FIRST UNITED CORPORATION EXECUTIVE AND DIRECTOR DEFERRED COMPENSATION PLAN

This amended and restated First United Corporation Executive and Director Deferred Compensation Plan (the “Plan”) is adopted by First United Corporation (the “Employer”), effective as of November 19, 2008, for certain of its (or its participating subsidiary’s) executive employees and Directors. The Plan constitutes an amendment and restatement of the First United Corporation Deferred Compensation Plan and Trust, and supersedes any prior version of the Plan.

The purpose of the Plan is to offer participants an opportunity to elect to defer the receipt of compensation in order to provide deferred compensation benefits taxable pursuant to section 451 of the Internal Revenue Code of 1986, as amended (the “Code”), and to provide a deferred compensation vehicle to which the Employer may credit certain amounts on behalf of participants. The Plan is intended to be a “top-hat” plan under sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan is also intended to comply with the requirements of section 409A of the Code, as added by the American Jobs Creation Act of 2004, and the Treasury regulations or any other authoritative guidance issued thereunder (“Section 409A”).

1.1   ACCOUNT  means the balance credited to a Participant’s or Beneficiary’s Plan account, including contribution credits and deemed income, gains and losses credited thereto. A Participant’s or Beneficiary’s Account shall be determined as of the date of reference.

1.2   BENEFICIARY  means any person or person so designated in accordance with the provisions of Article 7.

1.3   BOARD  means the Board of Directors of the Employer.

1.4   CHANGE OF CONTROL  means a change in the ownership of a corporation, a change in the effective control of a corporation, or a change in the ownership of a substantial portion of a corporation’s assets, as such terms are defined in Treasury Reg. §1.409A-3(i)(5). 

1.5   CODE means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time.

1.6   COMPENSATION  means (i) with respect to an Eligible Individual who is an employee of the Employer, compensation as defined in the First United Corporation 401(k) Profit Sharing Plan, and (ii) with respect to an Eligible Individual who is a Director of the Employer, the total current cash remuneration paid by the Employer to the Eligible Individual with respect to his or her service for the Employer.

1.7   COMPENSATION DEFERRAL ACCOUNT is defined in Section 3.2.

1.8   COMPENSATION DEFERRALS is defined in Section 3.2.

1.9   DESIGNATION DATE  means the date or dates as of which a designation of deemed investment directions by an individual pursuant to Section 4.5, or any change in a prior designation of deemed investment directions by an individual pursuant to Section 4.5, shall become effective. The Designation Dates in any Plan Year shall be designated by the Employer.

1.10   DISABILITY  means that a Participant has been determined to be totally disabled by the Social Security Administration

1.11   EFFECTIVE DATE  means the effective date of this amendment and restatement of the Plan, which shall be November 19, 2008.

1.12   ELECTION FORM  means the form or forms on which a Participant elects to defer Compensation hereunder and/or on which the Participant makes certain other designations as required thereon.

1.13   ELIGIBLE INDIVIDUAL  means, for any Plan Year (or applicable portion thereof), a person who is determined by the Employer, or its designee, to be a member of a select group of management or highly compensated employees of the Employer or a member of the Board and who is designated by the Employer, or its designee, to be an Eligible Individual under the Plan. By each December 1 (or other date established by the Employer), the Employer, or its designee, shall notify those individuals, if any, who will be Eligible Individuals for the next Plan Year. If the Employer, or its designee, determines that an individual first becomes an Eligible Individual during a Plan Year, the Employer, or its designee, shall notify such individual of its determination and the individual shall first become an Eligible Individual as of the date of such notification.

1.14   EMPLOYER means First United Corporation and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of First United Corporation, or its successors or assigns, assumes the Employer’s obligations hereunder, or any other corporation or business organization which agrees, with the consent of First United Corporation, to become a party to the Plan.

1.15   EMPLOYER CONTRIBUTION CREDIT ACCOUNT  is defined Section 3.1. 

1.16   EMPLOYER CONTRIBUTION CREDITS  is defined in Section 3.1.

1.17   ENTRY DATE  with respect to an individual means the first day of the pay period following the date on which the individual first becomes an Eligible Individual.

1.18   PARTICIPANT  means any person so designated in accordance with the provisions of Article 2, including, where appropriate according to the context of the Plan, any former employee or former member of the Board who is or may become (or whose Beneficiaries may become) eligible to receive a benefit under the Plan.

1.19   PLAN means this First United Corporation Executive and Director Deferred Compensation Plan, an amendment and restatement of the First United Corporation Deferred Compensation Plan and Trust, as amended from time to time.

1.20   PLAN YEAR  means the twelve (12) month period ending on the December 31 of each year during which the Plan is in effect.

1.21   SECTION 409A  means Code section 409A and the Treasury regulations or other authoritative guidance issued thereunder.

1.22   SEPARATION FROM SERVICE means separation from service within the meaning of Section 409A, including the termination of Board membership with respect to a Participant who is a Board member.

1.23   SPECIFIED EMPLOYEE.  A Participant is a “Specified Employee” for the 12-month period beginning on any April 1 if the Participant is a key employee, as defined in Code Section 416(i) (without regard to paragraph (5) thereof and using the definition of compensation under Treasury Reg. §1.415(c)-2(d)(4)), at any time during the 12-month period ending on the preceding December 31.

1.24   TRUST  means the Trust established pursuant to Article 11.

1.25   TRUSTEE  means the trustee of the Trust established pursuant to Article 11.

1.26   VALUATION DATE  means the last day of each Plan Year and any other date that the Employer, in its sole discretion, designates as a Valuation Date.

2.1   REQUIREMENTS . Every Eligible Individual on the Effective Date shall be eligible to become or continue as a Participant on the Effective Date. Every other Eligible Individual shall be eligible to become a Participant on the first Entry Date occurring on or after the date on which he or she becomes an Eligible Individual. No individual shall become a Participant, however, if he or she is not an Eligible Individual on the date his or her participation is to begin. Participation in the Participant Compensation Deferral feature of the Plan is voluntary. In order to participate in the Participant Compensation Deferral feature of the Plan, an otherwise Eligible Individual must make written application on an Election Form at such time and in such manner as may be required by Section 3.2 and by the Employer and must agree to make Compensation Deferrals as provided in Article 3.

Participation in the Employer Contribution Credit feature of the Plan is automatic for all Participants.

2.2   RE-EMPLOYMENT, ETC . Subject to Section 409A, if a Participant who experiences a Separation from Service is subsequently re-employed by or subsequently becomes a Director of the Employer, he or she shall become a Participant in accordance with the provisions of Section 2.1.

2.3   CHANGE OF EMPLOYMENT CATEGORY . During any period in which a Participant remains in the employ of the Employer, but ceases to be an Eligible Individual, he or she shall not be eligible to make Compensation Deferrals or to be credited with Employer Contribution Credits (if any) hereunder.

2.4   TERMINATION OF PARTICIPATION . To the extent permitted under Section 409A, the Employer, in its sole discretion, may (a) permit a Participant during the 2005 calendar year to terminate participation in the Plan and receive a payment of his or her Account pursuant to Article 6, or (b) require a Participant to terminate participation in the Plan during the 2005 calendar year and receive payment of his or her Account pursuant to Article 6; provided that any amounts subject to termination are includible in the income of the Participant in the 2005 calendar year or, if later, the taxable year in which the amounts are earned and vested.

3.1   EMPLOYER CONTRIBUTION CREDITS . There shall be established and maintained a separate Employer Contribution Credit Account in the name of each Participant. Such Account shall be credited or debited, as applicable, with (a) amounts equal to the Employer’s Contribution Credits credited to that Account, if any; (b) any deemed earnings and losses (to the extent realized, based upon deemed fair market value of the Account’s deemed assets) allocated to that Account; and (c) expenses and/or taxes charged to that Account.

For purposes of this Section, the Employer’s Contribution Credits credited to a Participant’s Employer Contribution Credit Account for a particular Plan Year shall be an amount (if any) determined by the Employer, in its discretion.

The Participant’s Employer Contribution Credit Account shall be credited or debited, as applicable, as of each Valuation Date, with deemed earnings or losses, as applicable, and, at the Employer’s discretion, expenses. The amount of deemed earnings or losses and expenses shall be as determined by the Employer. The Employer shall have the discretion to allocate such deemed earnings or losses and expenses among Participants’ Employer Contribution Credit Accounts pursuant to such allocation rules as the Employer deems to be reasonable and administratively practicable.

A Participant shall be vested in amounts credited to his or her Employer Contribution Credit Account as provided in Section 5.2.

3.2   PARTICIPANT COMPENSATION DEFERRALS . In accordance with rules established by the Employer, a Participant may elect on an Election Form to defer Compensation which would otherwise be payable to the Participant, in any fixed periodic dollar amounts or percentages designated by the Participant. Amounts so deferred will be considered a Participant’s “Compensation Deferrals”. Except as otherwise provided below, a Participant shall make such an election with respect to a coming twelve (12) month Plan Year during the period beginning on the December 1 and ending on the December 31 of the prior Plan Year, or during such other period established by the Employer which ends no later than the last day of the Plan Year preceding the Plan Year in which the services giving rise to the Compensation to be deferred are to be performed.

Notwithstanding the preceding, in the case of the first Plan Year in which an Eligible Individual becomes eligible to become a Participant, if and to the extent permitted by the Employer, the Eligible Individual may make an election no later than thirty (30) days after the date he or she becomes eligible to become a Participant to defer Compensation for services to be performed after the election. Any such election to defer bonus shall apply only to the total amount of the bonus earned in such Plan Year multiplied by the ratio of the number of days remaining in the Plan Year after the election divided by 365 (or 366 in a leap year).

In addition, notwithstanding the preceding, to the extent permitted under Section 409A, the Employer may, in its sole discretion, permit a Participant to make an election to defer Compensation which relates all or in part to services performed prior to December 31, 2005 (including elections to defer (i) regular salary or retainer/meeting fee amounts for services to be performed in the 2005 calendar year, (ii) bonus payment amounts payable in 2005 in respect of services performed during the 2004 calendar year and/or (iii) bonus payment amounts payable in 2006 in respect of services performed during the 2005 calendar year) no later than the earlier of (a) March 15, 2005 or (b) the date such Compensation is otherwise payable to the Participant.

Compensation Deferrals shall be made through regular payroll or retainer/meeting fee deductions and/or through an election by the Participant to defer a bonus payment. The Participant may change and/or revoke his or her Compensation Deferral election only if and to the extent permitted by the Employer and in accordance with Section 409A, specifically relating to the change and/or revocation of deferral elections. To the extent permitted under Section 409A and by the Employer, a Participant may terminate participation in the Plan or cancel a deferral election under the Plan at any time during the 2005 calendar year.

Once made, a Compensation Deferral election shall continue in force only for the Plan Year to which the election relates. A Compensation Deferral election shall terminate during a Plan Year if a Participant receives an unforeseeable emergency distribution under Section 5.1 or if required for the Participant to receive a hardship distribution under a Code section 401(k) plan. If a Compensation Deferral election terminates, any subsequent Compensation Deferral election must comply with the first paragraph of this Section 3.2.

Compensation Deferrals shall be deducted by the Employer from the pay of a deferring Participant. There shall be established and maintained by the Employer a separate Compensation Deferral Account in the name of each Participant to which shall be credited or debited: (a) amounts equal to the Participant’s Compensation Deferrals; (b) amounts equal to any deemed earnings or losses (to the extent realized, based upon deemed fair market value of the Account’s deemed assets) attributable or allocable thereto; and (c) expenses and/or taxes charged to that Account.

A Participant shall at all times be one hundred percent (100%) vested in amounts credited to his or her Participant Compensation Deferral Account.

4.1   ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS . Subject to Section 4.5, each Participant shall have the right to direct the Employer as to how amounts in his or her Plan Account shall be deemed to be invested in the deemed investment options made available under the Plan. Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to the date on which a direction will become effective, the Participant shall have the right to direct the Employer as to how amounts in his or her Account shall be deemed to be invested.

The Employer shall direct the Trustee to invest the account maintained in the Trust on behalf of the Participant pursuant to the deemed investment directions the Employer properly has received from the Participant. The value of the Participant’s Account shall be equal to the value of the account maintained under the Trust on behalf of the Participant. As of each valuation date of the Trust, the Participant’s Account will be credited or debited to reflect the Participant’s deemed investments of the Trust.

The Participant’s Plan Account will be credited or debited with the increase or decrease in the realizable net asset value or credited interest, as applicable, of the designated deemed investments, as follows. As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Employer or the Trustee, as applicable), of each deemed investment option within the Account since the preceding Valuation Date shall be allocated among all Participants’ Accounts deemed to be invested in that investment option in accordance with the ratio which the portion of the Account of each Participant which is deemed to be invested within that investment option, determined as provided herein, bears to the aggregate of all amounts deemed to be invested within that investment option.

4.2   ACCOUNTING FOR DISTRIBUTIONS . As of the date of any distribution hereunder, the distribution made hereunder to the Participant or his or her Beneficiary or Beneficiaries shall be charged to such Participant’s Account. Such amounts shall be charged on a pro rata basis against the investments of the Trust in which the Participant’s Account is deemed to be invested.

4.3   SEPARATE ACCOUNTS . A separate account under the Plan shall be established and maintained hereunder to reflect the Account for each Participant with sub-accounts to show separately the applicable deemed investments of the Account.

4.4   INTERIM VALUATIONS . If it is determined by the Employer that the value of a Participant’s Account as of any date on which distributions are to be made differs materially from the value of the Participant’s Account on the prior Valuation Date upon which the distribution is to be based, the Employer, in its discretion, shall have the right to designate any date in the interim as a Valuation Date for the purpose of revaluing the Participant’s Account so that the Account will, prior to the distribution, reflect its share of such material difference in value.

4.5   DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS . Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to and effective for each Designation Date, each Participant may communicate to the Employer a direction as to how his or her Plan Accounts should be deemed to be invested among such categories of deemed investments as may be made available by the Employer hereunder. Such direction shall designate the percentage (in any whole percent multiples) of the Participant’s Plan Account which is requested to be deemed to be invested in such categories of deemed investments.

An election concerning deemed investment choices shall continue indefinitely until changed by the Participant in a manner specified by the Employer. If the Employer receives an initial or revised deemed investment direction which it deems to be incomplete, unclear or improper, the Participant’s investment direction then in effect shall remain in effect (or, in the case of a deficiency in an initial deemed investment direction, the Participant shall be deemed to have filed no deemed investment direction) until the next Designation Date, unless the Employer provides for, and permits the application of, corrective action prior thereto.

If the Employer possesses (or is deemed to possess as provided above) at any time directions as to the deemed investment of less than all of a Participant’s Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income, stable value or similar fund made available under the Plan as determined by the Employer in its discretion.

Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Employer and its agents and representatives from any losses or damages of any kind relating to the deemed investment of the Participant’s Account hereunder.

4.6   EXPENSES . Expenses, including Trustee fees, allocable to the administration or operation of an Account maintained under the Plan shall be paid by the Employer unless, in the discretion of the Employer, the Employer elects to charge such expenses, or any portion thereof, against the appropriate Participant’s Account or Participants’ Accounts. If an expense, or any portion thereof, is charged against a Participant’s Account, at the discretion of the Employer, such expense, or portion thereof, either (i) will reduce the contribution to the Trust under Article 3 next due to be made by the Employer in respect of the Account, or (ii) will be paid from the Trust to the Employer out of assets of the Trust corresponding to the Participant’s Account hereunder.

4.7   TAXES . Any taxes generated by earnings in an Account, as determined by the Employer, shall be paid by the Employer unless, in the discretion of the Employer, the Employer elects to charge such taxes against the appropriate Participant’s Account or Participants’ Accounts. If a tax amount is charged against a Participant’s Account, at the discretion of the Employer, such expense either (i) will reduce the contribution to the Trust under Article 3 next due to be made by the Employer in respect of the Account, or (ii) will be paid from the Trust to the Employer out of assets of the Trust corresponding to the Participant’s Account.

5.1   UNFORESEEABLE EMERGENCY DISTRIBUTIONS . In the event the Participant incurs an unforeseeable emergency, as hereinafter defined, the Participant may apply to the Employer for the distribution of all or any part of his or her vested Account. The Employer shall consider the circumstances of each such case, and the best interests of the Participant and his or her family, and shall have the right, in its sole discretion, if applicable, to allow such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution; provided, however, that such distribution shall be permitted solely to the extent permitted under Section 409A. Upon a finding of unforeseeable emergency, the Employer shall make the appropriate distribution to the Participant from amounts held by the Employer in respect of the Participant’s vested Account in a lump sum payment within 30 days of the date of such finding. In no event shall the aggregate amount of the distribution exceed either the full value of the Participant’s vested Account or the amount determined by the Employer to be necessary to satisfy the unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which the unforeseeable emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of assets would not itself cause severe financial hardship) or by the cessation of Composition Deferrals under this Plan. A distribution under this Section 5.1 shall be permitted solely to the extent permitted under Section 409A.

“Unforeseeable emergency” means (a) a severe financial hardship to the Participant resulting