Exhibit 10.1

 

 

FIRST UNITED CORPORATION

LONG-TERM INCENTIVE PLAN

 

Introduction

 

The Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of First United Corporation (the “Corporation”) has adopted this
Long-Term Incentive Plan (this “Plan”) as a sub-plan of the Corporation’s 2018
Equity Compensation Plan that was adopted at the 2018 annual meeting of
shareholders (the “Equity Plan”). The purpose of this Plan is to reward
participants for increasing shareholder value of the Corporation, align
interests with shareholders, and serve as a retention tool for key executives.

 

As used in this Plan, the term “Corporation” refers to First United Corporation
and, as the context requires, its subsidiaries.

 

Objectives for this Plan

 

The Plan is part of a total compensation package that includes base salary,
annual incentives, long-term incentives, and benefits. Below are specific
objectives for this Plan:

 

·Motivate and reward senior management for increasing the long-term shareholder
value of the Corporation.

 

·Create a strong focus on pay-for-performance by providing a significant portion
of total compensation at risk.

 

·Position the Corporation’s total compensation to be competitive with market for
meeting defined performance goals.

 

·Enable the Corporation to attract and retain talent needed to drive its
success.

 

Eligibility/Participation

 

The CEO of First United Corporation and certain other executive officers of the
Corporation are eligible to participate in this Plan. The Compensation Committee
designates those executive officers who are eligible to participate in this Plan
and who should receive awards under this Plan. The Compensation Committee may
solicit eligibility and participation recommendations from the CEO.

 

In order to receive an Award under this Plan, participants must be an active
employee of the Corporation and in good standing at the time of grant. Employees
hired after a grant date will not be eligible to participate in that grant.

 

Grant of Awards

 

The Compensation Committee believes that awards that vest based on the
Corporation’s performance and/or time align executive officers with shareholder
interests. Accordingly, under this Plan, a participant will receive one or more
awards of restricted stock units (an “Award”). An Award may vest based on
performance metrics to be established by the Compensation Committee from time to
time (a “Performance Award”),or may vest over a period of time (the “Time
Award”). The value of an Award is a specified percentage of the participant’s
salary as of the date of grant, which will be stated on an Appendix A to this
Plan. Each participant’s Award opportunity will be determined based on
competitive market practice for his/her role. These opportunities will be
determined so as to reflect a target total compensation package that is
competitive and provides a significant percentage of pay based on performance
(annual incentive + long-term incentive).

 

 

 

 

An Award of an RSU represents the right to receive the aggregate value of the
shares of the Corporation’s common stock subject to Award as of the date on
which the Award vests. That value may be paid in shares of stock, cash, or a
combination of shares and cash, as determined by the Compensation Committee at
the time each Award is granted. To determine the targeted number of shares that
are subject to an Award, the value of the Award will be divided by the Fair
Market Value (as that term is defined in the Equity Plan) of a share of the
Corporation’s common stock as of the date of grant, rounded down to the nearest
whole share (the “Target Shares”). For Performance Awards, the number of shares
that could be issued (or converted into a cash payment, if the Compensation
Committee were to determine to pay an Award in cash) if the threshold, target or
the maximum target is met will be determined by multiplying the Target Shares by
the threshold percentage, target percentage and maximum percentage,
respectively. All Awards will be evidenced by an individual award agreement with
the participant that details the number of shares of common stock covered by the
Award, the performance metrics that will dictate whether and the extent to which
the Award will vest, and other terms consistent with this Plan and the Equity
Plan.

 

Performance Goals; Performance Period; Vesting of Awards

 

For each Performance Award, the Compensation Committee will establish one or
more performance goals for a three-year performance period (the “Performance
Period”) and the minimum thresholds that must be met for the Award to vest,
stated as a percentage of the targeted performance goals. The extent to which an
Award will vest will be based on whether performance for the Performance Period
meets or exceeds the threshold levels, target levels or stretch levels
established for each performance metric. The Compensation Committee may assign
particular weightings to each of these performance metrics. Threshold
performance will cause a portion of an Award that is less than 100% to vest;
target performance will cause 100% of the Award to vest; and maximum performance
will cause a multiple of 100% of the Award to vest. Actual vesting amounts will
be pro-rated between threshold and target levels and target and maximum levels
to reward incremental improvement. The Performance Period, the applicable
performance metrics, and the threshold, target and maximum levels for those
metrics will be established each year by the Compensation Committee and set
forth in Appendix A to this Plan. The goals for the performance metrics will be
specified in a participant’s award agreement.

 

The vesting of a Performance Award is “all or nothing”, in that the Performance
Award will vest only if the Corporation achieves the threshold goals and then
only if the participant is employed by the Corporation on the vesting date. All
Performance Shares will lapse if the specified thresholds are not met or the
participant is not employed on the vesting date. Achievement of the threshold,
target or maximum levels for a Performance Award will be determined by the
Compensation Committee on the date on which 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 Award or March 15th of the year following
the end of the Performance Period, whichever occurs first. If the Corporation is
not required to file a Form 10-K, then the determination will occur no later
than March 15th of the year following the end of the Performance Period.
Promptly thereafter, the Compensation Committee shall notify each participant in
writing as to whether the threshold, target or maximum levels for the
Performance Period were satisfied. In all cases, the vesting date for a
Performance Award will be March 15th of the year following the end of the
Performance Period for that Award.

 

A Time Award will vest on the date or dates specified in the related award
agreement.

 

 

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Long-Term Incentive Plan Subject to Equity Plan

 

Notwithstanding anything in this Plan to the contrary, the terms of this Plan
are subject to the terms of the Equity Plan, a copy of which must be provided to
each participant at the time an Award is granted.

 

Effective Date

 

The Plan is effective as of March 11, 2020. The Plan, its performance goals and
its other components may be reviewed and revised annually by the Compensation
Committee to ensure proper alignment with the Corporation’s objectives. The
Compensation Committee retains the right as described below to amend, modify or
terminate this Plan at any time during the specified period.

 

Program Authorization and Oversight

 

The Compensation Committee has the sole authority to establish rules for and
otherwise interpret this Plan, to designate those employees who are eligible for
participation, to grant awards under this Plan, and to otherwise administer this
Plan as described in the Omnibus Equity Compensation Plan. Any determination by
the Compensation Committee will be final and binding.

 

Amendment and Termination

 

The Compensation Committee has developed this Plan on the basis of existing
business, market and economic conditions; current philosophy and staff
assignments. If substantial changes occur that affect these factors, the
Compensation Committee may add to, amend, modify or discontinue any of the terms
or conditions of the Program at any time. No such addition, amendment,
modification or discontinuance shall adversely impact any participant who has
been granted an Award without that participant’s consent.

 

Termination of Employment; Disability, Retirement and Death; Leaves of Absence

 

If the employment of a participant is terminated prior to the vesting date of an
outstanding Award other than because of death, disability, or retirement, all
unvested awards will lapse and be forfeited.

 

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 shares or 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. Such payment will be made as soon as practicable after
termination.

 

In the event of retirement or death, the Corporation will pay an amount of
shares or 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. Such payment will be made as soon as
practicable after death or retirement.

 

The method of determining the pro rata portion that shall be deemed vested in
the event of termination due to disability, retirement or death shall 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. 

 

 

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Change in Control of First United Corporation

 

Unless a participant has entered into an agreement under the First United
Corporation Change in Control Severance Plan that provides otherwise (the “CiC
Plan”), in which case the CiC Plan shall control, Section 15 of the Equity Plan
shall apply to the Awards in the event there is a Change in Control (as defined
in the Equity Plan).

 

Ethics

 

Any unvested Award will terminate and lapse in the event the Compensation
Committee determines 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 shall forfeit and return to the Corporation all
shares of common stock (or cash, to the extent the Award was paid in cash, in
which case such amount shall be repaid to the Corporation) issued pursuant to a
Performance Award to the extent it vested based on the altered, inflated, or
manipulated financial results.

 

Clawback

 

Subject to the forfeiture provisions in the “Ethics” section above, 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, the award shall be adjusted to give
retroactive effect to the restatement. In such case, a participant who received
a distribution under such an Award will generally be required to forfeit and
return to the Corporation that portion of the award that the restatement shows
should not have been earned; provided, however, that, notwithstanding the
foregoing, no participant or former participant shall 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.

 

Miscellaneous

 

Upon the vesting of an Award or the payment of cash upon termination of
employment, the Corporation shall be entitled to withhold Performance Shares or
cash from the award in an amount necessary to satisfy all federal, state and
local taxes required to be withheld or otherwise deducted and paid with respect
to such award.

 

Neither this Plan nor any award agreement granted hereunder will be deemed to
give any participant the right to remain an employee of the Corporation, nor
will this Plan or an award agreement interfere with the right of the Corporation
to discharge any participant at any time. In the absence of an authorized,
written employment contract, the relationship between employees and the
Corporation is one of at-will employment. The Plan does not alter the
relationship.

 

The Program and the transactions and payouts hereunder shall, in all respect, be
governed by, and construed and enforced in accordance with the laws of the State
of Maryland and the Omnibus Equity Compensation Plan.

 

Each provision of this Plan is severable. If any provision is held to be
invalid, illegal, or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not, in any way, be affected or impaired thereby.

 

 

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APPENDIX A

 

Performance Award Opportunities – Three-Year Performance Period Beginning
January 1, 2019

 

The Compensation Committee may grant Performance Awards in 2020 with respect to
a Performance Period that will be deemed to have commenced on January 1, 2019
and that will end on December 31, 2021. The value of an Award will be equal to
10% of the participant’s base salary as of December 31, 2018, and the
performance metric will be earnings per share. The threshold level for vesting
purposes will be 50% of the target amounts. The maximum level will be 150% of
the target amount. The targeted performance goal for this Performance Period
will be specified in each award agreement. If the threshold level is met, then
50% of the Performance Award will vest; if the target level is met, then 100% of
the Performance Award will vest; and if the maximum level is met, then 150% of
the Performance Award will vest. Actual vesting amounts will be pro-rated
between threshold and target level and target and maximum levels. The targeted
performance goal will be specified in each award agreement. The vesting date for
these Performance Awards will be March 15, 2022, provided that (i) the
participant is an employee of the Corporation in good standing on such date and
(ii) the Corporation’s earnings per share for the one-year period ending
December 31, 2021 meet or exceed the threshold level.

 

Performance and Award Opportunities – Three-Year Performance Period Beginning
January 1, 2020

 

The table below provides the Award opportunities as a percentage of base salary
at December 31, 2019:

 

Tier

Annual Target Award Opportunity

(% of Base Salary)

CEO 15% I 15%

 

Tier I includes the following executive officers: Chief Financial Officer; Chief
Operating Officer; Chief Revenue Officer; and Senior Trust Officer.

 

Two-thirds of an Award will be a Performance Award, and one-third of the Award
will be a Time Award. The Time Award will vest ratably over a three-year period,
beginning on the first anniversary of the grant date. A participant must be an
employee in good standing on each vesting date to receive shares under a Time
Award.

 

2020 Performance Goals for Performance Awards

 

The Performance Period will be deemed to have commenced on January 1, 2020 and
will end on December 31, 2022. The targeted performance goals will be earnings
per share and tangible book value per share. The threshold level for vesting
purposes will be 50% of the target amount. The maximum level will be 150% of the
target amount. Threshold performance for at least one of these performance
metrics must be met for an award to vest. The targeted performance goals for
this Performance Period will be specified in each award agreement. If the
threshold levels are met, then 50% of the Performance Award will vest; if the
target levels are met, then 100% of the Performance Award will vest; and if the
maximum levels are met, then 150% of the Performance Award will vest. Actual
vesting amounts will be pro-rated between threshold and target levels and target
and maximum levels. The vesting date for these Performance Awards will be March
31, 2023, provided that the participant is an employee of the Corporation in
good standing on such date, and either (a) the Corporation’s earnings per share
for the one-year period ending December 31, 2022 meets or exceeds the threshold
level for that performance metric, or (b) the Corporation’s tangible book value
per share meets or exceeds the threshold level for that performance metric.