contemplate awards which are less
than and greater than, respectively, the target award. If actual
performance is less than the threshold goal, then no award is
paid. If actual performance meets the threshold goal but does not
meet the target, then a portion of the target award is paid. If
actual performance exceeds the target goal and meets the stretch goal, then an
executive will receive more than the target payout, up to an established
maximum. The Compensation Committee has historically required that we
achieve a minimum level of performance with respect to at least one goal as a
condition to any award being paid.
The EPP provides for the claw-back of
an award if the Corporation is required to prepare an accounting restatement due
to the material noncompliance of the Corporation with any financial reporting
requirement under applicable securities laws or applicable accounting
principles. In such case, each participant who received an award
under the EPP is required to return to the Corporation his or her award to the
extent the accounting restatement shows that a smaller award should have been
paid; however, no participant or former participant is required to return any
portion of any award to the extent it was paid more than three years prior to
the date the Corporation determines that a restatement is
required. Additionally, if it is found that a participant willfully
engaged or is willfully engaging in any activity that was or is injurious to the
Corporation or its affiliates, then the participant is required to forfeit
eligibility for an award for the plan year in which that determination is
made. If it is determined that the activity occurred during a plan
year for which the participant received an award under the EPP, then, subject to
any provision of the Corporation’s deferred compensation plan that does not
permit the forfeiture of amounts deferred into such plan, the participant must
return the award to the Corporation.
At year-end, the Compensation Committee
reviews the Corporation’s 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.
Equity/Incentive Compensation –
In 2008, the Compensation Committee adopted the Long-Term Incentive
Program (the “LTIP”) as a sub-plan of the Corporation’s Omnibus Equity
Compensation Plan that was adopted at the 2007 annual meeting of
shareholders. The purposes of the LTIP are to reward participants for
increasing shareholder value of the Corporation, to align interests with
shareholders, and to serve as a retention tool for key
executives. More specifically, the objectives of the LTIP are
to:
|
·
|
Motivate
and reward senior management for increasing long-term shareholder
value.
|
|
·
|
Create
a strong focus on pay-for-performance by ensuring that a significant
portion of total compensation is subject to the risk of forfeiture if
performance goals are not
satisfied.
|
|
·
|
Position
total compensation to be competitive with the market for meeting defined
performance goals.
|
|
·
|
Enable
us to attract and retain talent needed to drive its
success.
|
The
Compensation Committee believes that awards which vest based on our performance
align the interests of executive officers with shareholder
interests. Accordingly, under the LTIP, a participant will receive an
award of shares of performance-vesting stock (“Performance
Shares”). The value of the award is a specified percentage of the
participant’s salary as of the date of the grant and reflects the executive’s
management role.
For each
grant, the Compensation Committee will establish a performance goal for a
three-year performance period (the “Performance Period”), beginning January 1 of
the year in which the grant is made, and the minimum threshold (stated as a
percentage of the performance goal) that must be met for the award to
vest. The vesting is “all or nothing”, in that Performance Shares
will vest only if the Corporation achieves the threshold goal and then only if
the executive is employed by the Corporation on the vesting date, except for
termination due to death, disability or retirement. All Performance
Shares will lapse unless the specified threshold is met.
Achievement
of the threshold for a grant will be determined by the Compensation Committee
after the Corporation files its Annual Report on Form 10-K containing audited
financial statements for the last year of the Performance Period related to the
grant.
Any unvested award will terminate and
lapse in the event it is determined that a participant (i) knowingly
participated in the altering, inflating, and/or inappropriate manipulation of
performance or financial results of the Corporation for any fiscal year or (ii)
willfully engaged in any activity injurious to the Corporation. In
addition, in the event of item (i), the participant must forfeit and return to
the Corporation all Performance Shares under an award to the extent the award
vested based on the altered, inflated, or manipulated financial
results. Additionally, if an award has vested and the Corporation is
thereafter required to restate its financial statements in respect of any period
covered by the performance period for that award due to the material
noncompliance with any applicable financial reporting requirements, including
securities laws, then the award will be adjusted to give retroactive effect to
the restatement. In such case, a participant who received a
distribution under the award must forfeit and return to the Corporation that
portion of the award that the restatement shows should not have been earned;
provided, however, that no participant or former participant will be required to
return any portion of any award to the extent it was paid more than three years
prior to the date the Corporation determines that a restatement is
required.
401(k) Profit Sharing Plan –
In furtherance of our belief that every employee should have the ability
to accrue valuable retirement benefits, we adopted the 401(k) Profit Sharing
Plan, which is available to all employees, including executive
officers. Employees may enter the plan 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 the potential of 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. 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. The employee must be a plan participant and be actively
employed on the last day of the plan year to share in the employer matching
contribution.
Pension Plan – We believe
that every employee should share in our success and have the ability to accrue
valuable 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 five years of service. A year
of service is defined as working at least 1,000 hours in a plan
year.
Supplemental Executive Retirement
Plan – The Bank adopted the Supplemental Executive Retirement Plan (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. 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 (the “Code”) that could arise in connection with
our Change in Control Severance Plan (the “Severance Plan”). 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 Compensation
Committee excluded the SERP benefits payable to Mr. Grant from the 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.
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. The Compensation Committee chose this plan design to provide
competitive retirement benefits and to encourage long and faithful
service. The SERP was designed 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. Accordingly,
the SERP benefits are offset by any accrued benefits payable under the Pension
Plan and 50% of the social security benefits received by the
participant. 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. 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 10 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 10 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 (as defined in the
SERP). 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.
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
BOLI) – The Bank purchased policies of BOLI, which are insurance policies
on the lives of 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 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 Amended and Restated
Executive and Director Deferred Compensation Plan (the “Deferred Compensation
Plan”). The Deferred Compensation Plan 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
Compensation Committee. 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. To date, the
Corporation has not made any discretionary contributions 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.
Change in Control Severance
Plan—Each of the executive officers of
the Corporation participates in the 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.
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 Reason” 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 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 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.
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.
Perquisites – Perquisites are
provided to executive officers at the discretion of the Compensation Committee
and are reviewed periodically. In 2008, 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.
2008
Compensation Decisions (Analysis and Actions)
2008 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. During 2008, the Compensation Committee
continued to work with PM&P to provide ongoing comprehensive market analysis
of executive compensation, as well as expert advice and counsel on the various
components of total compensation for executives. The Committee
reviewed the base salary of the CEO, considering market data provided by
PM&P, financial performance of the corporation and collective performance
reviews by the Board of Directors related to the CEO’s
performance. The Committee reviewed base salaries for the other
executive officers based on individual performance reviews conducted by the CEO,
market data provided by PM&P and salary increase recommendations made by the
CEO.
2008 Executive
Pay for Performance Plan Awards
The 2008 targeted performance goals
under the EPP were as follows:
|
-
|
Return
on shareholder’s
equity: 13.44%
|
|
-
|
Earnings
per share: $2.35
|
|
-
|
Efficiency
ratio: 61.80%
|
|
-
|
Operating
Income as a Percentage of Net
Revenue: 29%
|
|
-
|
Growth
of COBO
Relationships: 5%
|
The
incentive award is allocable as follows: 30% to achievement of the goal for
return on shareholders’ equity, 30% to the goal for earnings per share, 15% to
the goal for efficiency ratio, 15% to the goal for operating income as a
percentage of net revenue and the remaining 10% to the goal for growth of COBO
relationships. Incentive awards are based on position and range of
responsibility with named executives receiving payments as outlined in the table
below. The threshold goal for all executives was 90% of target goal
performance, and the stretch performance goal was 120% of target goal
performance. The Compensation Committee conditioned all awards on the
Corporation’s attainment of the threshold goal for either return on equity or
earnings per share.
The
following table shows the potential threshold, target and stretch incentive
awards (as percentage of base salary) for meeting the incentive
goals:
|
|
Threshold %
|
|
|
Target %
|
|
|
Stretch %
|
|
William
B. Grant
|
|
|
20 |
% |
|
|
40 |
% |
|
|
50 |
% |
Robert
W. Kurtz
|
|
|
15 |
% |
|
|
30 |
% |
|
|
37.5 |
% |
Carissa
L. Rodeheaver
|
|
|
15 |
% |
|
|
30 |
% |
|
|
37.5 |
% |
Steven
M. Lantz
|
|
|
10 |
% |
|
|
20 |
% |
|
|
25 |
% |
Robin
E. Murray
|
|
|
10 |
% |
|
|
20 |
% |
|
|
25 |
% |
The
actual financial results for 2008 were as follows:
|
-
|
Return
on shareholders’ equity
of 9.31%
|
|
-
|
Earnings
per share of $1.45
|
|
-
|
Efficiency
ratio of 59.85%
|
|
-
|
Operating
Income as a % of Net Revenue
of 25.97%
|
|
-
|
Growth
of COBO Relationships
of 8.58%
|
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 performance. As
neither the ROE threshold goal nor the EPS threshold goal was met, no awards
were made for 2008.
Incentive/Equity
Awards
In 2008, the Compensation Committee
desired to closely align the LTIP to the Corporation’s strategic plan and the
goal of increasing shareholder value. As a means of accomplishing
this goal, the Committee granted Performance Shares to each of the executives
that will vest if the Corporation’s diluted earnings per share for the year
ended December 31, 2010 meets or exceeds 90% of the target goal. The
number of Performance Shares awarded to Mr. Grant was based upon 40% of his base
salary; the number of Performance Shares awarded to Mr. Kurtz and Ms. Rodeheaver
was based upon 30% of their base salaries and the number of Performance Shares
awarded to Mr. Lantz and Ms. Murray was based upon 20% of their base
salary. The target diluted earnings per share is $2.720, so the
Performance Shares will vest if, and only if, the 2010 diluted earnings per
share is at least $2.448.
The Compensation Committee chose
diluted earnings per share because it allows the measurement of income in
relationship to shares outstanding and provides a more stable approach to
earnings measurement, as the number of shares tends to remain more
consistent. The Compensation Committee selected a three-year
measurement period because it provides for a projection period short enough to
be realistically projected but long enough to retain the focus on long-term
financial performance. The Compensation Committee based the
percentage of salary for each award on the executive’s level of responsibility
within the organization and the total mix of all other elements of compensation
compared to compensation paid to executives in similar roles in our peer
group.
Other 2008
Decisions
The Compensation Committee chose not to
make any discretionary profit sharing contributions or payments in 2008 under
the 401(k) Profit Sharing Plan due to the increase in the 401(k) plan match
formula which was effective January 1, 2008.
Competitive Review and
Benchmarking
Understanding
the industry landscape is one element the Compensation Committee considers in
setting program targets and making compensation decisions. As stated
above, the Compensation Committee engaged PM&G during 2007 to conduct a
comprehensive market analysis, to establish a peer group and to provide
recommendations related to the executive compensation program going
forward. During 2008, the consultant continued to provide updates to
allow First United to monitor how its compensation levels compared with
market. The peer group used in 2008 included 20 institutions with
asset sizes ranging from approximately one-half to two times our size, similar
regional locations and similar business models. The objective is to
position our compensation programs at approximately the median. The 2008 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
|
|
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
|
Our peer
group 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.
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 overall financial
performance. During 2008, this was accomplished through the
EPP. In 2008, long-term incentives were added to align the interests
of executive officers and Board members with the interests of 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 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 of the Bank must own stock of the
Corporation equal to at least $500.
Accounting
and Tax Considerations
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.
Section 409A of the Code imposes
certain restrictions on the manner and timing of distributions to participants
who are “key employees” of the Corporation under non-qualified deferred
compensation plans and arrangements, including a prohibition against paying
benefits to a key executive for six months following his or her separation from
service. In June 2008 and November 2008, respectively, we amended the
Severance Plan and the Deferred Compensation Plan to ensure that they comply
with Section 409A of the Code. If an executive is entitled to
nonqualified deferred compensation that are subject to Section 409A and such
compensation does not comply with Section 409A, then the compensation is taxable
in the first year it is 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
compensation includible in income. In addition, 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.
Emergency
Economic Stabilization Act of 2008 Certification
The Compensation Committee certifies
that it has reviewed, with our senior risk officers, the incentive compensation
arrangements with our “senior executive officers”, as defined in 31 C.F.R. §
30.2 (“SEOs”), and has made reasonable efforts to ensure that such arrangements
do not encourage our SEOs to take unnecessary and excessive risks that threaten
the value of First United Corporation.
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 (the
“SEC”). 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, Chairman
|
|
David
J. Beachy
|
|
M.
Kathryn Burkey
|
|
Faye
E. Cannon
|
|
Paul
Cox, Jr.
|
|
Raymond
F. Hinkle
|
|
Donald
E. Moran
|
|
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: David J. Beachy, M. Kathryn Burkey, Faye
E. Cannon, Paul Cox, Jr., Raymond F. Hinkle, Elaine L. McDonald, Donald E.
Moran, Richard G. Stanton, and Robert G. Stuck. None of these
Directors served as an officer or employee of the Corporation during 2008, had
any interlocking relationship as contemplated by Item 407 of the SEC’s
Regulation S-K, or had any relationship subject to disclosure pursuant to Item
404 of the SEC’s Regulation S-K.
REMUNERATION
OF EXECUTIVE OFFICERS
The following table sets forth for the
last fiscal year 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, 2008 and whose total compensation (excluding changes
in pension value and non-qualified deferred compensation earnings) exceeded
$100,000 during 2008 (the CEO, CFO and such other officers are referred to as
the “named executive officers”).
SUMMARY COMPENSATION
TABLE
|
|
Name and
principal position
|
|
Year
|
|
Salary
($)
|
|
|
Stock
Awards
($)(2)
|
|
|
Non-equity
incentive plan
compensation
($)(3)
|
|
|
Change in
pension value
and non-
qualified
deferred
compensation
earnings
($)(4)
|
|
|
All other
compensation
($)(5)
|
|
|
Total
($)
|
|
William
B. Grant, Chairman/CEO (1)
|
|
2008
|
|
|
257,500 |
|
|
|
103,000 |
|
|
|
- |
|
|
|
160,266 |
|
|
|
10,937 |
|
|
|
531,703 |
|
|
2007
|
|
|
250,000 |
|
|
|
- |
|
|
|
100,000 |
|
|
|
- |
|
|
|
9,705
|
|
|
|
359,705 |
|
|
2006
|
|
|
250,000 |
|
|
|
- |
|
|
|
- |
|
|
|
758,646 |
|
|
|
11,550 |
|
|
|
1,020,196 |
|
Robert
W. Kurtz,
President/CRO
(1)
|
|
2008
|
|
|
176,000 |
|
|
|
52,800 |
|
|
|
- |
|
|
|
- |
|
|
|
3,279 |
|
|
|
232,079 |
|
|
2007
|
|
|
170,000 |
|
|
|
- |
|
|
|
51,000 |
|
|
|
- |
|
|
|
3,583
|
|
|
|
224,583 |
|
|
2006
|
|
|
163,269 |
|
|
|
- |
|
|
|
- |
|
|
|
332,565 |
|
|
|
3,825 |
|
|
|
499,659 |
|
Carissa
L. Rodeheaver, EVP / CFO
|
|
2008
|
|
|
182,000 |
|
|
|
54,600 |
|
|
|
- |
|
|
|
45,216 |
|
|
|
7,567 |
|
|
|
289,383 |
|
|
2007
|
|
|
145,796 |
|
|
|
- |
|
|
|
29,500 |
|
|
|
58,620
|
|
|
|
5,360
|
|
|
|
239,276 |
|
|
2006
|
|
|
115,579 |
|
|
|
- |
|
|
|
- |
|
|
|
45,717 |
|
|
|
4,581 |
|
|
|
165,887 |
|
Steven
M. Lantz,
SVP
/ Chief Lending Officer
|
|
2008
|
|
|
170,000 |
|
|
|
34,000 |
|
|
|
- |
|
|
|
73,749 |
|
|
|
8,057 |
|
|
|
285,806 |
|
|
2007
|
|
|
162,500 |
|
|
|
- |
|
|
|
32,500 |
|
|
|
-
|
|
|
|
7,062
|
|
|
|
202,062 |
|
|
2006
|
|
|
162,500 |
|
|
|
- |
|
|
|
- |
|
|
|
205,524 |
|
|
|
9,193 |
|
|
|
377,217 |
|
Robin
E. Murray, SVP / Director of Retail Banking
|
|
2008
|
|
|
148,000 |
|
|
|
29,600 |
|
|
|
- |
|
|
|
39,342 |
|
|
|
6,736 |
|
|
|
223,678 |
|
|
2007
|
|
|
140,000 |
|
|
|
- |
|
|
|
25,833 |
|
|
|
140,573
|
|
|
|
5,006
|
|
|
|
311,412 |
|
|
2006
|
|
|
116,667 |
|
|
|
- |
|
|
|
- |
|
|
|
100,248 |
|
|
|
5,264 |
|
|
|
222,179 |
|
(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 calculates the value of stock awards using the provisions of
Statement of Financial Accounting Standards No. 123R, “Accounting for
Share-based Payments”. See Note 1 to the consolidated audited
financial statements contained in the Corporation’s Annual Report on Form
10-K for the year ended December 31, 2008 regarding assumptions underlying
valuation of equity awards.
|
(3)
|
Represents
amounts earned during the year under the
EPP.
|
(4)
|
Amounts
represent changes in the present value of the accumulated benefit (PVAB)
under the Pension Plan and the SERP from the previous year
end. Changes in value for the Pension Plan were: Mr.
Grant, $67,518 for 2008, $50,828 for 2007 and $35,289 for 2006; Mr. Kurtz,
$96,252 for 2008, $126,461 for 2007 and $66,409 for 2006; Ms. Rodeheaver,
$19,126 for 2008, $11,338 for 2007 and $8,783 for 2006; Mr. Lantz, $35,537
for 2008, $53,695 for 2007 and $34,050 for 2006; and Ms Murray, $33,097
for 2008, $35,260 for 2007 and $14,770 for 2006. Changes in
value for the SERP were: Mr. Grant, $92,748 for 2008, $-501,590
for 2007 and $723,357 for 2006; Mr. Kurtz, -$361,709 for 2008, -$182,001
for 2007 and $266,156 for 2006; Ms. Rodeheaver, $26,090 for 2008, $47,282
for 2007 and $36,934 for 2006; Mr. Lantz, $38,212 for 2008, -$174,148 for
2007 and $171,474 for 2006; and Ms Murray, $6,245 for 2008, $105,313 for
2007 and $85,478 for 2006.
|
(5)
|
Amounts include premiums related
to BOLI and group term life insurance available to all employees and
matching contributions to the 401(k) plan. The dollar value 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, $2,887 for 2008, $882 for 2007 and $653 for
2006; Mr. Kurtz, $3,583 for 2008, $3,583 for 2007 and $3,040 for 2006; Ms.
Rodeheaver, $309 for 2008, $248 for 2007 and $297 for 2006; Mr. Lantz,
$1,017 for 2008, $1,328 for 2007 and $836 for 2006; and Ms. Murray, $798
for 2008, $573 for 2007 and $331 for 2006. Matching
contributions made by the Corporation for the named executive officers
under the 401(k) Profit Sharing Plan are as follows: Mr. Grant,
$8,050 for 2008, $8,823 for 2007 and $5,284 for 2006; Mr. Kurtz, $0 for
2008, $0 for 2007 and $0 for 2006; Ms. Rodeheaver, $7,258 for 2008, $5,112
for 2007 and $3,716 for 2006; Mr. Lantz, $7,040 for 2008, $7,446 for 2007
and $5,468 for 2006; and Ms. Murray, $5,938 for 2008, $4,433 for 2007 and
$4,933 for 2006.
|
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 three principal
elements: (i) base salary; (ii) incentive compensation, consisting of
amounts payable under the EPP and (iii) a long-term equity element, consisting
of an award of performance-vesting stock under the LTIP.
Salaries proposed to be paid in 2009 to
the named executive officers are as follows: Mr. Grant, $257,500; Ms.
Rodeheaver, $182,000; Mr. Kurtz, $176,000; Mr. Lantz, $170,000; and Ms. Murray,
$148,000.
Executive
Pay for Performance Plan
As mentioned above, the Corporation
maintains an EPP that rewards executives when the Corporation attains certain
performance goals. The following table provides information about
grants that could have been earned in 2008 and paid in 2009 pursuant to those
grants upon satisfaction of the conditions set forth above.
GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
|
|
|
Estimated Possible Payouts Under
Equity Incentive Plan
Awards
|
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)(1)
|
|
|
Target
(#)(1)
|
|
|
Maximum
(#)(1)
|
|
Mr.
Grant
|
|
1/1/2008
|
|
$ |
51,500 |
|
|
$ |
103,000 |
|
|
$ |
128,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
5,415 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Kurtz
|
|
1/1/2008
|
|
|
26,400 |
|
|
|
52,800 |
|
|
|
66,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
2,776 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Rodeheaver
|
|
1/1/2008
|
|
|
27,300 |
|
|
|
54,600 |
|
|
|
68,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
2,870 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Lantz
|
|
1/1/2008
|
|
|
17,000 |
|
|
|
34,000 |
|
|
|
42,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
1,787 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Murray
|
|
1/1/2008
|
|
|
14,800 |
|
|
|
29,600 |
|
|
|
37,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
1,556 |
|
|
|
- |
|
(1)
|
The
awards were granted under the LTIP and provide for only a single award
payout if (and only if) the Corporation’s earnings per share for the year
ended December 31, 2010 equals or exceeds
$2.448.
|
No awards were earned under the EPP for
2008 because the threshold for neither the earnings per share incentive goal nor
the return on equity incentive goal was met.
Equity
Compensation - LTIP
Equity compensation awarded to the
named executive officers during 2008 consisted of grants of Performance Shares
under the LTIP. The following table provides information about
outstanding equity awards as of December 31, 2008.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
Stock Awards
|
|
Name
|
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other
Rights That Have Not Vested
(#)(1)
|
|
|
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares,
Units or Other Rights That Have Not
Vested
($)(2)
|
|
Mr.
Grant
|
|
|
5,415 |
|
|
|
72,994 |
|
Mr.
Kurtz
|
|
|
2,776 |
|
|
|
37,420 |
|
Ms.
Rodeheaver
|
|
|
2,870 |
|
|
|
38,688 |
|
Mr.
Lantz
|
|
|
1,787 |
|
|
|
24,089 |
|
Ms.
Murray
|
|
|
1,556 |
|
|
|
20,975 |
|
|
(1)
|
The
awards were granted under the LTIP and provide for the vesting of the
shares if (and only if) the Corporation’s earnings per share for the year
ended December 31, 2010 equals or exceeds
$2.448.
|
|
(2)
|
The market value of each award is
calculated based on a per share market value of $13.48, which was the
closing sales price of a share of common stock on December 31,
2008.
|
No outstanding equity award vested
during 2008.
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. The current death benefits payable to
the beneficiaries of the named executive officers for split dollar insurance is
as follows: Mr. Grant, $450,000; Mr. Kurtz, $295,000; Ms. Rodeheaver,
$125,541; Mr. Lantz, $335,000; and Ms Murray, $250,000.
Pension
Benefits
All employees are eligible to
participate in the Pension Plan upon completion of one year of service and the
attainment of the age 21. A year of service is defined as the
completion of 12 consecutive months of employment during which the employee
worked at least 1,000 hours. Full vesting occurs after 5 years of
service.
Information
about the benefits payable to each of the named executive officers under the
Pension Plan and the SERP is provided in the following table.
PENSION BENEFITS
|
|
Name
|
|
Plan Name
|
|
Number of
years credited
service
(#) (1)
|
|
|
Present value of
accumulated
benefit
($) (2) (3)
|
|
|
Payments
during last fiscal
year
($)
|
|
Mr.
Grant
|
|
Pension
Plan
|
|
30
|
|
|
|
489,930 |
|
|
|
- |
|
|
SERP
|
|
30
|
|
|
|
734,799 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Kurtz
|
|
Pension
Plan
|
|
36
|
|
|
|
979,857 |
|
|
|
- |
|
|
SERP
|
|
36
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Rodeheaver
|
|
Pension
Plan
|
|
17
|
|
|
|
76,958 |
|
|
|
- |
|
|
SERP
|
|
24
|
|
|
|
343,967 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Lantz
|
|
Pension
Plan
|
|
22
|
|
|
|
271,041 |
|
|
|
- |
|
|
SERP
|
|
24
|
|
|
|
511,018 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms.
Murray
|
|
Pension
Plan
|
|
25
|
|
|
|
140,928 |
|
|
|
- |
|
|
SERP
|
|
25
|
|
|
|
326,628 |
|
|
|
- |
|
(1)
|
The
credited years of service under the SERP for Ms. Rodeheaver and Mr. Lantz
exceed their actual years of service by seven years and two years
respectively. The differences between the credited years SERP
value and the actual years SERP value for these officers
are: $233,661 for Ms. Rodeheaver and $254,481 for Mr.
Lantz.
|
(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 – RP-2000; 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.
|
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, 2008, see the table that is included
below under “Benefits Upon a Separation From Service” and the discussion below
entitled “Impact of Recent Legislation on Executive
Compensation”.
Deferred
Compensation Plan
Each of the named executive officers is
eligible to participate in the Deferred Compensation Plan. The
following table provides information relating to amounts deferred by or for the
benefit of the named executive officers in 2008 under the Deferred Compensation
Plan. The named executive officers are 100% vested in their plan
accounts.
NON-QUALIFIED DEFERRED COMPENSATION
|
|
Name
|
|
Executive
contributions
in last FY
($)
|
|
|
Registrant
contributions
in last FY
($)
|
|
|
Aggregate
earnings in
last FY (1)
($)
|
|
|
Aggregate
withdrawals/
distributions
($)
|
|
|
Aggregate
balance at
last FYE
($)
|
|
Mr.
Grant
|
|
|
- |
|
|
|
- |
|
|
|
10,697 |
|
|
|
- |
|
|
|
278,855 |
|
Mr.
Kurtz
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ms.
Rodeheaver
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Mr.
Lantz
|
|
|
15,000 |
|
|
|
- |
|
|
|
951 |
|
|
|
- |
|
|
|
32,255 |
|
Ms.
Murray
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
(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.
|
Benefits
Upon a Separation from Service
The table
that follows shows the estimated present value of benefits (as of December 31,
2008) that could be payable to the named executive officers under the Severance
Plan, the SERP, and the BOLI benefits program upon a separation from service
(without regard to the limitations on severance payments discussed below under
“Impact of Recent Legislation on Executive Compensation”). 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.
Name
|
|
Reason for Termination
|
|
Severance
Plan Cash
Benefit
($)
|
|
|
Severance Plan
Benefit
Continuation
($) (3)
|
|
|
Estimated
SERP Benefit
($) (1) (2)
|
|
|
Estimated
BOLI
Benefit
($)
|
|
|
Total
($)
|
|
Mr.
Grant
|
|
Change
in control, disability, involuntary termination other than for cause, or
voluntary termination for good reason
|
|
|
872,925 |
|
|
|
14,226 |
|
|
|
734,799 |
|
|
|
- |
|
|
|
1,621,950 |
|
|
Death
|
|
|
- |
|
|
|
- |
|
|
|
284,799 |
|
|
|
450,000 |
|
|
|
734,799 |
|
|
|
Voluntary termination without good
reason
|
|
|
- |
|
|
|
- |
|
|
|
734,799 |
|
|
|
- |
|
|
|
734,799 |
|
Mr.
Kurtz
|
|
Change
in control, disability, involuntary termination other than for cause, or
voluntary termination for good reason
|
|
|
404,800 |
|
|
|
14,226 |
|
|
|
- |
|
|
|
- |
|
|
|
419,026 |
|
|
Death
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
295,000 |
|
|
|
295,000 |
|
|
|
Voluntary termination without good
reason
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ms.
Rodeheaver |
|
Change
in control, disability, involuntary termination other than for cause, or
voluntary termination for good reason
|
|
|
418,600 |
|
|
|
20,172 |
|
|
|
343,967 |
|
|
|
- |
|
|
|
782,739 |
|
|
|
Death
|
|
|
- |
|
|
|
- |
|
|
|
218,426 |
|
|
|
125,541 |
|
|
|
343,967 |
|
|
|
Voluntary
termination without good reason
|
|
|
- |
|
|
|
- |
|
|
|
110,306 |
|
|
|
- |
|
|
|
110,306 |
|
Mr.
Lantz
|
|
Change
in control, disability, involuntary termination other than for cause, or
voluntary termination for good reason
|
|
|
374,000 |
|
|
|
16,676 |
|
|
|
511,018 |
|
|
|
- |
|
|
|
901,694 |
|
|
Death
|
|
|
- |
|
|
|
- |
|
|
|
176,018 |
|
|
|
335,000 |
|
|
|
511,018 |
|
|
|
Voluntary
termination without good reason
|
|
|
- |
|
|
|
- |
|
|
|
256,537 |
|
|
|
- |
|
|
|
256,537 |
|
Ms.
Murray
|
|
Change
in control, disability, involuntary termination other than for cause, or
voluntary termination for good reason
|
|
|
325,600 |
|
|
|
11,764 |
|
|
|
326,628 |
|
|
|
- |
|
|
|
663,992 |
|
|
Death
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
Voluntary
termination without good reason
|
|
|
- |
|
|
|
- |
|
|
|
326,628 |
|
|
|
- |
|
|
|
326,628 |
|
|
(1)
|
SERP
benefits payable upon a separation from service due to death are reduced
dollar for dollar by the BOLI benefits payable at
death. Accordingly, the amounts shown as the Estimated SERP
Benefit have been reduced to reflect the amounts shown in the column
entitled “Estimated BOLI Benefit
($)”.
|
|
(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 Mr. Lantz in connection with a voluntary
termination without good reason are based on actual years of service of 17
and 22 respectively. Messrs. Grant and Kurtz and Ms. Murray
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 are
calculated at current rates and current cost sharing formulas, as futures
costs are unknown. Amounts reflect the value of two years of
coverage.
|
Impact
of Recent Legislation on Executive Compensation
On January 30, 2009, the Corporation
participated in the Troubled Asset Relief Program (“TARP”) Capital Purchase
Program (the “CPP”) adopted by the U.S. Department of Treasury (“Treasury”)
pursuant to the Emergency Economic Stabilization Act of 2008 (“EESA”) by selling
shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the
“Series A Preferred Stock”) to Treasury and issuing a 10-year common stock
purchase warrant (the “Warrant”) to Treasury. As part of these
transactions, we adopted Treasury’s standards for executive compensation and
corporate governance for the period during which Treasury holds any shares of
the Series A Preferred Stock and/or any shares of common stock that may be
acquired upon exercise of the Warrant. On February 17, 2009, the
American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) was signed
into law, which, among other things, imposed additional restrictions on the
payment of executive compensation by institutions that participate in
TARP. The Recovery Act’s restrictions apply to the Corporation for as
long as Treasury holds any of the Series A Preferred Stock (the “Covered
Period”).
Treasury’s standards for executive
compensation apply to the Corporation’s named executive officers and
include: (i) a prohibition on incentive compensation plans and
arrangements for named executive officers that encourage unnecessary and
excessive risks that threaten the value of the Corporation; (ii) a clawback of
any bonus or incentive compensation paid (or under a legally binding obligation
to be paid) to a named executive officer on materially inaccurate financial
statements or other materially inaccurate performance metric criteria; (iii) a
prohibition on making “golden parachute payments” to named executive officers;
and (4) an agreement not to claim a deduction, for federal income tax purposes,
for compensation paid to any of the named executive officers in excess of
$500,000 per year.
The Recovery Act continues all of the
same compensation and governance restrictions imposed under EESA and the CPP,
and adds substantially to these restrictions in several areas. The
new standards include (but are not limited to): (i) prohibitions on
bonuses, retention awards and other incentive compensation to certain of the
Corporation’s five most highly compensated employees, other than restricted
stock grants, in an amount not more than one-third of the employee’s total
annual compensation which do not fully vest during the Covered Period; (ii)
prohibitions on making severance payments to any named executive officer or any
of the Corporation’s next five most highly compensated employees; (iii) an
expanded clawback of bonuses, retention awards, and incentive compensation if
payment is based on materially inaccurate statements of earnings, revenues,
gains or other criteria; (iv) prohibitions on compensation plans that encourage
manipulation of reported earnings; (v) retroactive review of bonuses, retention
awards and other compensation previously provided by Capital Purchase Program
participants if found by the Treasury to be inconsistent with the purposes of
such program or otherwise contrary to public interest, (vi) required
establishment of a company-wide policy regarding “excessive or luxury
expenditures”; and (vii) inclusion in a CPP participant’s proxy statements for
annual shareholder meetings of a non-binding “Say-on-Pay” proposal to allow a
shareholder vote to approve the compensation of executives.
Accordingly, for so long as Treasury
holds any shares of the Series A Preferred Stock, the Corporation may not (i)
pay any Severance Plan benefits to the named executive officers or (ii) make
payments under the EPP or, unless future awards comply with the above
requirements, the LTIP to our five most highly compensated
employees. Each of the named executive officers other than Ms. Murray
is among the Corporations’ five most highly compensated employees.
There is no stated effective date
for each of the Recovery Act’s executive compensation
standards. Treasury is directed to issue regulations to implement
these standards and the SEC is required to issue regulations related to the “Say
on Pay” requirements. The SEC recently announced that the “Say on
Pay” requirement is currently effective, so the Corporation has included a “Say
on Pay” proposal in this proxy statement to provide shareholders with the right
to cast an advisory vote at the 2009 Annual Meeting on its executive
compensation policies and practices. For more information, see
“Non-Binding Advisory Vote On Executive Compensation (Proposal
3)”. Until Treasury’s implementing regulations are adopted, it is
unclear whether the other requirements of the Recovery Act are immediately
effective.
The Corporation will carefully review
the remaining Recovery Act executive compensation standards and any Treasury
and/or SEC regulations, once issued. To the extent that Treasury
amends the securities purchase agreement pursuant to which the Series A
Preferred Stock was sold to make these standards applicable, Treasury and/or the
SEC issues regulations describing how the Corporation is to comply with these
standards or the Corporation determines that these standards apply, the
Corporation will work with its covered employees to take such steps as it deems
necessary to comply with the standards and adopt administrative and other
procedures consistent with the foregoing.
It is impossible to predict when, if at
all, Treasury will dispose of the Series A Preferred Stock. At the
time of the transactions, Treasury’s stated intention was to sell the Series A
Preferred Stock as it is able to do so, and we recently filed a registration
statement with the SEC to register the Series A Preferred Stock for
resale. Moreover, the Recovery Act permits the Corporation to repay
CPP assistance at any time after consulting with the Federal Reserve Bank of
Richmond. Recent guidance issued by Treasury states that a CPP
participant that desires to repay assistance must repay a minimum of
25%. If the Corporation were to repay more than $5,000,000 in
assistance, the Corporation believes that the above-described prohibition
against paying or accruing any bonus, retention award, or incentive compensation
would apply only to our most highly compensated employee (currently, Mr.
Grant).
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Party Transactions since January 1, 2008
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 2008
were $632,690. 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 2009 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 Rule 4350(h) requires the
Corporation 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 Corporation’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 Corporation
is a participant and the amount involved exceeds $120,000, and in which any
Director, Director nominee, or executive officer of the Corporation, any holder
of more than 5% of the outstanding voting securities of the Corporation, 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
Corporation.
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
Bank’s board of directors semi-annually reviews the total indebtedness of each
Director and executive officer of the Corporation.
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, 2008, such persons timely filed all reports required to
be filed by Section 16(a) except that David J. Beachy filed
one late Form 4 (covering the sale of stock).
RATIFICATION
OF APPOINTMENT OF BEARD MILLER COMPANY LLP AS THE CORPORATION’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (Proposal 2)
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,
2009. Beard Miller Company LLP has served as the Corporation’s
independent auditing firm since 2006. Beard Miller Company LLP 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 2009.
AUDIT
FEES AND SERVICES
The
following table shows the fees paid or accrued by the Corporation for the audit
and other services provided by its principal accountant, Bear Miller Company
LLP, for fiscal years 2008 and 2007:
|
|
FY 2008
|
|
|
FY 2007
|
|
Audit
Fees
|
|
$ |
259,471 |
|
|
$ |
258,274 |
|
Audit-Related
Fees
|
|
|
5,800 |
|
|
|
1,200 |
|
Tax
Fees
|
|
|
4,139 |
|
|
|
— |
|
All
Other Fees
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
269,410 |
|
|
$ |
259,474 |
|
Audit Fees include fees associated with
the annual audit, the reviews of the Corporation’s quarterly reports on Form
10-Q, and the attestation of management’s report on internal control over
financial reporting. Audit-Related Fees for 2008 include fees
associated with the filing of Form S-3 and other-than-temporary impairment
assessment associated with trust preferred securities. For 2007,
Audit-Related 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 as well as the
filing of Form S-8. Tax Fees relate to tax planning. The
Audit Committee has reviewed summaries of the services provided by Beard Miller
Company LLP and the related fees and has determined that the provision of
non-audit services is compatible with maintaining the independence of Beard
Miller Company LLP.
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 2008 and 2007 services
described above were pre-approved by the Audit Committee.
NON-BINDING
ADVISORY VOTE ON EXECUTIVE COMPENSATION (Proposal 3)
As stated above, the Recovery Act was
signed into law on February 17, 2009. In addition to a wide variety
of programs intended to stimulate the economy, the Recovery Act imposes
significant new requirements for and restrictions relating to the compensation
arrangements of financial institutions that received government funds through
TARP, including institutions like the Corporation that participated in the CPP
prior to the enactment of the Recovery Act. These restrictions apply
until a participant repays the financial assistance received through TARP (the
“TARP Period”).
One of the new requirements is that any
proxy for a meeting of shareholders at which directors are to be elected which
is held during the TARP Period permit a non-binding advisory vote on the
compensation of the executive officers of the TARP participant, as described in
the participant’s proxy statement. This advisory vote is commonly
referred to as a “Say on Pay” proposal.
As a shareholder, you are being
provided with the opportunity to endorse or not endorse the Corporation’s
executive compensation program and policies through the following
resolution:
“Resolved,
that the shareholders approve the compensation of the Corporation’s executive
officers, as described in the sections of this Proxy Statement entitled
“COMPENSATION DISCUSSION AND ANALYSIS” AND “REMUNERATION OF EXECUTIVE
OFFICERS”.
Because your vote is advisory, it will
not be binding upon the Board of Directors, overrule any decision made by the
Board of Directors, or create or imply any additional fiduciary duty by the
Board of Directors. The Compensation Committee may, however, take
into account the outcome of the vote when considering future executive
compensation arrangements.
The Board of Directors and its
Compensation Committee believe that the Corporation’s compensation policies and
procedures are reasonable in comparison both to the Corporation’s peer group and
to the Corporation’s relatively strong performance during 2008. The
Board of Directors and its Compensation Committee also believe that the
Corporation’s compensation program strongly aligns with the interests of
shareholders in the long-term value of the Corporation as well as the components
that drive long-term value.
The Board of Directors unanimously
recommends that shareholders vote FOR approval of the
Corporation’s executive compensation program and policies.
INCORPORATION
BY REFERENCE
Neither the Audit Committee Report nor
the Compensation Committee Report contained in this Proxy Statement is deemed
filed with the SEC, and neither shall be deemed incorporated by reference into
any prior or future filings made by the Corporation under the Securities Act of
1933, as amended, or the Exchange Act, except to the extent that the Corporation
specifically incorporates such information by reference.
SUBMISSION
OF SHAREHOLDER PROPOSALS FOR 2010 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 2010 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 27, 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 2010 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 10, 2010 (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
|
Under new
Securities and Exchange Commission rules, you are receiving this notice that the
proxy materials for the 2009 Annual Meeting of Shareholders are available on the
Internet. Follow the instructions below to view the materials and
vote online or by telephone or to request a copy. The matters to be
voted on and the location of the Annual Meeting are stated on the reverse
side. Your vote is important.
Important
Notice Regarding Availability of Proxy Materials for First United Corporation
Annual Meeting of Shareholders to be Held on May 14, 2009
1. This
communication presents only an overview of the more complete proxy materials
that are available to you on the Internet. We encourage you to access
and review all of the important information contained in the proxy materials
before voting.
2. The Proxy Statement,
related Proxy Card, and 2008 Annual Report to Shareholders (including First
United Corporation’s Annual Report on Form 10-K for the year ended December 31,
2008) are available at: http://www.stocktrans.com/eproxy/firstunited2009.
3. If
you want to receive a paper or an e-mail copy of these documents, you must
request one. There is no charge to you for requesting a
copy. Please make your request for a copy as instructed below on or
before April 7, 2009 to facilitate timely delivery.
You may
vote on-line, by phone, by mail or in person.
If you
wish to vote online, you must go to the Internet webpage provided on the Proxy
Card, enter your “Proxy Control
Number” (which can be found at the bottom right corner of the reverse
side of this notice) and follow the online instructions to cast your
vote.
If you
wish to vote by telephone, you must call the toll-free number listed on the
Proxy Card, enter your Proxy
Control Number and follow the prompts to cast your vote.
If you
wish to vote by mail, print out the Proxy Card available at the Internet website
stated above, mark it accordingly, date and sign it, and return it to us at the
address indicated on the Proxy Card.
If you
wish to vote in person, attend the Annual Meeting and cast your
vote. To help us plan for the Annual Meeting, if you plan to attend
in person we ask that you print the Proxy Card available at the Internet website
stated above, check the box that you plan to attend, and return it to us at the
address indicated on the Proxy Card (your failure to do this, however, will not
prevent you from voting in person).
To
request a paper copy or an e-mail copy of the proxy materials or directions to
the 2009 Annual Meeting, either:
|
·
|
Call our toll-free number –
(866) 360-7311; or
|
|
·
|
Visit our website at
http://www.stocktrans.com/eproxy/firstunited2009;
or
|
If you
request documents by e-mail, please clearly identify the documents you are
requesting, reference “First United Corporation”, provide your name and your
Proxy Control Number, and the name and physical address or electronic address
(if you are requesting an e-mail copy) to which the documents should be
mailed.
First
United Corporation – Annual Meeting
The
2009 Annual Meeting of Shareholders will be held at 10:00 a.m., Eastern Standard
Time, on May 14, 2009 at the Wisp at Deep Creek Mountain Resort, McHenry,
Maryland 21541.
Proposals
to be voted on at the meeting are listed below along with the recommendations of
the Board of Directors.
|
1.
|
Election
of Class II Directors:
|
01 Robert
W.
Kurtz 02 Elaine
L.
McDonald 03 Donald
E.
Moran 04 Gary
R. Ruddell
The Board of Directors recommends that
you vote FOR
all nominees
|
2.
|
Ratification
of appointment of Beard Miller Company LLP to serve as the Corporation’s
independent registered public accounting firm for fiscal year
2009.
|
The Board of Directors recommends that
you vote FOR
ratification.
|
3.
|
A
non-binding advisory vote on executive
compensation.
|
The Board of Directors recommends that
you vote FOR
approval of executive compensation.
|
4.
|
Such
other matters as may properly come before the
meeting.
|
PLEASE
NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares,
you must vote online, by telephone, by returning a signed and dated Proxy Card
to the Corporation, or by attending the meeting in person and casting your
vote.
By
Order of the Board of Directors,
|
|
|
William
B. Grant
|
Chairman
and
CEO
|
Your
Proxy Control Number _______________
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 Heather M. Broadwater, 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 below all the shares of Common Stock of First
United Corporation held of record by the undersigned on February 23, 2009 at the
Annual Meeting of Shareholders to be held on May 14, 2009 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” PROPOSAL 2,
“FOR” PROPOSAL 3, AND IN
THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING.
Important
Notice Regarding the Availability of Proxy Materials For the Shareholder Meeting
to be Held on May 14, 2009:
This
form of Proxy, the related Proxy Statement, and First United Corporation’s
Annual Report to Shareholders (including its Annual Report on Form 10-K) are
available at www.stocktrans.com/eproxy/firstunited2009.
The
Board of Directors recommends a vote “FOR
ALL NOMINEES” in Proposal 1.
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The
Board of Directors recommends a vote “FOR” Proposal 3.
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1.
Election of the following four (4) Class II Directors to serve until the
2012 Annual Meeting of Shareholders and until their successors are duly
elected and qualify.
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3.
Approve the Corporation’s executive compensation program and policies
(non-binding advisory vote).
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Class
II (term expires 2012)
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o |
FOR
ALL NOMINEES
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FOR o AGAINST o ABSTAIN o
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01
Robert W. Kurtz
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02
Elaine L. McDonald
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o |
WITHHOLD
AUTHORITY
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03
Donald E. Moran
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FOR
ALL NOMINEES
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04
Gary R. Ruddell
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o |
FOR
ALL EXCEPT
(see
instruction below)
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4.
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.
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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.
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The
Board of Directors recommends a vote “FOR” Proposal 2.
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2.
Ratification of the appointment of Beard Miller Company LLP as the
Corporation’s independent registered public accounting firm for
2009.
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THE
UNDERSIGNED ACKNOWLEDGES RECEIPT OF NOTICE OF THE AFORESAID ANNUAL MEETING
OF SHAREHOLDERS
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FOR o AGAINST o ABSTAIN o
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Date: _______________________,
2009
_________________________________
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.
Address
Change/Comments:
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VOTE BY INTERNET: Log-on to
www.votestock.com; Enter your control number
printed above; Vote your proxy by checking the appropriate boxes; Click on
“Accept Vote”.
VOTE BY
TELEPHONE: After you call the phone number below, you will be
asked to enter your control number printed above. You will need to
respond to only a few simple prompts. Your vote will be confirmed and cast as
directed.
Call
toll-free in the U.S. or Canada at 1-866-626-4508 on a touch-tone
telephone.
VOTE BY MAIL: If
you do not wish to vote over the Internet or by telephone, please complete, sign
and date the accompanying proxy card and return it in the pre-paid envelope
provided.