UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): June 18, 2008
First
United Corporation
(Exact
name of registrant as specified in its charter)
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Maryland
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0-14237
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52-1380770
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(State
or other jurisdiction of
incorporation
or organization)
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(Commission
file number)
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(IRS
Employer
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19
South Second Street, Oakland, Maryland 21550
(Address
of principal executive offices) (Zip Code)
(301)
334-9471
(Registrant’s
telephone number, including area code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions:
¨
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
| ITEM
5.02. |
Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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(e) |
Compensatory
Arrangements.
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On
June
18, 2008, the Board of Directors of First United Corporation (the “Corporation”)
adopted a Long-Term Incentive Program (the “LTIP”) and formalized the existing
Executive Pay for Performance Plan (the “EPPP”). The Board also amended and
restated the First United Corporation Change in Control Severance Plan (the
“CiC”) to conform it to certain provisions of the First United Corporation
Omnibus Equity Compensation Plan. The material terms of the LTIP and the EPPP
and of the amendments to the CiC are discussed below and are qualified in their
entirety by the terms of these plans, which are attached hereto as
exhibits.
First
United Corporation Long-Term Incentive Program
The
LTIP
was adopted as a sub-plan of the Corporation’s Omnibus Equity Compensation Plan
to reward participants for increasing shareholder value, align executive
interests with those of shareholders, and serve as a retention tool for key
executives. The Chief Executive Officer and certain other executive officers
selected by the Board’s Compensation Committee are eligible to receive grants.
Under the LTIP, participants are granted shares of restricted common stock
of
the Corporation. The value of an award will be based on a specified percentage
of the participant’s salary as of the date of grant, which percentage will be
based on competitive market practice for the participant’s role. These shares
will vest if the Corporation meets or exceeds certain performance thresholds
established by the Compensation Committee. For the first plan year, which began
on January 1, 2008, the performance goal is diluted earnings per share (“EPS”)
of $2.72 for the year ended December 31, 2010, and shares will vest if, and
only
if, the EPS for the year ended December 31, 2010 meets or exceeds 90% of this
amount. Performance will be determined once the Compensation Committee has
received and reviewed the Corporation’s audited financial statements for the
last year of the performance period. Accordingly, for the first plan year,
award
vesting will be determined in 2011.
The
LTIP
calls for the forfeiture of unvested awards if the employment of a participant
is terminated prior to the vesting date other than because of death, disability,
or retirement. If a participant becomes disabled and is disabled long enough
to
be placed on long-term disability, his/her outstanding unvested awards may
be
appropriately prorated so that no award will be earned during the period of
long-term disability. If a participant’s employment is terminated due to
disability, the Corporation will
pay
an amount of cash to the participant based on the pro rata portion of the award
that would have been earned by the participant had the participant remained
employed through the vesting date and had the threshold goals been met.
In
the
event of retirement or death, the Corporation will pay an amount of cash to
the
participant or his or her estate (as the case may be) based on the pro rata
portion of the award that would have been earned by the participant had the
participant remained employed through the vesting date and had the threshold
goals been met. The method of determining the pro rata portion that will be
deemed vested will be specified in each award agreement.
In
the
event of an approved leave of absence, a participant’s award may be
appropriately adjusted to reflect the period of active status.
Generally,
if there is a change in control (as defined in the Omnibus Equity Compensation
Plan) and a participant incurs a severance (as defined in the award agreement
granting the award) during the period commencing on the date that is 90 days
before the date on which the change in control occurs and ending on the first
anniversary of the date on which the change in control occurs, then the
restrictions and conditions on all outstanding awards that have not already
vested or expired or been forfeited pursuant to their terms will immediately
lapse upon the date of severance and the awards will be payable.
The
LTIP
also includes forfeiture and clawback provisions in the event of malfeasance
on
the part of a participant. Further, the LTIP provides that all participants
will
be required to forfeit vested awards if the Corporation is required to restate
its financial statements to the extent awards vested based on incorrect
financial statements, but this forfeiture provision has a three-year look-back
period.
Each
award will be evidenced by a restricted stock agreement. William B. Grant’s
agreement will differ only in that the definition of “Good Reason” for purposes
of determining whether a “Severance” has occurred in connection with a change in
control will include him not being employed, after a change in control, as
the
Chief Executive Officer of a corporation the capital stock of which is listed
or
traded on a national securities exchange.
For
2008,
the Compensation Committee has granted shares of restricted stock to each of
the
Corporation’s named executive officers as follows: Mr. Grant, 5,415 shares;
Robert W. Kurtz, 2,776 shares; Carissa L. Rodeheaver, 2,870 shares; Eugene
D.
Helbig, Jr., 1,472 shares; and Steven M. Lantz, 1,787. The Compensation
Committee also granted restricted shares to certain other executive officers
who
are not named executive officers. Specific information about these award
opportunities are set forth in Exhibit A to the LTIP.
First
United Corporation Executive Pay for Performance Plan
The
EPPP
is the Corporation’s cash incentive award program which rewards executives for
the Corporation’s annual performance. The EPPP is designed to reward executives
as a team, rather than focusing on individual contributions. Incentive goals
for
the EPPP are selected each year by the Compensation Committee to reflect the
Corporation’s core financial objectives and are expressed as a percentage of
each participating executive’s annual salary. Each target award is subject to an
upward adjustment of up to 125% (i.e.,
“stretch performance”) when performance exceeds targeted expectations and to a
downward adjustment by as much as 50% when performance falls below targeted
expectations but meets the threshold expectation (i.e.,
“threshold performance”). No award will be earned if performance falls below the
threshold performance level. Each award is based upon certain performance
metrics, and each performance metric is weighted so that it makes up a
percentage of the overall award. Metrics will be established each year by the
Compensation Committee. For a metric to be count towards the threshold
performance award if the Corporation achieves 90% of the target for that metric.
A metric will count towards the stretch performance award if the Corporation
achieves 110% of the target for that metric. At year-end, the Compensation
Committee will review the Corporation’s projected performance for that year and
will make a determination as to whether awards under the EPPP are payable for
the year. If so, awards are paid in the first quarter of the following year.
Except
in
the case of a termination due to a participant’s death, disability or retirement
as discussed below, no incentive award will be granted to any participant whose
employment with the Corporation is terminated for any reason. In addition,
a
participant must be an active employee of the Corporation on the date the
incentive is paid to receive an award.
If
a
participant is disabled by an accident or illness and is disabled long enough
to
be placed on long-term disability under the Corporation’s long-term disability
policy, then the participant’s award for the plan year will be prorated so that
no award will be earned during the period of long-term disability. In the event
a participant’s employment is terminated due to death or disability (as defined
in the Corporation’s long-term disability policy), the Corporation will pay to
the participant’s estate or to the participant (as the case may be) the pro rata
portion of the award that had been earned by the participant through the date
of
termination. Participant’s who retire (as defined in the plan) during a plan
year will receive a pro-rata portion of the award based on the retirement date.
Similar
to the LTIP, the EPPP includes forfeiture and clawback provisions in the event
of malfeasance on the part of a participant. Further, the EPPP provides that
all
participants will be required to forfeit vested awards if the Corporation is
required to restate its financial statements to the extent awards vested based
on incorrect financial statements, but this forfeiture provision has a
three-year look-back period.
For
2008,
the performance metrics are return on equity, EPS, the efficiency ratio,
operating income as a percentage of net revenue, and growth of community
oriented business owners loan and deposit relationships. The award opportunities
and performance metrics for 2008 are detailed in Appendix A of the EPPP. The
following table provides information about awards that could be earned by the
Corporation’s named executive officers in 2008 and paid in 2009 under the EPPP:
GRANTS
OF PLAN-BASED AWARDS
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Estimated Possible Annual Payouts Under the
EPPP
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Name
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Date
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Threshold
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Target
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Maximum
(Stretch)
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William
B. Grant
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2008
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$
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51,500
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$
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103,000
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$
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128,750
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Robert
W. Kurtz
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2008
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26,400
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52,800
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66,000
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Carissa
L. Rodeheaver
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2008
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27,300
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54,600
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68,250
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Steven
M. Lantz
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2008
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17,000
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34,000
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42,500
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Eugene
D. Helbig
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2008
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14,000
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28,000
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35,000
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Amendments
to the Change in Control Severance Plan
As
adopted, the CiC provided that a change in control will occur if, during any
12-month period, any person (or group of persons) becomes a beneficial owner
of
more than 20% of the outstanding voting securities of the Corporation. Under
the
Omnibus Equity Compensation Plan Plan, however, a change in control will occur
if such a person acquires more than 35% of the outstanding voting securities
of
the Corporation during any 12-month period. To ensure that the CiC and the
Omnibus Equity Compensation Plan were consistent, the Corporation has, with
the
consent of all participants, amended the CiC by replacing the reference to
20%
with 35%.
The
CiC
further provided that a change in control will also occur if, during any
24-month period, individuals who constitute the Board of Directors cease for
any
reason to constitute at least a majority of the Corporation’s Board of
Directors, unless the election or nomination for election of the subsequent
directors was approved by the Corporation’s shareholders. The Omnibus Equity
Compensation Plan, however, provides that a change in control will occur if
this
event occurs during any 12-month period. Accordingly, the Corporation has
amended the CiC by replacing the reference to a 24-month period with a 12-month
period.
ITEM
9.01. Financial Statements and Exhibits.
The
exhibits filed with this report are listed in the Exhibit Index that immediately
follows the signature hereto. This Exhibit Index is incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
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FIRST
UNITED CORPORATION
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Dated:
June 20, 2008
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By:
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/s/
Carissa L. Rodeheaver
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Carissa
L. Rodeheaver, Senior Vice
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President
and Chief Financial Officer
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EXHIBIT
INDEX
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Exhibit
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Description
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10.1
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First
United Corporation Long-Term Incentive Plan (filed
herewith).
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10.2
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Restricted
Stock Agreement for William B. Grant (filed herewith)
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10.3
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Form
of Restricted Stock Agreement for Executive Officers other than the
Chief
Executive Officer (filed herewith)
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10.4
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First
United Corporation Executive Pay for Performance Plan (filed
herewith).
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10.5
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Amended
and Restated Change in Control Severance Plan (filed
herewith).
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