AGREEMENT UNDER THE FIRST UNITED BANK CORPORATION CHANGE IN CONTROL SEVERANCE PLAN
Exhibit
10.2
AGREEMENT
UNDER THE
FIRST
UNITED BANK CORPORATION
CHANGE
IN CONTROL SEVERANCE PLAN
THIS
AGREEMENT (the “Agreement”) is entered into this 14th
day of
February, 2007 by and between FIRST
UNITED
CORPORATION, a
Maryland corporation (“the
Company”), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an executive officer of the Company (the
“Eligible Employee”).
RECITALS:
WHEREAS,
the Company adopted the First United Corporation Change in Control Severance
Plan effective as of February 14, 2007, a copy of which is attached hereto
as
Exhibit
A;
and
WHEREAS,
the Eligible Employee has been designated as a participant in the Plan,
effective as of the date set forth in Section 2 of this Agreement;
and
WHEREAS,
the Company and the Eligible Employee desire to enter into this Agreement to
set
forth the benefits to which the Eligible Employee is entitled under the Plan;
and
NOW,
THEREFORE, in consideration of the foregoing, the agreements and covenants
set
forth herein, and other valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties agree to enter into this Agreement,
effective as set forth in Section 2 of this Agreement, as follows:
1. Definitions.
Except
as defined in the Recitals and below, capitalized terms in this Agreement shall
have the meanings given those terms in the Plan.
| (a) |
“Cause”
means one of the following reasons for which the Eligible Employee’s
employment with the Employer is terminated: (1) willful or grossly
negligent misconduct that is materially injurious to the Employer;
(2)
embezzlement or misappropriation of funds or property of the Employer;
(3)
conviction of a felony or the entrance of a plea of guilty or nolo
contendere to a felony; (4) conviction of any crime involving fraud,
dishonesty, moral turpitude or breach of trust or the entrance of
a plea
of guilty or nolo contendere to such a crime; (5) failure or refusal
by
the Eligible Employee to devote full business time and attention
to the
performance of his duties and responsibilities if such breach has
not been
cured within 15 days after notice is given to the Eligible Employee;
or
(6) issuance of a final non-appealable order or other direction by
a
Federal or state regulatory agency prohibiting the Eligible Employee’s
employment in the business of
banking.
|
| (b) |
“Change
in Control Severance Benefits”
means the benefits payable pursuant to Section 3 of this
Agreement.
|
| (c) |
“Change
in Control Protection Period”
means the period commencing on the later of (1) the date that is
90 days
before the date a Change in Control occurs or (2) the Effective Date,
and
ending on the first anniversary of the date the Change in Control
occurs.
|
| (d) |
“Disability”
shall have the meaning given that term under the First United Bank
&
Trust Long Term Disability Plan, as in effect at the time a determination
of Disability is to be made.
|
| (e) |
“Effective
Date”
means the date set forth in Section 2 of this
Agreement.
|
| (f) |
“Employer”
means the Company or an Affiliate.
|
| (g) |
“Final
Pay”
means the sum of (1) the Eligible Employee’s annual salary for the year in
which employment terminates, regardless of whether all such salary
has
been paid at the time of termination of employment and (2) the greater
of
(A) the Eligible Employee’s targeted cash bonus for the year in which
employment terminates or (B) the actual cash bonus earned by the
Eligible
Employee for the year immediately prior to the year in which employment
terminates.
|
| (h) |
“Good
Reason”
means, without the specific written consent of the Eligible
Employee, any of the following:
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(1) A
material and adverse change in the Eligible Employee’s status or position(s) as
an officer or management employee of the Employer as in effect immediately
prior
to the Change in Control, including, without limitation, any adverse change
in
his status or position as an employee of the Employer as a result of a material
diminution in his duties or responsibilities (other than, if applicable, any
such change directly attributable to the fact that the Employer is no longer
publicly owned) or the assignment to him of any duties or responsibilities
which
are materially inconsistent with such status or position(s) (other than any
isolated and inadvertent failure by the Employer that is cured promptly upon
his
giving notice), or any removal of the Eligible Employee from or any failure
to
reappoint or reelect him to such position(s) (except in connection with the
Eligible Employee’s Severance other than for Good Reason). Without limiting the
foregoing, “Good Reason” shall include the Eligible Employee’s 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.
(2) A
10% or
greater reduction in the Eligible Employee’s base salary and targeted bonus from
the base salary and targeted bonus that was in effective immediately prior
to
the occurrence of a Change of Control, but disregarding any reduction in bonus
which occurs in accordance with the terms of any written bonus program as it
reads immediately prior to the occurrence of a Change of Control.
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(3) The
failure by the Employer or any successor to continue in effect any employee
benefit plan (excluding any equity compensation plan) in which the Eligible
Employee is participating at the time of the Change in Control (or plans
providing the Eligible Employee with at least substantially similar benefits
in
the aggregate) other than as a result of the normal expiration of any such
plan
in accordance with its terms as in effect at the time of the Change in Control;
or the taking of any action, or the failure to act, by the Employer or any
successor which would adversely affect the Eligible Employee’s continued
participation in any of such plans on at least as favorable a basis to him
as is
the case on the date of the Change in Control or which would materially reduce
his benefits under any of such plans.
(4) The
Employer’s requiring the Eligible Employee to be based at an office that is both
more than 50 miles from where his office is located immediately prior to the
Change in Control and further from his then current residence, except for
required travel on the Employer’s business to an extent substantially consistent
with the business travel obligations which the Eligible Employee undertook
on
behalf of the Employer prior to the Change in Control.
(5) The
failure by the Company to obtain assumption of the Plan by a
successor.
| (i) |
“Incentive
Plan”
means the First United Corporation 2006 Stock and Incentive Compensation
Plan (or a successor plan).
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| (j) |
“Key
Employee”
means, for the 12-month period beginning on a particular April 1,
an
Eligible Employee described in Section 416(i) of the Code (applied
in
accordance with the Section 416 regulations and disregarding Section
416(i)(5) of the Code) at any time during the 12-month period ending
on
the preceding December 31.
|
| (k) |
“Severance”
means (1) the involuntary termination of the Eligible Employee’s
employment by the Employer, other than for Cause, death or Disability
or
(2) a termination of the Eligible Employee’s employment by the Eligible
Employee for Good Reason, in each case, during the Change in Control
Protection Period; provided, however, that in each case the termination
constitutes a “separation from service” within the meaning of Section
409A(a)(2)(A)(i) of the Code and Treasury Regulations
thereunder.
|
| (l) |
“Severance
Date”
means the date on which the Eligible Employee incurs a
Severance.
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2. Effective
Date and Term of Agreement.
The
effective date of this Agreement shall be February 14, 2007. This
Agreement shall remain in effect from the Effective Date through February 14,
2010; provided, however, that (a) the Agreement shall automatically extend
for
additional one-year terms unless the Company provides written notice to the
Eligible Employee not less than six months before the end of the then-current
term; and (b) the Agreement shall automatically extend until the end of the
Change in Control Protection Period if a Change in Control occurs during the
term of the Agreement.
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3. Change
in Control Severance Benefits.
| (a) |
Generally.
Subject to subsections (h) and (i) below, the Eligible Employee shall
be
entitled to the Change in Control Severance Benefits provided in
this
Section 3 if he incurs a Severance during the Change in Control Protection
Period. Except for any benefits to which the Eligible Employee may
be
entitled to receive pursuant to the First United Bank & Trust
Supplemental Executive Retirement Plan (as amended or supplemented
from
time to time), the Change in Control Severance Benefits provided
in this
Section 3 shall be the sole severance payments and benefits to which
the
Eligible Employee shall be entitled during the Change in Control
Protection Period.
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| (b) |
Payment
of Accrued Obligations.
If the Eligible Employee incurs a Severance during the Change in
Control
Protection Period, the Company shall pay to him a lump sum payment
in
cash, no later than 10 days after the Severance Date, equal to the
sum of
(1) the Eligible Employee’s accrued annual base salary and any accrued
vacation pay through the Severance Date, and (2) the Eligible Employee’s
annual bonus earned for the fiscal year immediately preceding the
fiscal
year in which the Severance Date occurs if such bonus has not been
paid as
of the Severance Date.
|
| (c) |
Payment
of Severance.
Subject to subsections (h) and (i) below, if the Eligible Employee
incurs
a Severance during the Change in Control Protection Period, the Company
shall pay to him a lump sum cash payment, no later than 10 days after
the
Severance Date, equal to 2.99 times the Eligible Employee’s Final
Pay.
|
| (d) |
[Intentionally
Omitted].
|
| (e) |
Immediate
Vesting of Equity-Based Compensation Awards upon a Change in
Control.
Subject to subsections (h) and (i) below and any other limitations
imposed
by law, if the Eligible Employee incurs a Severance during the Change
in
Control Protection Period, (1) the unexercised portions of all Options
and
SARs (as defined in the Incentive Plan) granted to the Eligible Employee
under the Incentive Plan that have not expired or been forfeited
pursuant
to their terms shall automatically accelerate and become fully
exercisable, (2) the restrictions and conditions on all outstanding
Stock
Awards (as defined in the Incentive Plan) granted to the Eligible
Employee
that have not expired or been forfeited pursuant to their terms shall
immediately lapse, (3) all outstanding Performance Units (as defined
in
the Incentive Plan) granted to the Eligible Employee that have not
expired
or been forfeited pursuant to their terms shall become payable in
an
amount determined by the Committee, based on the Eligible Employee’s
target payment for the relevant performance period and the portion
of the
relevant performance period that precedes the Change in Control,
(4) all
outstanding Stock Units (as defined in the Incentive Plan) granted
to the
Eligible Employee that have not expired or been forfeited pursuant
to
their terms shall become payable in an amount not less than their
target
amounts, as determined by the Committee, and (5) all unpaid Dividend
Equivalents (as defined in the Incentive Plan) and other Stock-Based
Awards (as defined in the Incentive Plan) granted to the Eligible
Employee
that have not expired or been forfeited pursuant to their terms shall
become fully payable in amounts determined by the Committee; provided,
however, that, where a Severance precedes the Change in Control and
the
terms of any award granted to the Eligible Employee under the Incentive
Plan would otherwise call for the forfeiture of such award upon the
termination of the Eligible Employee’s employment with the Company, such
award shall not be deemed to be forfeited on account of the Eligible
Employee’s Severance and shall remain outstanding (subject to the other
terms of the award, including its original term) as if the Change
in
Control preceded the Severance.
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4
| (f) |
Benefit
Continuation.
Subject to subsections (h) and (i) below, if the Eligible Employee
incurs
a Severance during the Change in Control Protection Period, commencing
on
the date immediately following such Eligible Employee’s Severance Date and
continuing for 30 months (or such lesser time as required to avoid
the
imposition of additional taxes under Section 409A of the Code) (the
“Welfare Benefit Continuation Period”), the Company shall cover the
Eligible Employee under the same type (e.g., individual or family
coverage) of Employer-sponsored group health plan and dental plan
in which
he was covered as of his Severance Date. The Eligible Employee shall
receive such continued coverage under the same terms and conditions
(e.g.,
any requirement that employees pay all or any portion of the cost
of such
coverage) that would apply if the Eligible Employee had continued
to be an
employee of the Employer during the Welfare Benefit Continuation
Period.
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For
each
month during the Welfare Benefit Continuation Period in which the Eligible
Employee’s continued coverage under an insured plan is not possible, the Company
shall, in lieu of providing the coverage described in the preceding paragraph,
make a monthly cash payment to the Eligible Employee equal to the monthly
premium the Employer would be charged for coverage of a similarly-situated
employee. The Company shall not be obligated to “gross up” or otherwise
compensate the Eligible Employee for any taxes due on amounts paid pursuant
to
the preceding sentence.
Notwithstanding
any other provision of this subsection (f), the Company’s obligation to provide
continued coverage (or, in lieu thereof, make a cash payment) pursuant to this
subsection (f) shall expire on the date the Eligible Employee becomes covered
under one or more plans sponsored by a new employer (other than a successor
to
the Company) that, at the sole discretion of the Plan Administrator, are
determined to provide coverage at least equivalent in the aggregate to the
benefits continued under this subsection (f). The coverage period for purposes
of the group health continuation requirements of Section 4980B of the Code
shall
commence at the expiration of the Welfare Benefit Continuation
Period.
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| (g) |
Outplacement
Services.
Subject to subsection (i) below, if the Eligible Employee incurs
a
Severance during the Change in Control Protection Period, the Company
shall provide him with reasonable outplacement services for up to
12
months following the Severance
Date.
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| (h) |
Release.
The Eligible Employee shall not be eligible to receive any Change
in
Control Severance Benefits provided in this Section 3 (other than
payments
under Section 3(b)) unless he first executes a written release and
agreement provided by the Company and does not revoke such release
and
agreement within the time permitted therein for such
revocation.
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| (i) |
Restriction
on Timing of Distribution for Key Employees.
Notwithstanding any provision of this Agreement to the contrary and
to the
extent required by Section 409A of the Code and the Treasury Regulations
thereunder, if the Eligible Employee is a Key Employee and any class
of
securities of the Company (or of any person with whom the Company
would be
considered a single employer under Section 414(b) and (c) of the
Code) is
publicly traded as of the Eligible Employee’s Severance Date, no
distribution may be made to the Eligible Employee on account of such
Severance before the date that is six months after the Severance
Date (or,
if earlier, the date of the Key Employee’s
death).
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4. Excise
Tax.
| (a) |
Gross-Up
Payment.
Notwithstanding any provision of the Plan or this Agreement to the
contrary, in the event
it
shall be determined that any payment or
distribution whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to
or by
reason of any other agreement, policy, plan, program or arrangement
(including, without limitation, payments or acceleration of vesting
in
respect of any equity-based or other award), or similar right
(collectively, a “Payment”), to or for the benefit of the Eligible
Employee, would be subject to the excise tax imposed by Section 4999
of
the Code, or any successor provision thereto, or any similar tax
imposed
by state or local law, or any interest or penalties with respect
to such
excise tax (such tax or taxes, together with any such interest and
penalties, are collectively referred to as the “Excise Tax”), then the
Eligible Employee shall be entitled to receive an additional payment
(a
“Gross-Up Payment”) in an amount such that, after payment by the Eligible
Employee of all taxes (including any interest or penalties imposed
with
respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, the Eligible Employee retains an amount of the
Gross-Up
Payment equal to the Excise Tax imposed upon the
Payment.
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| (b) |
Determination.
Subject to subsection (d) below, all determinations required to be
made
under this Section 4, including whether an Excise Tax is payable
by the
Eligible Employee and the amount of such Excise Tax and whether a
Gross-Up
Payment is required and the amount of such Gross-Up Payment, will
be made,
at the Company’s discretion, by the Company’s outside auditing firm or by
a nationally recognized accounting or benefits consulting firm (the
“Firm”) designated by the Company prior to a Change in Control. If the
Firm determines that any Excise Tax is payable by the Eligible Employee,
the Company will pay the required Gross-Up Payment to the Eligible
Employee during the calendar year following the Severance Date. If
the
Firm determines that no Excise Tax is payable by the Eligible Employee,
it
will, at the same time as it makes such determination, furnish the
Eligible Employee with an opinion that he has substantial authority
not to
report any Excise Tax on his federal, state, local income or other
tax
return. Any determination by the Firm as to the amount of the
Gross-Up Payment will be binding upon the Company and the Eligible
Employee. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and
the
possibility of similar uncertainty regarding applicable state or
local tax
law at the time of any determination by the Firm hereunder, it is
possible
that Gross-Up Payments which will not have been made by the Company
should
have been made (an “Underpayment”), consistent with the calculations
required to be made hereunder. If the Company exhausts or fails to
pursue its remedies pursuant to subsection (d) below, and the Eligible
Employee thereafter is required to make a payment of any Excise Tax,
the
Eligible Employee shall so notify the Company, which will direct
the Firm
to determine the amount of the Underpayment that has occurred and
to
submit its determination and detailed supporting calculations to
both the
Company and the Eligible Employee as promptly as possible. Any such
Underpayment will be paid by the Company to, or for the benefit of,
the
Eligible Employee within five business days after receipt of such
determination and calculations.
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6
| (c) |
Fees
and Expenses.
The fees and expenses of the Firm for its services under this Section
4
will be borne by the Company.
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| (d) |
IRS
Claim.
The Eligible Employee will notify the Company in writing of any claim
by
the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification will
be given as promptly as practicable but no later than 10 business
days
after the Eligible Employee actually receives notice of such claim
and the
Eligible Employee will further apprise the Company of the nature
of such
claim and the date on which such claim is requested to be paid (in
each
case, to the extent known by the Eligible Employee). The Eligible
Employee will not pay such claim prior to the earlier of (1) the
expiration of the 30-calendar-day period following the date on which
he
gives such notice to the Company, or (2) the date that any payment
of
amounts with respect to such claim is
due.
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The
Company will bear and pay directly all costs and expenses (including interest
and penalties) incurred in connection with contesting such claim and will
indemnify and hold harmless the Eligible Employee, on an after-tax basis, for
and against any Excise Tax or income tax, including interest and penalties
with
respect thereto, imposed as a result of such representation and payment of
costs
and expenses.
7
Without
limiting the foregoing provisions of this subsection (d), the Company will
control all proceedings taken in connection with the contest of any claim
contemplated by this subsection (d) and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided that the Eligible
Employee may participate therein at his own cost and expense) and may, at its
option, either direct the Eligible Employee to pay the tax claimed and ▇▇▇
for a
refund or contest the claim in any permissible manner, and the Eligible Employee
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company will determine. If the Company directs the Eligible
Employee to pay the tax claimed and ▇▇▇ for a refund, the Company will advance
the amount of such payment to the Eligible Employee on an interest-free basis
and will indemnify and hold harmless the Eligible Employee, on an after-tax
basis, from any Excise Tax or income tax, including interest or penalties
thereon, imposed with respect to such advance. Any extension of the statute
of
limitations relating to payment of taxes for the taxable year of the Eligible
Employee in which the contested amount is claimed to be due is limited solely
to
such contested amount. Furthermore, the Company’s control of any such
contested claim will be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and the Eligible Employee will be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
| (e) |
Refund.
If, after the receipt by the Eligible Employee of an amount advanced
by
the Company pursuant to subsection (d) above, the Eligible Employee
receives any refund with respect to such claim, the Eligible Employee
will
(subject to the Company’s complying with the requirements of subsection
(d) above) promptly pay to the Company the amount of such refund
(together
with any interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Eligible Employee of an
amount advanced by the Company pursuant to subsection (d) above,
a
determination is made that the Eligible Employee will not be entitled
to
any refund with respect to such claim, and the Company does not notify
the
Eligible Employee in writing of its intent to contest such denial
or
refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be
required
to be repaid, and the amount of such advance will offset, to the
extent
thereof, the amount of Gross-Up Payment required to be paid pursuant
to
this Section 4. If, after the receipt by the Eligible Employee of a
Gross-Up Payment but before the payment by the Eligible Employee
of the
Excise Tax, it is determined by the Firm that the Excise Tax payable
by
the Eligible Employee is less than the amount originally computed
by the
Firm and consequently that the amount of the Gross-Up Payment is
larger
than that required by this Section 4, the Eligible Employee shall
promptly
refund to the Company the amount by which the Gross-Up Payment initially
made to him exceeds the Gross-Up Payment required under this Section
4.
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8
5. Taxes;
Withholding.
Subject
to Section 4, the Eligible Employee shall be responsible for the payment of
all
applicable local, state and federal taxes associated with the Eligible
Employee’s participation in the Plan and the receipt of Change in Control
Severance Benefits hereunder, and the Company shall have the right to deduct
from any distributions hereunder any such taxes or other amounts required by
law
to be withheld therefrom.
6. General
Provisions
| (a) |
Amendment
and Termination.
This
Agreement may not be terminated prior to the end of its term without
the
written consent of the Eligible Employee. This Agreement may
be amended by the Board at any time; provided, however, that
this Agreement may not be amended without the written consent of
the
Eligible Employee if such amendment would in any manner adversely
affect
the interests of the Eligible Employee. Any action taken by the
Company or the Plan Administrator to cause the Eligible Employee
to no
longer be designated as an Eligible Employee or any action taken
by the
Company or the Plan Administrator to decrease the benefits for which
the
Eligible Employee is eligible shall be treated as an amendment to
the
Agreement which adversely affects the interests of the Eligible
Employee.
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| (b) |
Compliance
with Law.
Notwithstanding subsection (a) above or any other provision of this
Agreement to the contrary, the Company may amend, modify or terminate
this
Agreement, without the consent of the Eligible Employee, as the Company
deems necessary or appropriate to ensure compliance with any law,
rule,
regulation or other regulatory pronouncement applicable to the Plan
or
this Agreement, including, without limitation, Section 409A of the
Code
and any Treasury Regulations or other guidance thereunder.
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| (c) |
Governing
Law.
This Agreement shall be construed and enforced according to the laws
of
the State of Maryland to the extent not preempted by federal law,
without
regard to any conflict of laws principles that would apply the law
of
another jurisdiction.
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| (d) |
Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Agreement shall be construed and enforced as if
such
provisions had not been included.
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| (e) |
Headings
and Terms.
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Agreement,
and shall
not be employed in the construction of the Agreement. Capitalized
terms
shall have the meanings given herein. Singular nouns shall be read
as
plural and masculine pronouns shall be read as feminine, and vice
versa,
as appropriate.
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| (f) |
Successors.
This Agreement shall
be
binding upon each of the parties and shall also be binding upon their
respective successors or assigns.
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| (g) |
Application
of the Plan; Entire Agreement.
The
Eligible Employee acknowledges, by executing this Agreement, that
(1) this
Agreement is subject in all respects to the provisions of the Plan,
as
amended from time to time, the terms of which are incorporated herein
by
reference and made a part hereof, (2) that a copy of the Plan and
all
amendments thereto through the date hereof were provided to the Eligible
Employee on the date hereof, and (3) he understands and accepts of
all of
the terms and conditions of the Plan. This
Agreement sets forth the entire agreement of the parties with respect
to
the subject matter hereof. Any and all prior agreements or understandings
with respect to such matters are hereby
superseded.
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IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
as
of the day first above written.
| ATTEST: | FIRST UNITED CORPORATION | |
| |
|
|
| /s/ | By: | /s/ |
|
|
Name: ▇▇▇▇▇▇
▇. ▇▇▇▇▇
Title: President/Chief
Risk Officer
|
|
| WITNESS: | ELIGIBLE EMPLOYEE | |
| /s/ | /s/ | |
|
|
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ |
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10