FIRST UNITED CORPORATION RESTRICTED STOCK AGREEMENT
Exhibit
10.3
FIRST
UNITED CORPORATION
THIS
RESTRICTED STOCK AGREEMENT (this “Agreement”), made as of June 18, 2008 by and
between First United Corporation, a Maryland corporation (the together with
all
of its Affiliates, the “Corporation”), and ___________________ (the “Employee”)
is
made
pursuant and subject to the provisions of the Corporation’s Omnibus Equity
Compensation Plan, as amended from time to time (the “Omnibus Plan”), and
the
2008
Long-Term Incentive Program (the “Program”) adopted by the Committee thereunder
(the Omnibus Plan and the Program are collectively referred to herein as the
“Plan”).
All
capitalized terms used but not defined herein shall have the meanings given
such
terms in the Plan.
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto have agreed and
do
hereby agree as follows:
1. Grant
of Award.
On June
18, 2008 (the “Grant Date”), pursuant to Section 11 of the Omnibus Plan, the
Corporation granted (the “Award”) to the Employee _________ shares of restricted
Common Stock (the “Restricted Stock”).
2. Performance
Period; Vesting Goals.
The
performance period for this Award shall commence on January 1, 2008 and
terminate on December 31, 2010 (the “Performance Period”). The Committee has
established performance criteria for the Performance Period relating to the
Corporation’s diluted earnings per share (“EPS”) for the year ended December 31,
2010 that apply to the vesting of the shares of Restricted Stock granted hereby.
The EPS goal is $2.72 (the “EPS Goal”). The threshold EPS is 90% of EPS Goal, or
$2.448 (the “EPS Threshold”).
3. Vesting.
The
shares of Restricted Stock granted hereby shall vest if the audited financial
statements for the year ended December 31, 2010 confirm that the EPS for the
year ended December 31, 2010 equals or exceeds the EPS Threshold. For purposes
of, and subject to, the foregoing, the date on which the shares of Restricted
Stock shall vest and on which the Employee shall be entitled to receive shares
of freely transferable Common Stock equal to the number of vested shares of
Restricted Stock shall be the later of (i) March 31, 2011 or (ii) the date
the
Corporation’s audited financial statements for the year ended December 31, 2010
have been finalized and provided to the Compensation Committee for verification
of vesting (the “Vesting Date”), provided
that, as
of the Vesting Date, the Employee’s employment with the Corporation has not
terminated. Except as set forth in Section
11
and
Section
12
hereof,
there shall be no proportionate or partial vesting of this Award during the
Performance Period or between the end of the Performance Period and the Vesting
Date. Except as set forth in Section
11
and
Section
12
hereof,
no vesting shall occur after the Employee’s employment terminates for any
reason.
4. Effect
of Failure of to Meet EPS Threshold.
Subject
to Section
11
and
Section
12
hereof,
if the EPS for the year ended December 31, 2010 does not equal or exceed the
EPS
Threshold, as determined pursuant to Section 2 hereof, then all
shares of Restricted Stock granted hereby shall lapse and be forfeited and
canceled.
5. Rights
as a Stockholder.
Unless
and until the shares of Restricted Stock granted hereby become vested, the
Employee shall have none of the rights of a stockholder with respect to those
shares, including, without limitation, the right to vote shares or the right
to
receive dividends thereon.
6. Custody
of Certificates.
Custody
of all stock certificates evidencing the shares of Restricted Stock shall be
retained by the Corporation for so long as such shares are not vested. The
Corporation shall place a legend on each certificate evidencing a share of
Restricted Stock restricting the transfer of such share. As soon as practicable
after shares of Restricted Stock become vested, the Corporation shall remove
the
restrictive legend and deliver to the Employee one ore more stock certificates
evidencing that number of freely transferable shares of Common Stock equal
to
the number of vested shares of Restricted Stock.
7. Stock
Power.
Upon
signing this Agreement, the Employee shall deliver to the Corporation a stock
power, endorsed in blank, with respect to the shares of Restricted Stock granted
pursuant to this Agreement. The Corporation shall use the stock power to cancel
any shares of Restricted Stock that do not become vested. The Company shall
return the stock power to the Employee with respect to any shares of Restricted
Stock that become vested.
8. Restrictions
on Transfer.
Shares
of Restricted Stock may not be transferred or otherwise disposed of by the
Employee, including by way of sale, assignment, transfer, pledge, hypothecation
or otherwise, except as permitted by the Committee, or by will or the laws
of
descent and distribution, and
are
subject to a substantial risk of forfeiture.
9. Approvals.
The
delivery of any shares of Common Stock hereunder is subject to approval of
any
government agency which may, in the opinion of counsel, be required in
connection with the authorization, issuance or sale of Common Stock. No shares
of Common Stock shall be issued upon the lapse of restrictions relating to
the
shares of Restricted Stock prior to compliance with such requirements and with
the Corporation’s listing agreement with The NASDAQ Stock Market (or other
national exchange upon which the Corporation’s shares of Common Stock may then
be listed).
10. Invalid
Transfers.
No
purported sale, assignment, mortgage, hypothecation, transfer, pledge,
encumbrance, gift, transfer in trust (voting or other) or other disposition
of,
or creation of a security interest in or lien on, any of the shares of
Restricted Stock by any holder thereof in violation of the provisions of this
Agreement shall be valid, and the Company will not transfer any of said shares
of Restricted Stock on its books nor will any of said shares of Restricted
Stock
be entitled to vote, nor will any dividends be paid thereon, unless and until
there has been full compliance with said provisions to the satisfaction of
the
Corporation. The foregoing restrictions are in addition to and not in lieu
of
any other remedies, legal or equitable, available to enforce said
provisions.
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11. Change
in Control.
(a) Vesting
of Performance Shares.
Subject
to any conditions or restrictions imposed on the Employee pursuant to a change
in control agreement into which the Employee has entered pursuant to the First
United Corporation Change in Control Severance Plan (the “Severance Plan”), if
there is a Change in Control prior to the Vesting Date and the Employee incurs
a
Severance during the period commencing on the date that is 90 days before the
date on which the Change in Control occurs and ending on the first anniversary
of the date on which the change in control occurs, then all shares
of
Restricted Stock granted hereby shall vest
on the
Severance Date, regardless
of whether the performance criterion set forth in Section
2
hereof
has been attained, to
the
extent they have not otherwise vested and have not expired or been forfeited
pursuant to the other provisions of this Agreement; provided,
however,
that,
where the Severance precedes the Change in Control and the terms of this
Agreement would otherwise call for the forfeiture of the Award upon the
termination of the Employee’s employment with the Corporation, the Award shall
not be deemed to be forfeited on account of the Employee’s Severance and shall
remain outstanding (subject to the other terms of this Agreement) as if the
Change in Control preceded the Severance. Upon such vesting, the Employee shall
be entitled to receive shares of freely transferable Common
Stock equal to the number of shares of Restricted Stock
granted
hereby.
(b) Definitions.
For
purposes of this Section:
(i) “Change
in “Control” has the meaning given such term in the Omnibus Plan;
(ii) “Severance”
means (1) the involuntary termination of the Employee’s employment by the
Corporation, other than for Cause, death or Disability or (2) a termination
of
the Employee’s employment by the Employee for Good Reason, 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 Internal Revenue Code and Treasury
Regulations thereunder;
(iii) “Cause”
means one of the following reasons for which the Employee’s employment with the
Corporation is terminated: (1) willful or grossly negligent misconduct that
is
materially injurious to the Corporation; (2) embezzlement or misappropriation
of
funds or property of the Corporation; (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 Employee to devote full business time and attention to the performance
of
his or her duties and responsibilities if such breach has not been cured within
15 days after notice is given to the Employee; or (6) issuance of a final
non-appealable order or other direction by a Federal or state regulatory agency
prohibiting the Employee’s employment in the business of banking;
(iv) “Disability”
has the meaning given such term in Section
12(e)
of this
Agreement;
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(v) “Good
Reason” means, without the specific written consent of the Eligible
Employee, any of the following:
(1) A
material and adverse change in the Employee’s status or position(s) as an
officer or management employee of the Corporation as in effect immediately
prior
to the Change in Control, including, without limitation, any adverse change
in
his or her status or position as an employee of the Employer as a result of
a
material diminution in his or her duties or responsibilities (other than, if
applicable, any such change directly attributable to the fact that the
Corporation is no longer publicly owned) or the assignment to him or her of
any
duties or responsibilities which are materially inconsistent with such status
or
position(s) (other than any isolated and inadvertent failure by the Corporation
that is cured promptly upon his or her giving notice), or any removal of the
Employee from or any failure to reappoint or reelect him or her to such
position(s) (except in connection with the Employee’s Severance other than for
Good Reason);
(2) A
10% or
greater reduction in the 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;
(3) The
failure by the Corporation or any successor to continue in effect any employee
benefit plan (excluding any equity compensation plan) in which the Employee
is
participating at the time of the Change in Control (or plans providing the
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 Corporation or any successor which
would adversely affect the Employee’s continued participation in any of such
plans on at least as favorable a basis to him or her as is the case on the
date
of the Change in Control or which would materially reduce his or her benefits
under any of such plans;
(4) The
Corporation’s requiring the Employee to be based at an office that is both more
than 50 miles from where his or her office is located immediately prior to
the
Change in Control and further from his or her then current residence, except
for
required travel on the Corporation’s business to an extent substantially
consistent with the business travel obligations which the Employee undertook
on
behalf of the Corporation prior to the Change in Control; or
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(5) If
the
Employee has entered into a change in control agreement pursuant to the
Severance Plan, the failure by the Corporation to obtain assumption of the
Severance Plan by a successor; and
(c) “Severance
Date” means the date on which the Employee incurs a Severance.
12. Effect
of Termination of Employment, Disability and Leaves of Absence.
(a) Partial
Vesting Upon Death, Disability and Retirement.
If the
employment of the Employee is terminated prior to the Vesting Date by reason
of
his/her death, Disability or Retirement,
then
this Award shall vest and be payable in cash to the Employee or his or her
estate (as the case may be) pursuant to the following formula:
(A x B x
C) / D; where “A” is the number of Shares of Restricted Stock granted hereby
multiplied by either 50% if termination occurs during the first year of the
Performance Period, 65% if termination occurs during the second year of the
Performance Period, or 80% if termination occurs during the third year of the
Performance Period; “B” is the number of whole months during the Performance
Period that the Employee was employed; “C” is Fair Market Value of a share of
Common Stock as of the date of termination; and “D” is the number of whole
months in the Performance Period. The Award shall otherwise lapse and be
forfeited and canceled.
Example
1:
Employee receives a grant of 300 shares of Restricted Stock on April 1, 2008
and
dies on July 1, 2008. The Fair Market Value of a share of Common Stock as of
July 1, 2008 is $19.00. Employee’s estate will be entitled to cash in the amount
of ((300 shares x 50%) x 6 months x $19.00) / 36 months = $475.00.
Example
2:
Employee receives a grant of 300 shares of Restricted Stock on April 1, 2008
and
retires on July 1, 2009. The Fair Market Value of a share of Common Stock as
of
July 1, 2009 is $20.00. Employee will be entitled to cash in the amount of
((300
shares x 65%) x 18 months x $20.00) / 36 months = $1,950.00.
Example
3:
Employee receives a grant of 300 shares of Restricted Stock on April 1, 2008
and
terminates employment due to a Disability on December 15, 2010. The Fair Market
Value of a share of Common Stock as of December 15, 2010 is $21.00. Employee
will be entitled to cash in the amount of ((300 shares x 80%) x 35 months x
$21.00) / 36 months = $4,900.00.
(b) Other
Termination of Employment.
Subject
to Section
11
hereof,
if the employment of the Employee is terminated prior to the Vesting Date for
any reason other than by reason of death, Disability, or Retirement, then this
Award shall
lapse and be forfeited and canceled.
(c) Disability
and Return to Service.
If the
Employee suffers a Disability, his or her employment is not terminated because
of such Disability, and he or she thereafter returns to active employment,
then
the Award shall be reduced to reflect that period during the Performance Period
that the Employee was not in active service with the Corporation. If the Award
is so reduced, the Corporation shall promptly provide the Employee with a
schedule of the reduction.
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(d) Leave
of Absence.
If the
Employee takes an approved leave of absence, then the Award shall be reduced
to
reflect that period during the Performance Period that the Employee was not
in
active service with the Corporation. If the Award is so reduced, the Corporation
shall promptly provide the Employee with a schedule of the
reduction.
(e) Definitions.
For
purposes of this Section:
(i) “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;
(ii) “Retirement”
means the termination of the Employee’s employment with the Corporation for any
reason other than death, Disability or Cause after the Employee has both (i)
completed 10 Years of Service with the Corporation and (ii) attained 60 years
of
age; and
(iii) “Year
of
Service” means each 12 consecutive month period of full time employment with the
Corporation.
13. Forfeiture
in Certain Events.
This
Award will terminate and lapse in the event the Board of Directors of the
Corporation determines that the Employee (a) knowingly participated in the
altering, inflating, and/or inappropriate manipulation of performance or
financial results of the Corporation for any fiscal year or (b) willfully
engaged in any activity injurious to the Corporation. In addition, in the event
of item (a), the Employee shall forfeit and return to the Corporation all
shares
of
freely transferable Common Stock received hereunder
to the extent the Award vested based on the altered, inflated, or manipulated
financial results.
14. Clawback.
If this
Award vests and the Corporation is thereafter required to restate its financial
statements in respect of any period covered by the Performance Period due to
the
material noncompliance by the Corporation with any applicable financial
reporting requirements, including securities laws, then, regardless of fault
on
the part of the Employee, the Award shall be adjusted to give retroactive effect
to the restatement. If, in such case, shares of freely
transferable Common Stock have been paid hereunder,
then the Employee shall forfeit and return to the Corporation that number of
shares
of
to
the
extent the restatement shows that such shares should not have been earned;
provided,
however, that,
notwithstanding the foregoing, and except in the case of the Employee’s
alteration, inflation, and/or inappropriate manipulation of performance or
financial results of the Corporation, the Employee shall not be required to
return any portion of the Award to the extent it was paid more than three years
prior to the date the Corporation determines that a restatement is required.
This Section is in addition to, and not in lieu of, the rights and obligations
of the parties provided in Section
13.
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15.
Taxes.
(a) At
the
time any shares of Restricted Stock become vested hereunder or any cash becomes
payable under Section
12,
the
Corporation shall have the right to retain and withhold from such vested shares
or cash that portion representing the amount of federal, state and local taxes
required by any governmental agency to be withheld or otherwise deducted and
paid with respect to such vested shares or cash. The number of shares withheld
will be calculated based on the Fair Market Value of a share of Common Stock
as
of the Vesting Date. Any shares so withheld shall be canceled by the
Corporation.
(b) The
Employee shall be precluded from making any election pursuant to Section 83(b)
of the Internal Revenue Code with respect to the shares of Restricted Stock
granted hereby.
(c) The
Employee understands that he or she (and not the Corporation) shall be
responsible for any tax liability that may arise as a result of the transactions
contemplated by this Agreement.
(d) This
Agreement shall be interpreted and applied so that the Employee’s Restricted
Stock will not be subject to Internal Revenue Code Section 409A. If
notwithstanding the preceding sentence the Employee’s Restricted Stock becomes
subject to Section 409A, then the specified time of payment of the Restricted
Stock for purposes of Section 409A shall be the calendar year in which the
short-term deferral period expires with respect to the Restricted Stock (but
payment may be made by such later time as may be permitted by Section 409A
under
the circumstances).
16. Amendment
and Termination.
This
Agreement may not be terminated prior to the end of its term without the written
consent of the Employee. This Agreement may be amended by the Committee at
any
time; provided,
however,
that
this Agreement may not be amended without the written consent of the Employee
if
such amendment would in any manner adversely affect the interests of the
Employee.
17. Compliance
with Law.
Notwithstanding Section 14 hereof or any other provision of this Agreement
to
the contrary, the Committee may amend, modify or terminate this Agreement or
the
Plan, without the consent of the Employee, as the Committee 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.
18. 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.
19. 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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20. Successors.
This
Agreement shall
be
binding upon each of the parties and shall also be binding upon their respective
successors or assigns.
21. Application
of the Plan; Entire Agreement.
The
Employee acknowledges, by executing this Agreement, that (a) 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, (b) that a copy of the Plan and all amendments thereto through the
date
hereof were provided to the Employee on the date hereof, and (c) he or she
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.
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
as
of the day first above written.
| FIRST UNITED CORPORATION | |||
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By:
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Name:
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Title:
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WITNESS:
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EMPLOYEE | ||
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Name: | ||
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