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 B|_|
Check the appropriate box:
|_| Preliminary Proxy Statement
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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):
|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(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
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(5) Total fee paid: N/A
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|_| 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.:
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(4) Date Filed:
FIRST UNITED CORPORATION
March 25, 2005
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
Tuesday, April 26, 2005, at 3:00 p.m., at Rocky Gap Lodge & Golf Resort, 16701
Lakeview Road, NE, Flintstone, Maryland 21536. The notice of meeting and proxy
statement accompanying this letter describe the specific business to be acted
upon.
In addition to the specific matters to be acted upon, there will be a
report on the progress of your Corporation.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, we would ask that you mark, sign, date and
promptly return the enclosed proxy in the envelope provided.
There will be a reception with light refreshments immediately following
the meeting for all registered shareholders. I look forward to seeing you there.
Sincerely yours,
WILLIAM B. GRANT
Chairman of the Board &
Chief Executive Officer
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 25, 2005
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 Rocky Gap Lodge &
Golf Resort, 16701 Lakeview Road, NE, Flintstone, Maryland 21536. The meeting is
scheduled for:
TUESDAY, APRIL 26, 2005, at 3:00 p.m.
The purposes of the meeting are:
1. To elect five (5) Class I Directors to serve until the 2008 Annual
Meeting and until the election and qualification of their
successors, and one (1) Class II Director to serve until the 2006
Annual Meeting and until the election and qualification of his
successor.
2. To transact such other business as may be properly brought before
the meeting or any adjournment thereof.
WE HOPE THAT YOU WILL ATTEND THE MEETING. HOWEVER, WHETHER OR NOT YOU
CONTEMPLATE ATTENDING THE MEETING, PLEASE SIGN THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND
VOTE IN PERSON, IF YOU SO DESIRE. ALL SHAREHOLDERS OF RECORD AT THE CLOSE OF
BUSINESS ON FEBRUARY 11, 2005 ARE ENTITLED TO VOTE AT THIS MEETING.
Anyone acting as proxy agent for a shareholder must present a proxy
properly executed by the shareholder authorizing the agent in form and substance
satisfactory to the judges of election, and otherwise in accordance with the
Corporation's Amended and Restated Bylaws.
By order of the Board of Directors
ROBERT W. KURTZ
Secretary
[THIS PAGE INTENTIONALLY LEFT BLANK]
FIRST UNITED CORPORATION
19 South Second Street
P.O. Box 9
Oakland, Maryland 21550-0009
March 25, 2005
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of First United
Corporation (the "Corporation") in connection with the Annual Meeting of
Shareholders to be held on April 26, 2005, at 3:00 p.m. at Rocky Gap Lodge &
Golf Resort, 16701 Lakeview Road, NE, Flintstone, Maryland 21536, and any
adjournment or postponements thereof. The cost of soliciting proxies will be
borne by the Corporation. In addition to solicitation by mail, proxies may be
solicited by officers, Directors and regular employees of the Corporation
personally or by telephone, telegraph or facsimile. No additional remuneration
will be paid to officers, Directors or regular employees who solicit proxies.
The Corporation may reimburse brokers, banks, custodians, nominees and other
fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy
materials to their principals. The approximate date on which this proxy
statement and form of proxy will be mailed to shareholders is March 25, 2005.
Please complete and sign the enclosed proxy and return it promptly to our
transfer agent, Mellon Investor Services. Your proxy may be revoked at any time
prior to its use by signing and delivering another proxy bearing a later date or
by delivering written notice of the revocation to Robert W. Kurtz, Secretary,
First United Corporation, P.O. Box 9, Oakland, Maryland 21550-0009. Should you
attend the meeting and desire to vote in person, you may withdraw your proxy
prior to its use by written request delivered to the Secretary of the
Corporation at the meeting.
Your proxy will be voted in accordance with the instructions on the proxy
card. If no instructions are given, your proxy will be voted FOR the Director
nominees listed below, and in the discretion of the persons named in the proxy
with respect to any other matter properly brought before the meeting.
OUTSTANDING VOTING SECURITIES; VOTING RIGHTS
Only shareholders of record of the Corporation's common stock, par value
$.01 per share ("Common Stock"), at the close of business on February 11, 2005
(the "Record Date"), will be entitled to receive notice of and vote at the
Annual Meeting of Shareholders. As of the Record Date, there were 6,099,383
shares of Common Stock outstanding and entitled to be voted at the Annual
Meeting of Shareholders. Each share of Common Stock is entitled to one vote.
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 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 indicated, the persons named in the table have sole
investment powers with respect to each of the shares reported as beneficially
owned by such person. Except as otherwise noted, the address of each person
named below is the address of the Corporation.
Common Stock Percent of
Beneficially Outstanding
Owned Common Stock
Directors, Nominees and Executive Officers:
David J. Beachy ............................................................ 6,627 (1) .11%
Rex W. Burton .............................................................. 9,178 (2) .15%
Faye E. Cannon ............................................................. 500 .01%
Paul Cox, Jr................................................................ 1,776 .03%
Jeannette R. Fitzwater...................................................... 10,842 (3) .18%
Philip D. Frantz............................................................ 1,985 (4) .03%
William B. Grant ........................................................... 9,034 (5) .15%
Eugene D. Helbig, Jr........................................................ 2,778 (6) .05%
Raymond F. Hinkle .......................................................... 5,684 .09%
Robert W. Kurtz ............................................................ 3,641 (7) .06%
Steven M. Lantz............................................................. 1,537 (8) .03%
John W. McCullough ......................................................... 5,000 .08%
Elaine L. McDonald.......................................................... 4,447 (9) .07%
Donald E. Moran............................................................. 136,164 (10) 2.23%
Robin E. Murray............................................................. 688 (11)
.01%
Karen F. Myers ............................................................. 7,987 (12) .13%
Gary R. Ruddell............................................................. 278 .00%
I. Robert Rudy.............................................................. 32,651 (13) .54%
Richard G. Stanton.......................................................... 13,677 (14) .22%
Robert G. Stuck............................................................. 3,162 .05%
Frederick A. Thayer, IV..................................................... 4,330 (15) .07%
Directors & Executive Officers as a Group (21 persons) ..................... 261,966 4.29%
5% Beneficial Owners:
Firstoak & Corporation...................................................... 515,996 (16) 8.46%
P.O. Box 557
Oakland, Maryland 21550
(1) Includes 21 shares owned by spouse.
(2) Includes 2,754 shares owned by spouse.
(3) Includes 7,298 shares owned jointly with spouse, 756 shares held in
a 401(k) plan account, 630 shares owned by Fitzwater, LLC and over
which Ms. Fitzwater's spouse has investment discretion, and 2,069
shares owned by spouse for the benefit of two minor children.
(4) Includes 1,337 shares held in a 401(k) plan account, 618 shares held
in spouse's 401(k) account, and 30 shares held by spouse for benefit
of minor child.
(5) Includes 186 shares owned by son, 11 shares owned by daughter, 2,605
shares held in a 401(k) plan account, 322 shares owned by spouse's
IRA, and 173 shares owned by spouse for benefit of minor child.
(6) Includes 49 shares owned by daughter and 2,192 shares held in a
401(k) plan account.
(7) Includes 2,455 shares held in a 401(k) plan account.
(8) Includes 5 shares owned by son and 1,119 shares held in a 401(k)
plan account.
(9) Includes 230 shares held by spouse's IRA and 1,000 shares held by
Grantor Trust of which Ms. McDonald is trustee and beneficiary.
(10) Includes 86,593 shares owned by daughters over which Mr. Moran has
shared investment discretion and 25,000 shares owned by spouse.
(11) Includes 569 shares held in a 401(k) plan account and 119 shares
owned by spouse.
(12) Includes 1,000 shares held by Grantor Trust of which Ms. Myers is a
beneficiary and trustee.
(13) Includes 5,378 shares owned by spouse, 1,783 shares owned by
daughter, 1,783 shares owned by daughter, 15,575 shares owned by
I.R. Rudy's, Inc. of which Mr. Rudy is owner, and 4,473 shares held
by the I.R. Rudy Credit Shelter Trust of which Mr. Rudy has sole
investment discretion.
(14) Includes 7,172 shares owned by spouse and 1,383 shares held in
spouse's IRA.
(15) Includes 454 shares owned by daughter and 411 shares owned by son.
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(16) Shares held in the name of Firstoak & Corporation, a nominee, are
administered by the Trust Department of First United Bank & Trust in
a fiduciary capacity. Firstoak & Corporation disclaims beneficial
ownership of such shares.
ELECTION OF DIRECTORS (PROPOSAL NO. 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.
Directors are elected to hold office for a term of three years, and the term of
one class of Directors expires each year. The term of Directors of Class I
expires this year, the term of Directors of Class II expires in 2006, and the
term of Directors of Class III expires in 2007. In all cases, Directors are
elected until their successors are duly elected and qualify.
Stockholders are being asked to vote for a total of six (6) Director
nominees at this year's Annual Meeting. As previoulsly disclosed, Rex W. Burton,
a Class I Director, is retiring from the Board pursuant to the Corporation's
mandatory retirement policy and is not standing for re-election. Each of the
remaining three current Class I Directors is standing for re-election.
Additionally, Faye E. Cannon, John McCullough, and Gary Ruddell are also
standing for election. The Maryland General Corporation Law and the
Corporation's Bylaws require any Director who was elected during the year other
than at a regular or special meeting of the Corporation's stockholders to stand
for re-election at the annual meeting of shareholders immediately following that
initial election. In September 2004, the Board elected Ms. Cannon and Messrs.
McCullough and Ruddell to serve as Directors. Directors Cannon, McCullough and
Ruddell were recommended for initial election by the Corporation's Chief
Executive Officer ("CEO"). If re-elected by shareholders at this year's Annual
Meeting, Ms. Cannon and Mr. McCullough will serve as Class I Directors and Mr.
Ruddell will serve as a Class II Director.
No Director or nominee holds any directorship in any other public company.
All current Directors and Director nominees serve on the board of directors of
First United Bank & Trust, the Corporation's wholly-owned subsidiary (the
"Bank"). The Corporation's Chairman and CEO is a Class I Director. The
Corporation's President and Chief Financial Officer ("CFO") is a Class II
Director.
The following tables provide information about the Director nominees,
including their ages as of the Record Date, their principal occupations and
business experience, and certain other information. In the event a nominee
declines or is unable to serve as a Director, which is not anticipated, the
proxies will vote in their discretion with respect to a substitute nominee named
by the Board.
Nominees for Class I (term expires in 2008)
Occupation Director
Name Age During Past Five Years Since
David J. Beachy 64 Fred E. Beachy Lumber Co., Inc. 1985
Building Supplies - retired.
Faye E. Cannon 55 Consultant and Director of Dan 2004
Ryan Builders, Inc. Former Chief
Executive Officer and President
of F & M Bancorp, Frederick,
Maryland - retired.
Paul Cox, Jr. 65 Owner, Professional Tax Service. 1993
William B. Grant 51 Chairman of the Board/CEO 1995
First United Corporation and
First United Bank & Trust.
John W. McCullough 55 Certified Public Accountant. Retired in 1999 2004
as Partner of Ernst & Young, LLC.
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Nominee for Class II (term expires in 2006)
Occupation Director
Name Age During Past Five Years Since
Gary R. Ruddell 57 President, Hobby House Press, Inc., dba 2004
Total Biz Fulfillment, provides business
services. Member, Gary R. Ruddell LLC,
commercial real estate. Member, MSG
Glendale Properties LLC, residential real
estate.
The election of Directors requires the affirmative vote of holders of a
majority of the shares of Common Stock present and voting at the Annual Meeting
of Shareholders. A quorum for the Annual Meeting consists of a majority of the
issued and outstanding shares of Common Stock present in person or by proxy and
entitled to vote. Consequently, the withholding of votes, abstentions and broker
non-votes with respect to shares otherwise present at the Annual Meeting in
person or by proxy will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR SUCH NOMINEES.
Information about the Directors of Class II and Class III whose terms do
not expire in 2005, including their ages as of the Record Date, and their
principal occupations and business experience, is listed in the tables below.
Class II Directors (term expires in 2006)
Occupation Director
Name Age During Past Five Years Since
Raymond F. Hinkle 68 Tax Consultant. 1996
Robert W. Kurtz 58 President/CFO/Secretary/Treasurer, 1990
First United Corporation and
First United Bank & Trust.
Elaine L. McDonald 56 Realtor, Long & Foster Realtors. 1995
Donald E. Moran 74 Secretary/Treasurer, Moran Coal Corporation. 1988
Class III Directors (term expires in 2007)
Occupation Director
Name Age During Past Five Years Since
Karen F. Myers 53 President, Mountaineer Log & Siding Co., Inc. 1991
President, Recreational Industries Inc.;
Member, DC Development LLC;
Real Estate Broker, Deep Creek
Mountain Resort.
I. Robert Rudy 52 President, Rudy's Inc., 1992
Retail Apparel and Sporting Goods
Member, DC Development LLC.
Richard G. Stanton 65 Retired. Served as the Chairman, President 1985
and Chief Executive Officer of First United
Corporation and First United Bank & Trust
until 1996.
Robert G. Stuck 58 Vice President, Oakview Motors, Inc. - retired. 1995
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Family Relationships
As defined by Securities and Exchange Commission's rules and regulations,
family relationships exist among Directors, Director nominees, and executive
officers. Director I. Robert Rudy and Senior Vice President Jeannette R.
Fitzwater are siblings. Director Karen F. Myers and Senior Vice President Philip
D. Frantz are first cousins. No other family relationships exist.
Committees of the Board of Directors
The Board of Directors has an Audit Committee, an Asset and Liability
Management Committee, an Executive Committee, a Strategic Planning Committee, a
Compensation Committee, and a Nominating and Governance Committee (the
"Nominating Committee"). These committees are discussed below.
Audit Committee - The Audit Committee is established pursuant to Section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and consists of David J. Beachy, Paul Cox, Jr., Raymond F. Hinkle, John
W. McCullough, Richard G. Stanton, and Robert G. Stuck. Mr. McCullough was
appointed to the Committee in September 2004. The committee is solely
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 Mr. Stanton qualifies as an
"audit committee financial expert" as that term is defined by Item 401(h) of the
SEC's Regulation S-K. This committee met 11 times in 2004. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is attached to this proxy statement as Appendix A.
Asset and Liability Management Committee - The Asset and Liability
Management Committee consists of David J. Beachy, Paul Cox, Jr., William B.
Grant, Raymond F. Hinkle, Robert W. Kurtz, John W. McCullough, Elaine L.
McDonald, Karen F. Myers, I. Robert Rudy, Richard G. Stanton, and Robert G.
Stuck. Mr. McCullough was appointed to the Committee in October 2004. The
committee reviews and recommends changes to the Corporation's Asset and
Liability, Investment, Liquidity, and Capital Plans. This committee met five
times in 2004.
Executive Committee - The Executive Committee consists of Rex W. Burton,
Paul Cox, Jr., William B. Grant, Robert W. Kurtz, Donald E. Moran, I. Robert
Rudy, Richard G. Stanton, and Robert G. Stuck. James F. Scarpelli, Sr. was a
member of this committee until his resignation on November 17, 2004. The
committee is responsible for reviewing and recommending changes to the
Corporation's Insurance Program, overseeing compliance with the Corporation's
Bylaws and Articles of Incorporation, monitoring the performance of the
Corporation and its subsidiaries, and recommending changes to the personnel
policies of the Corporation and of its subsidiaries. The Executive Committee is
empowered to act on behalf of the full Board between meetings of the Board. This
committee did not meet in 2004.
Strategic Planning Committee - The Strategic Planning Committee consists
of Rex W. Burton, Faye E. Cannon, Paul Cox, Jr., William B. Grant, Raymond F.
Hinkle, Robert W. Kurtz, Elaine L. McDonald, Donald E. Moran, Gary R. Ruddell,
I. Robert Rudy, and Richard G. Stanton. Ms. Cannon and Mr. Ruddell were
appointed to the committee in October 2004. 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, review
of overall management of internal control procedures, and review of management's
internal and external information and communications systems. This committee met
one time in 2004.
Compensation Committee - The Compensation Committee consists of Rex W.
Burton, Faye E. Cannon, Raymond F. Hinkle, Elaine L. McDonald, Richard G.
Stanton, and Robert G. Stuck. James F. Scarpelli, Sr. was a member of this
committee until his retirement from the Board in November 2004. Ms. Cannon was
appointed to the committee in October 2004. The committee is responsible for
recommending to the Board a compensation policy for the CEO and other executive
officers of the Corporation and its subsidiaries, recommending changes to the
CEO's compensation package based on performance reviews, and produces an annual
report on executive compensation for inclusion in the Corporation's proxy
statement in accordance with applicable rules and regulations. This committee
met two times in 2004.
Nominating and Governance Committee - The Nominating Committee consists of
David J. Beachy, Rex W. Burton, Paul Cox, Jr., John W. McCullough, Elaine L.
McDonald, Donald E. Moran, and Richard G. Stanton. James F. Scarpelli, Sr. was a
member of this committee until his retirement from the Board in November 2004.
The committee is responsible for
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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 three times in 2004. The Nominating Committee
has a written charter, a copy of which is attached to this proxy statement as
Appendix B.
Director Independence
Pursuant to Rule 4350(c) of The Nasdaq Stock Market's listing standards
(the "Nasdaq Listing Standards"), a majority of the Corporation's Directors must
be "independent directors" as that term is defined by Nasdaq Listing Standards
Rule 4200(a)(15). The Corporation's Board of Directors has determined that David
J. Beachy, Rex W. Burton, Faye E. Cannon, Paul Cox, Jr., Raymond F. Hinkle, John
W. McCullough, Elaine L. McDonald, Donald E. Moran, Karen F. Myers, Gary R.
Ruddell, Richard G. Stanton, and Robert G. Stuck are "independent directors",
and these independent Directors constitute a majority of the Corporation's Board
of Directors. The Compensation Committee and the Nominating Committee are each
made up entirely of "independent directors". Each member of the Audit Committee
satisfies the independence requirements of Rule 4350(d)(2) of the Nasdaq Listing
Standards.
Director Compensation
Directors' fees are paid only to Directors who are not executive officers
of the Corporation or the Bank. These outside Directors receive $400 for
attending each Board meeting and $200 for attending each committee meeting of
the Board of which the Director is a member. Outside Directors also receive an
annual retainer fee of $10,000. Mr. Rudy received an additional $200 for
chairing the 2004 Annual Meeting of Shareholders. All Directors also serve on
the board of directors of the Bank and do not receive additional compensation
for this service unless a Bank board or committee meeting is held on a date on
which a Corporation Board or committee meeting is not also scheduled. In these
cases, outside Directors receive $400 per Bank board meeting and $200 per Bank
committee meeting.
Attendance at Board Meetings
The Board of Directors held 11 meetings in 2004. Each Director who served
as such during 2004 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 Board members, shareholders, officers 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.
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
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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 shareholder
value. Certain Board positions, such as Audit Committee membership, may require
other special skills, expertise or independence from the Corporation.
It should be noted that a shareholder recommendation is not a nomination,
and there is no guarantee that a candidate recommended by a shareholder will be
approved by the Nominating Committee or nominated by the Board of Directors. A
shareholder who is entitled to vote for the election of Directors and who
desires to nominate a candidate for election to be voted on at a Meeting of
Shareholders may do so only in accordance with Article II, Section 4, of the
Corporation's Amended and Restated Bylaws, which provides that a shareholder may
nominate a Director candidate by written notice to the Chairman of the Board or
the President not less than 150 days nor more than 180 days prior to the date of
the meeting of shareholders called for the election of Directors which, for
purposes of this requirement, shall be deemed to be on the same day and month as
the Annual Meeting of Shareholders for the preceding year. Such notice shall
contain the following information to the extent known by the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the Corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; (e) the number of shares of
capital stock of the Corporation owned by the notifying shareholder; (f) the
consent in writing of the proposed nominee as to the proposed nominee's name
being placed in nomination for Director; and (g) all information relating to
such proposed nominee that would be required to be disclosed by Regulation 14A
under the Exchange Act and Rule 14a-11 promulgated thereunder, assuming such
provisions would be applicable to the solicitation of proxies for such proposed
nominee.
Shareholder Communications with the Board of Directors
Shareholders may communicate with the Board of Directors, including the
non-management Directors, by sending a letter to First United Corporation Board
of Directors, c/o Robert W. Kurtz, Corporate Secretary, First United
Corporation, P.O. Box 9, Oakland, Maryland, 21550. The Corporate Secretary will
deliver all shareholder communications directly to the Board of Directors.
The Corporation believes that the Annual Meeting of Shareholders is an
opportunity for shareholders to communicate directly with Directors and,
accordingly, expects that all Directors will attend each Annual Meeting of
Shareholders. If you would like an opportunity to discuss issues directly with
our Directors, please consider attending this year's Annual Meeting of
Shareholders. At the 2004 Annual Meeting of Shareholders, all members of the
Board of Directors were in attendance.
AUDIT COMMITTEE REPORT
The Audit Committee has (i) reviewed and discussed the Corporation's
consolidated audited financial statements for the year ended December 31, 2004,
with Corporation management; (ii) discussed with Ernst & Young, LLP, the
Corporation's independent auditors, all matters required to be discussed by SAS
61 (Codification of Statements on Auditing Standards, AU ss. 380), as modified
or supplemented; and (iii) received the written disclosures and the letter from
Ernst & Young, LLP required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as modified or supplemented, and has discussed with the
auditors the auditors' independence. The Committee meets with the internal and
independent auditors, with and without management present, to discuss the
overall scope and plans for their respective audits, the results of their
examinations, their evaluations of the Corporation's internal controls, and the
overall quality of the Corporation's financial reporting. Based on these reviews
and discussions, the Audit Committee recommended to the Board of Directors that
the consolidated audited financial statements for the year ended December 31,
2004, be included in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2004.
AUDIT COMMITTEE
David J. Beachy John W. McCullough
Paul Cox, Jr. Richard G. Stanton
Raymond F. Hinkle Robert G. Stuck
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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 51, serves as Chairman of the Board and Chief
Executive Officer. Mr. Grant has been Chairman of the Board and Chief Executive
Officer since 1996. Prior to holding these positions, he served as Secretary and
Executive Vice President.
Robert W. Kurtz, age 58, serves as a Director and as the President, Chief
Financial Officer, Secretary, and Treasurer. Mr. Kurtz has been a Director since
1990 and has served as President since 1996 and Chief Financial Officer,
Secretary, and Treasurer since 1997. Prior to holding these positions, he served
as Chief Operating Officer and Executive Vice President.
Jeannette R. Fitzwater, age 44, serves as Senior Vice President and
Director of Human Resources. Mrs. 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.
Philip D. Frantz, age 44, serves as Senior Vice President and Director of
Operations & Support. Mr. Frantz was appointed Senior Vice President in 1993 and
was previously the Controller. He was appointed Director of Operations & Support
in 1997.
Steven M. Lantz, age 48, 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.
Eugene D. Helbig, Jr., age 52, 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.
Frederick A. Thayer, IV, age 46, serves as Senior Vice President, Director
of Sales, and CRA Officer. Mr. Thayer was appointed to these positions in 1997.
Prior to this time, he served as First Vice President, Regional Executive
Officer and Regional Sales Manager of the Bank.
Robin M. Murray, age 46, serves as Senior Vice President and Director of
Marketing. Mrs. Murray was appointed to these positions in 2003. From 1997 until
2003, she served as the Bank's Vice President & Director of Marketing and Retail
Sales and Marketing Retail Service Manager.
-8-
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the total remuneration for services in all
capacities paid during each of the last three fiscal years to the Corporation's
CEO and each other person who served as an executive officer of the Corporation
at any time during 2004.
Name and Annual Compensation
------------------- All Other
Principal Position Year Salary Bonus (1) Other Compensation(2)(3)
------------------ ---- ------ ----- -----------------
William B. Grant 2004 $179,524 -- -- $ 6,919
Chairman of the Board and 2003 $176,159 $43,814 -- $ 4,347
Chief Executive Officer 2002 $176,309 $55,439 $6,124 $ 3,861
Robert W. Kurtz 2004 $132,922 $24,338 -- $ 475
President, Chief Financial 2003 $132,922 $48,876 -- $ 438
Officer and Secretary/Treasurer 2002 $133,031 $51,288 $7,737 $ 424
Jeannette R. Fitzwater 2004 $ 69,300 $25,813 -- $ 3,307
Senior Vice President and 2003 $ 70,646 $60,194 -- $ 4,028
Director of Human Resources 2002 $ 70,569 $32,799 $2,103 $ 3,551
Philip D. Frantz 2004 $ 70,523 $25,813 -- $ 3,310
Senior Vice President and 2003 $ 70,523 $34,313 -- $ 3,257
Director of Operations and 2002 $ 70,512 $32,799 $1,984 $ 3,117
Support
Eugene D. Helbig, Jr. 2004 $ 86,973 $48,297 -- $ 4,541
Senior Vice President and 2003 $ 85,679 $52,912 -- $ 4,357
Senior Trust Officer 2002 $ 85,696 $52,249 $4,105 $ 4,456
Steven M. Lantz 2004 $ 95,877 $94,503 -- $ 6,310
Senior Vice President and 2003 $ 95,877 $87,017 -- $ 5,507
Senior Lending Officer 2002 $ 95,818 $62,719 $3,116 $ 3,397
Robin E. Murray 2004 $ 70,000 $25,813 -- $ 3,304
Senior Vice President and 2003 $ 70,356 $34,313 $2,706 $ 2,350
Director of Marketing 2002 $ 58,978 $ 4,299 $ 738 $ 1,726
Frederick A. Thayer, IV 2004 $ 80,746 $51,129 -- $ 4,725
Senior Vice President and 2003 $ 80,746 $71,207 -- $ 4,670
Director of Retail Banking 2002 $ 80,810 $74,345 $2,334 $ 4,975
(1) The amounts specified as bonus are made up of pay for performance and, in
certain cases, additional incentive payments. The amounts paid pursuant to
the pay for performance program (explained in further detail below in the
section entitled "Compensation Committee Report on Compensation") for
2002, 2003 and 2004 were distributed in 2003, 2004 and 2005, respectively.
The additional incentive payments were granted based on predetermined
business production goals as follows: Eugene D. Helbig, Jr., $16,953;
Steven M. Lantz, $59,202; and Frederick A. Thayer, IV, $29,004. These
amounts were paid in 2005. Jeannette R. Fitzwater elected to defer $23,838
of her 2004 pay for performance into the Corporation's Deferred
Compensation Plan.
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(2) Amounts shown include income imputed to the named executive in connection
with the bank-owned life insurance ("BOLI") plan established by the Bank
for certain Bank officers (see "BOLI Plan", below) as follows for 2004,
2003 and 2002, respectively: William B. Grant, $419, $395, $533; Robert W.
Kurtz, $475, $438, $424; Jeannette R. Fitzwater, $158, $150, $135; Phillip
D. Frantz, $140, $132, $119; Eugene D. Helbig, Jr., $302, $283, $281;
Steven M. Lantz, $261, $247, $224; Robin E. Murray, $175, $16, $15; and
Frederick A. Thayer, IV, $232, $215, $199. All other amounts shown are
matching contributions made by the Corporation for each respective
executive officer under the Corporation's 401(k) Profit Sharing Plan.
(3) Each executive officer has in excess of six years of credited service
under the 401(k) Profit Sharing Plan and are therefore 100% vested.
Pension Plan
The Corporation maintains a Defined Benefit Pension Plan (the "Pension
Plan") for the purpose of providing post-retirement benefits to vested
employees. The following table shows the maximum annual retirement benefits
payable under the Pension Plan for various levels of compensation during the
year of service:
APPROXIMATE ANNUAL BENEFIT UPON RETIREMENT AT AGE 65 BASED ON YEARS OF CREDITED SERVICE
YEARS OF SERVICE
FINAL
AVERAGE 15 20 25 30 35 40 45
COMPENSATION YEARS YEARS YEARS YEARS YEARS YEARS YEARS
------------ -------- -------- -------- -------- -------- -------- --------
$ 30,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 $ 14,000 $ 16,000 $ 18,000
70,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
110,000 24,000 32,000 40,000 48,000 56,000 64,000 72,000
150,000 33,000 44,000 55,000 66,000 77,000 88,000 99,000
190,000 42,000 56,000 70,000 84,000 98,000 112,000 126,000
230,000 46,500 62,000 77,500 93,000 108,500 124,000 139,500
For purposes of this table, final average compensation shown is twelve
times the average of the highest salary during sixty consecutive months in the
last one hundred twenty months preceding normal retirement. Also, for purposes
of the table, benefits are payable for life with a minimum guarantee of ten
years. Benefits are computed on an actuarial basis. To convert the benefits at
normal retirement to a lifetime only benefit, the amounts would be increased by
a factor of 1.0677%. Social Security benefits are not shown on the table and
would not reduce retirement benefits under the plan.
A table showing current compensation covered by the Pension Plan and the
estimated credited years of service for the Highly Compensated Employees
immediately follows the Supplemental Executive Retirement Plan discussion.
Supplemental Executive Retirement Plan
Effective November 1, 2001, the Bank's Board of Directors adopted the
First United Bank and Trust Supplemental Executive Retirement Plan (the "SERP").
The SERP provides supplemental retirement income to certain senior executives of
the Bank designated by the Bank's Board. The executives listed in the Summary
Compensation Table are also executives of the Bank and have been designated for
coverage under the SERP. The SERP benefit vests upon the executive reaching
Normal Retirement Age (as defined in the SERP), upon completion of 10 years of
service, or upon death. The normal retirement benefit will be 2.5% of final pay
for each year of service up to 24 years of service, plus 1% of final pay for
each year of service above 24 up to a maximum of 29 years of service, less 50%
of the executive's Social Security benefits and 100% of the benefits payable to
the executive under the Corporation's Pension Plan. If the participant dies
prior to retirement, the SERP benefit will additionally be reduced by the amount
of any death benefit payable to the participant's designated beneficiaries under
the Bank's split-dollar arrangements offered in connection with the BOLI plan.
In no event will the sum of the pre-retirement SERP benefit paid upon death and
the benefits paid under the split-dollar arrangement exceed the normal
retirement SERP benefit earned to date of death. For purposes of the SERP, a
participant's Final Pay shall mean the average of the three (3) highest annual
pay periods over the five (5) years preceding the participant's Normal
Retirement. The following table shows the projected benefit payable by the SERP
as a single life annuity for various levels of compensation and years of
service.
-10-
YEARS OF SERVICE
FINAL AVERAGE
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 29 YEARS
------------- -------- -------- -------- --------
$ 100,000 $ 5,790 $11,040 $14,790 $12,990
125,000 9,540 16,040 20,665 18,365
150,000 13,290 21,040 26,540 23,740
175,000 17,040 26,040 32,415 29,115
200,000 20,790 31,040 38,290 34,490
225,000 30,165 43,540 53,540 50,740
250,000 39,540 56,040 68,790 66,990
The SERP Benefit is based on the annual compensation listed in the Summary
Compensation Table. It is expected that the executives will have at least 29
years of service at retirement.
The executive may elect to receive benefits in a lump sum, calculated
using the same actuarial assumptions as used under the Pension Plan. Amounts to
pay the benefits may, at the Bank's discretion, be held in a rabbi trust. Upon a
change of control, the rabbi trust must be fully funded to pay accrued benefits.
In addition, upon certain terminations of employment following a change of
control, the eight executives designated for coverage become entitled to at
least the benefit they would receive based on 24 years of service.
The current compensation covered by the Pension Plan and by the SERP
(collectively, the "Plans") and the estimated credit years of service at
December 31, 2004, for each of the Highly Compensated Employees under the Plans
are as follows:
Estimated Credited
Current Compensation Years of Service at
Covered By the Plans 12/31/04
---------------------- -------------------- -------------------
William B. Grant $210,000 26 Years
Robert W. Kurtz $184,146 32 Years
Jeannette R. Fitzwater $103,985 19 Years
Philip D. Frantz $105,162 21 Years
Eugene D. Helbig, Jr. $146,526 19 Years
Steven M. Lantz $202,407 18 Years
Robin E. Murray $104,628 27 Years
Frederick A. Thayer, IV $149,692 13 Years
BOLI Plan
BOLI provides insurance on the lives of the Bank's executive and certain
other officers. The Bank purchased $18 million of BOLI in 2001 and $2.3 million
of BOLI in 2004. 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. The Bank has agreed,
however, to endorse a portion of the death benefits payable under the BOLI
policies to beneficiaries named by each covered officer. Participation in this
split-dollar arrangement can be terminated for any reason, at any time, by
either the Bank or the covered officer. The Bank intends to terminate each
covered officer's participation at retirement. For tax purposes, a covered
officer realizes nominal income from the split-dollar arrangement each year
equal to the value of that officer's life protection. If the executive officers
named above were to die while employed by the Bank, the benefits payable under
the split-dollar arrangement to their respective beneficiaries would be as
follows: William B. Grant, $455,000; Robert W. Kurtz, $295,000; Jeannette R.
Fitzwater, $255,000; Phillip D. Frantz, $225,000; Eugene D. Helbig, Jr.,
$290,000; Steven M. Lantz, $335,000; Robin M. Murray, $250,000; and Frederick A.
Thayer, IV, $331,000.
401(k) Profit Sharing Plan
Corporation employees are permitted to contribute a portion of their
salary to the Corporation's 401(k) Profit Sharing Plan. The Corporation makes a
matching contribution equal to 50% of the amount deferred, up to 6% of an
employee's salary, provided that the employee has completed at least one year of
service to the Corporation. The Corporation may make
-11-
additional discretionary contributions for employees equal to a percentage of
each employee's salary. In 2004, the Corporation made $30,729 in total matching
contributions for the benefit of executive officers. No executive officer
received a discretionary contribution in 2004.
Deferred Compensation Plan
Selected executives and Directors of the Corporation and its subsidiaries
are permitted to participate in the Corporation's Non-Tax Qualified Deferred
Compensation Plan. The plan permits each participant to defer all or a portion
of his or her bonus or Directors' fees (as applicable), which income is held in
a Rabbi Trust and invested in one or more investment options. The funds are
distributed to the participant at termination of employment or Director status,
unless the participant initially elects to receive distributions prior to
termination. The plan also permits early distribution in the event of certain
hardships. Plan benefits are taxed to the participant at the time of
distribution.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Board who performed the functions of the Compensation
Committee during the last completed fiscal year were: Rex W. Burton, Faye E.
Cannon, Raymond F. Hinkle, Elaine L. McDonald, Richard G. Stanton and Robert G.
Stuck. Mr. Stanton served as the Chairman of the Board, President and CEO of the
Corporation until June 1, 1996. James F. Scarpelli, Sr. was a member of this
committee until his retirement from the Board in November 2004. Faye E. Cannon
was appointed to the committee in September 2004.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The basic philosophy of the Corporation's compensation program is to offer
competitive compensation for all executive employees, which takes into account
both individual contributions and corporate performance.
Executive compensation for the Chairman of the Board/CEO, the
President/CFO, and each other executive officer consists of two principal
elements: (i) base salary; and (ii) incentives that are variable, fluctuate
annually, and are linked to the Corporation's performance, and therefore at
risk. Base salaries are set at levels intended to foster a career development
among executives, consistent with the long-term nature of the Corporation's
business objectives. In setting base salary levels, consideration is given to
establishing salary levels that approximate the amounts paid for similar
executive positions at other comparable community banking organizations. Salary
adjustments and the pay for performance amounts are determined in accordance
with the Annual Incentive Program established for executive officers and other
members of senior management. The incentive program, which was developed in
consultation with the Corporation's independent accountants, utilizes a targeted
goal-oriented approach whereby each year the committee establishes performance
goals based on the recommendation of the Chairman and CEO. The performance goals
include the following strategic financial measures: earnings per share; return
on equity; and, the efficiency ratio. Each of these elements is weighted
approximately the same. The measures are established annually at the start of
each fiscal year and are tied directly to the Corporation's business strategy,
projected budgeted results and competitive peer group performance.
Base salary levels for the executives in 2004 were recommended by the
Compensation Committee and were approved by the non-employee Directors of the
Board. Incentive compensation for the executives for 2004 was recommended in
December 2004 by the Compensation Committee and approved by the non-employee
Directors of the Board.
The targeted goals for incentive compensation are set at levels which only
reward continued exceptional Corporation performance. The incentive awards are
expressed as a percent of base pay and measured on a range around the targeted
goals with a fixed maximum incentive award.
Mr. Grant's incentive compensation was based on meeting certain financial
goals (earnings per share, return on equity and the efficiency ratios). The
incentive compensation for each other executive officer was based on a
combination of financial goals of the Corporation and certain subjective goals
related to the personal performance of each officer.
COMPENSATION COMMITTEE
Rex W. Burton Faye E. Cannon Raymond F. Hinkle
Elaine L. McDonald Richard G. Stanton Robert G. Stuck
-12-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 collectibility or present
other unfavorable features.
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, 2004, such persons
timely filed all reports required to be filed by Section 16(a) except that John
W. McCullough filed his initial statement of beneficial ownership late.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP has been engaged to audit the
books and accounts of the Corporation for the next fiscal year. Ernst & Young
LLP served as the Corporation's independent auditor in 2004. Ernst & Young 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 Ernst & Young LLP is not expected to be present at this year's Annual Meeting
of Shareholders.
AUDIT FEES AND SERVICES
The following table shows the fees paid or accrued by the Corporation for
the audit and other services provided by Ernst & Young LLP for fiscal years 2004
and 2003:
FY 2004 FY 2003
-------- --------
Audit Fees $452,147 $250,900
Audit-Related Fees -- 33,800
Tax Fees $126,630 142,715
All Other Fees $ 3,500 --
-------- --------
Total $582,277 $427,415
Fees for audit services include fees associated with the annual audit, the
reviews of the Corporation's quarterly reports on Form 10-Q, the attestation of
management's report on internal control over financial reporting, and accounting
consultations billed as audit services. Audit-related fees for 2003 principally
included the audit of the Corporation's employee benefit plans and accounting
consultation in connection with corporate governance matters. Tax fees included
tax compliance such as tax return preparation, tax advice and tax planning. For
2004, all other fees included a subscribtion to E&Y Accounting & Auditing
Research Tool and fees paid for services rendered in connection with the
transition to successor auditors for the employee beneifit plan audits. The
Audit Committee has reviewed summaries of the services provided by Ernst &
Young, LLP and the related fees and has determined that the provision of
non-audit services is compatible with maintaining the independence of Ernst &
Young, 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)(1)(B) of
the Exchange Act, which are approved by the Audit Committee prior to the
completion of the independent auditor's audit. In 2003, the Securities and
Exchange Commission adopted a rule pursuant to the federal Sarbanes-Oxley Act of
2002 that, except with respect to certain de minimis services discussed below,
requires Audit Committee pre-approval of audit and non-audit services provided
by the Corporation's independent auditors. All of the 2004 services described
above were pre-approved by the Audit Committee, and all of the 2003 services
described above were pre-approved to the extent that the Securities and Exchange
Commission's rule was applicable during 2003.
-13-
PERFORMANCE GRAPH
The following graph compares the performance of an investment in shares of
the Corporation's Common Stock for the last five years with the performance of a
broad market index and a nationally-recognized industry standard assuming in
each case both an initial $100 investment on December 31, 1999, and reinvestment
of dividends as of the end of the Corporation's fiscal years. The Corporation
has selected the NASDAQ Composite Index because prices for the Corporation's
Common Stock are quoted on Nasdaq National Market, and the SNL $1 billion to $5
billion Asset-Size Index as the relevant peer group index because of the
Corporation's asset size.
[LINE GRAPH]
Period Ending
--------------------------------------------------------------------
Index 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
------------------------ -------- -------- -------- -------- ------- --------
First United Corporation 100.00 76.23 123.46 132.00 202.63 176.85
NASDAQ Composite 100.00 60.82 48.16 33.11 49.93 54.49
SNL $1B-$5B Bank Index 100.00 113.48 137.88 159.16 216.44 267.12
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2006 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 2006 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 25, 2005 (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 Rule
14a-4(c)(1) under the Exchange Act, if a shareholder intends to present a
proposal for business to be considered at the 2006 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 9, 2006 (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.
-14-
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
-15-
APPENDIX A
First United Corporation
Audit Committee Charter
Purpose
The Audit Committee is appointed by the Board of Directors to assist the Board
in monitoring: (1) the integrity of the financial statements of First United
Corporation (the "Corporation"); (2) the independent auditor's qualifications
and independence; (3) the performance of the Corporation's internal audit
function and independent auditors; and (4) the compliance by the Corporation
with legal and regulatory requirements.
Committee Membership
The Audit Committee shall consist of no fewer than three members. The members of
the Audit Committee shall meet the independence and experience requirements of
Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"),
the rules of The Nasdaq Stock Market, Inc ("Nasdaq"), and the federal banking
laws and regulations applicable to the Corporation and its subsidiaries. Audit
Committee members must be able to read and understand financial statements at
the time of their appointment. At least one member of the Audit Committee shall
be an "audit committee financial expert" as defined by the Commission. Audit
committee members shall not simultaneously serve on the audit committees of more
than two other public companies. The members of the Audit Committee shall be
appointed by the Board. Audit Committee members may be removed and replaced by
the Board at any time.
Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Corporation or the Corporation's outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members of, or consultants
to, the Committee. The Audit Committee shall regularly report on Audit Committee
activities to the full Board.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint and replace the
independent auditor. The Audit Committee shall be directly responsible for the
compensation and oversight of the work of the independent auditor (including
resolution of disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work. The independent auditor shall report directly to the
Audit Committee.
The Audit Committee shall 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 auditor, subject to the de minimis exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act (or
any amendment or successor thereto), which are approved by the Audit Committee
prior to the completion of the audit.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Corporation shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Audit Committee.
The Audit Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval. The Audit
Committee shall perform an annual self-assessment of its performance with the
goal of continuing improvement and will report on such assessment, and any
recommendations with respect thereto, to the full Board.
The Audit Committee shall have the authority to, where appropriate, designate
one or more of its members to perform certain of its duties on its behalf,
subject to such reporting to or ratification by the Audit Committee as the Audit
Committee shall direct.
Without limiting the foregoing, the Audit Committee, to the extent it deems
necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the annual
audited financial statements, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" to be included in the
Corporation's Annual Report on Form 10-K, and, if deemed appropriate,
recommend to the Board that the audited financial statements be included
in the Corporation's Annual Report on Form 10-K.
2. Discuss with management and, on an exception basis, the independent
auditor the Corporation's quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
to be included in the Corporation's Quarterly Reports on Form 10-Q, prior
to the time such reports are filed, including the results of the
independent auditor's review of the quarterly financial statements.
3. Discuss with management and, on an exception basis, the independent
auditor the Corporation's quarterly earnings press releases, including the
use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and
rating agencies.
4. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Corporation's financial statements, including the quality, not just
the acceptability, of the Corporation's accounting principles, any
significant changes thereto, any major issues related to the adequacy of
the Corporation's internal controls and procedures, and any special steps
adopted to address material control deficiencies.
5. Review and discuss, as necessary, reports from the independent auditors
on:
(a) All critical accounting policies and practices to be used;
(b) All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor; and
(c) Other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences.
6. Review and approve the Provision for Loan Losses and the adequacy of the
Reserve for Probable Loan and Lease Losses.
7. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Corporation's financial statements.
8. Discuss with management the Corporation's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Corporation's risk assessment and risk management policies.
9. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
10. Review disclosures made to the Audit Committee by the Corporation's CEO
and CFO during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of internal
controls and procedures or material weaknesses therein and any fraud
involving
-2-
management or other employees who have a significant role in the
Corporation's internal control and procedures.
11. Review and approve all related-party transactions as defined from time to
time by Nasdaq and/or the SEC.
12. Prepare the report required by the rules of the Securities and Exchange
Commission (the "SEC") to be included in the Corporation's annual proxy
statements.
Oversight of the Corporation's Relationship with the Independent Auditor
13. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law.
14. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
15. Obtain and review annually a report from the independent auditor
describing the independent auditor's internal quality-control procedures;
and any material issues raised by the most recent internal quality-control
review or peer review or by any inquiry or investigation by governmental
or professional authorities, within the preceding five years, respecting
one or more independent audits carried out by the independent auditor, and
any steps taken to address such issues.
16. Recommend to the Board policies for the Corporation's hiring of employees
or former employees of the independent auditor who participated in any
capacity in the audit of the Corporation.
17. Obtain and review annually a formal written statement from the independent
auditor delineating all relationships between the independent auditor and
the Corporation ("Statement as to Independence"), addressing each
non-audit service provided to the Corporation and at least the matters set
forth in Independence Standards Board No. 1.
Oversight of the Corporation's Internal Audit Function
18. Review the appointment and replacement of the Corporation's internal Audit
Manager.
19. Review the significant reports to management prepared by the internal
audit department together with management's responses and follow-up to
these reports.
20. Discuss internal audit department responsibilities, budget, qualifications
and staffing and any recommended changes in the planned scope of the
internal audit department with management and the independent auditor.
Compliance Oversight Responsibilities
21. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act (communication of illegal acts) has not been implicated.
22. Obtain reports from management and the Corporation's internal audit
manager that the Corporation is in conformity with applicable legal
requirements and the Corporation's Code of Ethics.
23. Advise the Board with respect to the Corporation's policies and procedures
regarding compliance with applicable laws and regulations and with the
Corporation's Code of Ethics.
24. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports, which
raise material issues regarding the Corporation's financial statements or
accounting policies.
25. Discuss with legal counsel to the Corporation any legal matters that may
have a material impact on the financial statements or the Corporation's
compliance policies.
-3-
26. Review the significant reports to management prepared by the Compliance
Department and management's response.
27. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
Revised 02/18/05
-4-
APPENDIX B
First United Corporation
Nominating & Governance Committee Charter
As Amended on June 15, 2004
A. Name
There shall be a committee of the Board which shall be called the Nominating &
Governance Committee.
B. Purpose
The Nominating & Governance Committee shall (1) assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing from time to time the
size and composition of the Board of Directors (2) identify individuals
qualified to become Board members, and recommend that the Board select the
director nominees; and (3) develop and recommend to the Board the Corporate
Governance Guidelines applicable to the Company.
C. Committee Membership and Procedure
The Nominating & Governance Committee shall consist of no fewer than three
members. Each member of the Nominating & Governance Committee shall satisfy the
independence requirements of NASDAQ. The Board shall appoint the members of the
Nominating & Governance Committee, considering the views of the Chairman of the
Board and the Chief Executive Officer, as appropriate. The members of the
Nominating & Governance Committee shall serve until their successors are
appointed and qualify, and shall designate the Chairman of the Nominating &
Governance Committee. The Board shall have the power at any time to change the
membership of the Nominating & Governance Committee and to fill vacancies in it,
subject to such new member(s) satisfying the independence requirements
established by NASDAQ. Except as expressly provided in this Charter, the by-laws
of the Company or the Corporate Governance Guidelines of the Company, the
Nominating & Governance Committee shall fix its own rules of procedure.
D. Committee Authority and Responsibilities
Board and Committee Qualifications and Compositions
o The Nominating & Governance Committee shall review and recommend from time
to time any change to the size, composition and operations of the Board of
Directors and its committees.
o The Nominating & Governance Committee shall identify and recommend
individuals for nomination as director or to fill vacancy on the Board
considering qualifications and characteristics that the Committee from
time to time deem appropriate, including integrity, business experience,
education, accounting and financial expertise, age, diversity, reputation,
civic and community relationships, and knowledge and experience in matters
impacting financial institutions. In its discharge of this duty, the
Committee may evaluate candidates from the Advisory Council. o The
Nominating & Governance Committee shall annually recommend to the Board
the slate of nominees for election to the Board at the Annual Meeting of
Shareholders.
o The Nominating & Governance Committee shall consider candidates
recommended by shareholders to be nominees for director if such
recommendations are made in accordance with the by-laws of the Company.
Committee Operations
o The Nominating & Governance Committee shall have the sole authority to
retain and terminate any search firm to be used to identify director
candidates and shall have sole authority to approve the search firm's fees
and other retention terms. The Nominating & Governance Committee shall
also have authority to obtain advice and assistance from internal or
external legal, accounting or other advisors.
o The Nominating & Governance Committee shall make regular reports to the
Board.
o The Nominating & Governance Committee shall review and reassess the
adequacy of this Charter annually and recommend any proposed changes to
the Board for approval. The Nominating & Governance Committee shall
annually review its own performance.
o The Nominating & Governance Committee may form and delegate authority to
subcommittees when appropriate.
o The Nominating & Governance Committee shall develop and recommend to the
Board a Code of Business Conduct and Ethics, and shall consider any
requests for waivers from the Company's Code of Business Conduct and
Ethics. The Company shall make disclosure of such waivers to both NASDAQ
and the Securities and Exchange Commission.
o The Nominating & Governance Committee shall review periodically with the
Chairman and the Chief Executive Officer the succession plans relating to
positions held by elected corporate officers, and make recommendations to
the Board with respect to the selection and development of individuals to
occupy those positions.
Corporate Governance
o The Nominating & Governance Committee shall review and reassess at least
annually the adequacy of the Corporate Governance Guidelines of the
Company and recommend any proposed changes to the Board for approval.
APPENDIX C
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 M. Kathryn Burkey and Dr. William L. Graham, and
each of them, as Proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, and hereby authorizes
them to represent and to vote as designated on the reverse side, all the shares
of Common Stock of First United Corporation held of record by the undersigned on
February 11, 2005 at the Annual Meeting of Shareholders to be held on April 26,
2005 and any adjournment thereof.
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, AND IN THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTER THAT MAY BE
PRESENTED AT THE MEETING.
(Please sign on reverse side and return immediately)
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Address Change/Comments (Mark the corresponding box on the reverse side)
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FOLD AND DETACH HERE
You can now access your First United Corporation account online.
Access your First United Corporation shareholder account online via Investor
ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for First United Corporation, now
makes it easy and convenient to get current information on your shareholder
account.
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect(R) is a registered trademark
of Mellon Investor Services LLC
Please
Mark Here __
for Address | |
Change or |__|
Comments
SEE REVERSE SIDE
The Board of Directors recommends a vote `FOR ALL NOMINEES" in proposal 1.
1. Proposal to elect five (5) Directors to serve 2. In their discretion the Proxies are
until the 2008 Annual Meeting of Shareholders and authorized to vote upon such other
until their successors are duly elected and business as may properly come before
qualify, and one (1) Class II Director to serve the meeting and any adjournments
until the 2006 Annual Meeting of Shareholders and thereof.
until his successor is duly elected and qualify.
Class I (term expires 2008)
01 David J. Beachy WITHHOLD
02 Faye E. Cannon AUTHORITY FOR ALL EXCEPT
03 Paul Cox, Jr. FOR ALL NOMINEES FOR ALL NOMINIEES (See Instruction below)
04 William B. Grant |_| |_| |_|
05 John W. McCullough
Class II (term expires in 2006)
06 Gary R. Ruddell
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"FOR ALL EXCEPT" and strike a line through the nominee's name in the list above. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF
NOTICE OF THE AFORESAID ANNUAL MEETING OF
SHAREHOLDERS
Date:__________________________________, 2005
--------------------------------------------
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.
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FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time the day
prior to annual meeting day.
Your internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
-------------------------------- --------------------------------- ---------------------------------
Telephone
Internet 1-866-540-5760 Mail
http://www.proxyvoting.com/func1 Use any touch-tone telephone to Mark, sign and date your proxy
Use the internet to vote your OR vote your proxy. Have your proxy OR card and return it in the
proxy. Have your proxy card in card in hand when you call. enclosed postage-paid
hand when you access the web
site.
-------------------------------- --------------------------------- ---------------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.