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Section 1: SC 13D/A (AMENDMENT NO. 12 TO THE SCHEDULE 13D)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

(Amendment No. 12)1

First United Corporation

(Name of Issuer)

Common Stock, $0.01 par value

(Title of Class of Securities)

33741H107

(CUSIP Number)

J. ABBOTT R. COOPER

DRIVER MANAGEMENT COMPANY LLC

250 Park Avenue

7th Floor

New York, NY 10177

(212) 572-4811

 

with copies to:

 

ANDREW FREEDMAN, ESQ.

OLSHAN FROME WOLOSKY LLP

1325 Avenue of the Americas

New York, New York 10019

(212) 451-2300

 

EITAN HOENIG, ESQ.

KLUK FARBER LAW PLLC

166 Mercer Street, Suite 6B
New York, New York 10012
(646) 850-5009

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

 

December 13, 2019

(Date of Event Which Requires Filing of This Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ¨.

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See § 240.13d-7 for other parties to whom copies are to be sent.

 

 

 

1              The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

CUSIP No. 33741H107

  1   NAME OF REPORTING PERSON  
         
        Driver Opportunity Partners I LP  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC, OO  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Delaware  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         360,637  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          360,637  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        360,637  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        5.07%  
  14   TYPE OF REPORTING PERSON  
         
        PN  

  

2

CUSIP No. 33741H107

  1   NAME OF REPORTING PERSON  
         
        Driver Management Company LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF, OO  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Delaware  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         360,637  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          360,637  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        360,637  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        5.07%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

3

CUSIP No. 33741H107

 

  1   NAME OF REPORTING PERSON  
         
        J. Abbott R. Cooper  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF, OO  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        United States of America  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         360,637  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          360,637  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        360,637  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        5.07%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

4

CUSIP No. 33741H107

 

  1   NAME OF REPORTING PERSON  
         
        Michael J. Driscoll  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        PF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        United States of America  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         3,500  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          3,500  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        3,500  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        Less than 1%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

5

CUSIP No. 33741H107

 

  1   NAME OF REPORTING PERSON  
         
        Lisa Narrell-Mead  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        PF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        United States of America  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         650  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          650  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        650  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        Less than 1%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

6

CUSIP No. 33741H107

 

  1   NAME OF REPORTING PERSON  
         
        Ethan C. Elzen  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☒
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        PF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        United States of America  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         425  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         - 0 -  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          425  
    10   SHARED DISPOSITIVE POWER  
           
          - 0 -  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        425  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        Less than 1%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

7

CUSIP No. 33741H107

 

The following constitutes Amendment No. 12 to the Schedule 13D filed by the undersigned (“Amendment No. 12”). This Amendment No. 12 amends the Schedule 13D as specifically set forth herein.

 

Item 4.Purpose of Transaction.

Item 4 is hereby amended to add the following:

On December 13, 2019, Driver delivered a letter (the “Plurality Voting Letter”) to certain independent members (the “Independent Directors”) of the Issuer’s Board of Directors (the “Board”). In the Plurality Voting Letter, Driver questioned the independent designation of these directors based on their lengthy tenure, family relationships with other directors and business relationships with the Issuer. Driver expressed its view that this apparent combination of compromised objectivity and interconnectivity could be leading the Board to dismiss growing, vocal support amongst investors for a sale process. Driver stated its belief that one particularly troublesome corporate governance practice of the Issuer requires immediate attention: the lack of a plurality carve-out from the majority voting standard in contested elections.

Driver stated that the use of a majority voting standard in contested elections is widely viewed as a potential entrenchment device for boards because (i) a plurality voting standard in a proxy contest ensures that the director nominees receiving the most votes are duly elected to the board, which is an essential feature of corporate democracy and consistent with the voting guidelines of institutional shareholders and proxy advisory firms; (ii) a majority voting standard is not appropriate in a contested election because the threshold is too high, and it protects incumbency by allowing incumbent directors who do not receive at least a majority of the votes cast to continue serving on the Board as holdovers, even if they received fewer votes than a shareholder nominee; and (iii) a majority voting standard unduly restricts the ability of shareholders to elect their choice of directors in a contested election, making it possible that none of the director candidates up for election will receive the required majority of votes cast to be duly elected, resulting in a “failed election.”

Driver called on the Independent Directors, who have fiduciary duties to act in the best interest of all shareholders, to address what it views as an affront to the shareholder franchise by immediately amending the Issuer’s Bylaws to provide for a plurality voting carve-out in contested elections. Driver stated its belief that a failure to remedy this deficiency would demonstrate a clear disregard for the fundamental right of shareholders to elect directors of their choosing. Driver further stated that the Maryland General Corporation Law provides for a plurality voting standard by default, meaning the Board had to specifically amend the Bylaws to impose a majority voting standard. Since the Board can unilaterally amend the Bylaws without prior shareholder approval, Driver stated that the Board should therefore implement a plurality carve-out in contested elections immediately and without delay.

Driver concluded the Plurality Voting Letter by requesting that the Issuer indicate, prior to December 16, 2019, whether it would rectify this issue. Driver stated that, if it did not receive a response by then, it would assume that the Issuer intends to preserve the majority voting standard in contested elections as a mechanism to further entrench the Board, and would take action to preserve the corporate franchise and protect the rights of all shareholders.

The foregoing description of the Plurality Voting Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Plurality Voting Letter, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

8

CUSIP No. 33741H107

Following the delivery of the Plurality Voting Letter to the Independent Directors, Driver’s counsel engaged in discussions with the Issuer’s counsel regarding Driver’s serious concerns with the Issuer’s corporate governance practices, including the lack of a plurality carve-out from the majority voting standard in a contested election at the Issuer’s 2020 Annual Meeting of Shareholders (the “Annual Meeting”). During these discussions, the Issuer’s counsel proposed a framework for voting on the election of directors that would ensure that the director candidates who receive the most votes for the available number of seats would serve as the directors of the Issuer. However, as of the filing of this 13D amendment, the Issuer has not amended its Bylaws to add a plurality voting carve-out, even though this is an action that the Board can take at any time without shareholder approval.

On December 17, 2019, Driver delivered a letter (the “December 17 Letter”) to the Independent Directors, in which Driver stated that it viewed the Board’s approval of a plurality voting exception at the Annual Meeting as a reactionary step that was taken only after Driver publicly complained about it. In the December 17 Letter, Driver stated its belief that several corporate governance concerns persist and require the Independent Directors’ immediate attention and decisive action, including the Board’s questionable independence, a dysfunctional Lead Director, a lack of transparency surrounding Chairman and CEO Carissa Rodeheaver and Ms. Rodeheaver’s troubling stock loan and share ownership.

Driver stated in the December 17 Letter that the average tenure of the Issuer’s directors exceeds 15 years. Driver further stated that Institutional Shareholder Services’ (“ISS”) guidelines consider director tenure over nine years to be excessive, creating the potential to compromise a director’s independence, and that ISS scrutinizes boards with an average director tenure of over 15 years for independence from management and sufficient turnover to ensure new perspectives. Driver also expressed its concern that Robert Kurtz is the uncle of Brian Boal, a close family relationship that raises questions about their ability to act objectively and in the best interests of shareholders, especially since both Messrs. Kurtz and Boal serve on the Audit Committee. Driver requested that the Board elaborate on the process by which it determined the independence of the Independent Directors.

Driver further stated its belief that Lead Director John McCullough was the next appropriate point of contact between shareholders and the Board given the apparent conflicts of interest of Chairman and CEO Carissa Rodeheaver in exploring a sale of the Issuer. Driver noted that Mr. McCullough appeared to be absent from any dialogue with shareholders at a time when Driver believes his role as Lead Director is critical in serving the best interest of shareholders.

Driver continued the December 17 Letter by requesting that Ms. Rodeheaver disclose any family relationships that she has with employees of the Issuer so that shareholders can assess the depth and breadth of any potential conflict of interest that may exist. Driver also questioned, in light of the Issuer’s recent disclosure of security holdings of directors and executive officers, whether the loan for which Ms. Rodeheaver’s 5,000 shares served as collateral on February 28, 2019 was extended by the Issuer and, if so, whether such loan has been repaid in full or is currently secured by other collateral. Driver concluded the December 17 Letter by asking the Independent Directors how Ms. Rodeheaver’s interests are aligned with shareholders when the current market value of her share ownership is less than the amount of her total annual compensation in 2018, despite her 13 years of service as an officer of the Issuer.

The foregoing description of the December 17 Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the December 17 Letter, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 7.Material to be Filed as Exhibits.

Item 7 is hereby amended to add the following exhibits:

99.1The Plurality Voting Letter, dated December 13, 2019.
   
 99.2The December 17 Letter, dated December 17, 2019.
9

CUSIP No. 33741H107

SIGNATURES

After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: December 17, 2019

  Driver Opportunity Partners I LP
   
  By: Driver Management Company LLC
    its general partner
     
  By: /s/ J. Abbott R. Cooper
    Name: J. Abbott R. Cooper
    Title: Managing Member

 

  Driver Management Company LLC
   
  By:

/s/ J. Abbott R. Cooper

    Name: J. Abbott R. Cooper
    Title: Managing Member

 

 

 
 

/s/ J. Abbott R. Cooper

  J. Abbott R. Cooper

 

   
 

/s/ Michael J. Driscoll

  Michael J. Driscoll

 

   
 

/s/ Lisa Narrell-Mead

  Lisa Narrell-Mead

 

   
 

/s/ Ethan C. Elzen

  Ethan C. Elzen

 

10

 

 

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Section 2: EX-99.1 (THE PLURALITY VOTING LETTER)

Exhibit 99.1

 

Driver Management Company LLC

 

December 13, 2019


First United Corporation
19 South Second Street
Oakland, MD 21150
c/o Ms. Tonya Sturm, Secretary
Attn: Mmes. Kathryn Burkey, Elaine McDonald and Marisa Shockley, and Messrs. John Barr, Brian Boal, Robert Kurtz, Gary Ruddell, Robert Rudy and Andrew Walls

 

Via email

 

Ladies and Gentlemen,

We are writing to each of you in your capacities as “independent” members of the Board of Directors (the “Board”) of First United Corporation (“First United”)—other than John McCullough, whose independence and qualifications to serve as “Lead Director” we seriously call into question in light of his 15 years of service on the Board. It is also very concerning to us that Mr. McCullough refuses to speak with any of the now three (3) shareholders publicly calling for First United to explore a sale.

 

Regardless of First United’s characterization of each of you as an “independent” director, for many of you—whether due to lengthy tenure, family relationships with other directors, business relationships with First United, or other circumstances—this designation is suspect. It appears that the combination of compromised objectivity and inappropriate interconnectivity could be leading the Board to irrationally dismiss growing, vocal support amongst investors for a sale process. Nevertheless, there is an opportunity for you to begin to exercise some degree of independence by displaying your respect for shareholder rights and sound corporate governance.

 

There is one particularly troublesome corporate governance practice at First United that requires your immediate attention and correction: the lack of a plurality carve-out from the majority voting standard in contested elections. A majority voting standard in contested elections is widely viewed as a potential entrenchment device for boards (including by Institutional Shareholder Services1) for the following reasons:

1.A plurality voting standard in a proxy contest ensures that the director nominees receiving the most votes are duly elected to the Board, which is an essential feature of corporate democracy. Consistent with the voting guidelines of institutional shareholders and proxy advisory firms such as Institutional Shareholder Services and Glass Lewis, a plurality voting standard in contested elections is widely viewed as a “best practice” in good corporate governance because it enables shareholders to have their voices heard and their votes counted when director candidates who receive the largest number of votes are duly elected to serve on the Board.
2.A majority voting standard is not appropriate in a contested election because the threshold is too high and protects incumbency. Contested director elections should be decided based on which candidates receive the highest number of “for” votes. In any election of directors in which there are more director nominees than there are seats available, assuming there is a quorum, the highest vote getters for the number of seats available should be the ones elected. Requiring that a dissident’s nominees not only obtain more votes than the Company’s candidates, but also that they achieve at least a majority of the votes cast, tilts the playing field in favor of the current Board and unfairly changes the dynamics in any election contest. The very fact that a dissident’s nominees could receive more votes than incumbent directors but still fail to be elected, while such incumbent directors continue serving on the Board as holdovers, is as clear a subversion of the shareholder franchise as any of which we are aware.

1 https://www.issgovernance.com/majority-voting-potential-entrenchment-device/

 

 

3.A majority voting standard unduly restricts the ability of shareholders to elect their choice of directors in a contested election. It is possible that none of the director candidates up for election at First United’s 2020 Annual Meeting of Shareholders will be elected under the current majority voting standard due to the potential impact of abstentions and “against” votes in a contested election. Further, it is quite possible that fewer directors than the number up for election will receive the requisite majority of votes to be elected, resulting in a “failed election” in which First United’s incumbent directors continue to serve as holdovers, or causing vacancies on the Board that could only be filled by Board members instead of by shareholders. This would serve to entrench any such incumbent holdovers and undermine corporate democracy by overriding the vote of First United shareholders.

We are calling on you, as independent directors of First United with fiduciary duties to act in the best interest of all shareholders, to remedy this affront to the shareholder franchise by immediately amending First United’s Bylaws to provide for a plurality voting standard in contested elections. Any failure to do so will demonstrate your clear disregard for the fundamental right of shareholders to elect directors of their choosing.

 

We should note that the Maryland General Corporation Law provides, by default, for a plurality voting standard in §2-404. What this means is that the Board had to specifically amend the Bylaws to include such an entrenchment-minded majority voting standard without a plurality carve-out for contested elections. Since the Board is able to unilaterally amend the Bylaws without first obtaining shareholder approval, you should implement this necessary change immediately and without delay.

 

Please indicate as soon as possible, but in any event prior to December 16, 2019, whether you will indeed respect shareholders’ rights by rectifying this glaring corporate governance deficiency. If we do not hear from you by then, we will assume that you intend to preserve this mechanism to further entrench the Board, and we will take such actions as necessary to preserve the corporate franchise and protect the rights of all shareholders.

/s/ Abbott Cooper

J. Abbott R. Cooper
Managing Member
Driver Management Company LLC

 

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

Driver Management Company LLC, together with the other participants named herein (collectively, “Driver”), intend to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit votes for the election of its slate of highly-qualified director nominees at the 2020 annual meeting of stockholders of First United Corporation, a Maryland corporation (the “Corporation”).

DRIVER STRONGLY ADVISES ALL STOCKHOLDERS OF THE CORPORATION TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.

 

 

Participants in the Solicitation

The participants in the proxy solicitation are anticipated to be Driver Management Company LLC (“Driver Management”), Driver Opportunity Partners I LP (“Driver Opportunity”), J. Abbott R. Cooper, Michael J. Driscoll, Ed.D, Lisa Narrell-Mead and Ethan C. Elzen.

As of the date hereof, the participants in the proxy solicitation beneficially own in the aggregate 365,212 shares of Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”). As of the date hereof, Driver Opportunity beneficially owns directly 360,637 shares of Common Stock. Driver Management, as the general partner of Driver Opportunity, may be deemed to beneficially own the shares of Common Stock directly beneficially owned by Driver Opportunity. Mr. Cooper, as the Managing Member of Driver Management, may be deemed to beneficially own the shares of Common Stock directly beneficially owned by Driver Opportunity. As of the date hereof, Dr. Driscoll directly beneficially owns 3,500 shares of Common Stock. As of the date hereof, Ms. Narrell-Mead directly beneficially owns 650 shares of Common Stock. As of the date hereof, Mr. Elzen directly beneficially owns 425 shares of Common Stock.


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Section 3: EX-99.2 (THE DECEMBER 17 LETTER)

Exhibit 99.2

 

Driver Management Company LLC

 

December 17, 2019

 

First United Corporation
19 South Second Street
Oakland, MD 21150
c/o Ms. Tonya Sturm, Secretary
Attn: Mmes. Kathryn Burkey, Elaine McDonald and Marisa Shockley, and Messrs. John Barr, Brian Boal, Robert Kurtz, Gary Ruddell, Robert Rudy and Andrew Walls

 

Via email

 

Ladies and Gentlemen,

 

After reviewing the Form 8-K that First United Corporation (“First United” or the “Company”) filed with the SEC yesterday, we were left disappointed by your approach to “addressing changing shareholder expectations and evolving corporate governance practices.” In what we view as a patronizing attempt to appease shareholders, your agreement to approve a plurality voting exception for the 2020 annual meeting of shareholders (the “Annual Meeting”) appears to be nothing more than a reactionary step that was only taken after we publicly complained about it. It seems a little late for the board of directors (the “Board”) to claim credit for this, given that Driver has repeatedly expressed its concerns about the Company’s governance issues over the past several months. Is your position that, unless a shareholder complains, there is no reason to correct corporate governance practices that promote entrenchment at the expense of shareholders’ rights?

We believe there are several corporate governance concerns that persist at First United and require your immediate attention and decisive action: the Board’s questionable independence, a dysfunctional Lead Director, a lack of transparency surrounding Chairman and CEO Carissa Rodeheaver and Ms. Rodeheaver’s troubling stock loan and share ownership.

·Independence of Directors is Questionable at Best. First United stated in its 2019 proxy statement (the “Proxy Statement”) that each of you have been determined to be “independent directors,” meaning you are devoid of any relationship that “would interfere with the exercise of independent judgement in carrying out the responsibilities of a director.”1 However, Kathryn Burkey, Robert Kurtz, John McCullough, Elaine McDonald, Gary Ruddell, Robert Rudy and Andrew Walls have each served on the Board for more than 14 years, with the average tenure of all directors exceeding 15 years, calling into question their objectivity and independence from management.2 Proxy advisory firm Institutional Shareholder Services’ (“ISS”) guidelines consider director tenure over nine years to be excessive, with the potential to compromise a director’s independence, and ISS scrutinizes boards with an average director tenure of over 15 years for independence from management and sufficient turnover to ensure new perspectives. In addition to the lengthy tenure of directors, Mr. Kurtz is the uncle of Brian Boal, a close family relationship that also raises serious questions about their ability to act objectively and in the best interests of shareholders. The Audit Committee is comprised entirely of directors whose “independence” appears to warrant close scrutiny, based on Mr. Boal being the nephew of Mr. Kurtz, and the lengthy tenure of Mmes. Burkey and McDonald and Messrs. Kurtz and McCullough. Please elaborate on the process by which the Board determined that these directors have no relationships that “would interfere with the exercise of independent judgement in carrying out the responsibilities of a director.”

1 http://media.corporate-ir.net/media_files/irol/87/87823/corpgov/nasdaq_marketplace_rule_4200.pdf

2 See, https://www.issgovernance.com/file/policy/latest/americas/US-Voting-Guidelines.pdf (noting the need to “scrutinize boards where the average tenure of all directors exceeds 15 years for independence from management”), https://www.ejproxy.com/media/documents/Egan-JonesProxyVotingPrinciplesandGuidelinesSTANDARD2019_kowTcTe.pdf (stating that an independent director “should not be a member the Company’s Board of Directors for 10 years or more”)

 

 

 

·Where is Lead Director John McCullough? Three shareholders, including us, have publicly called for First United to immediately explore a sale, suggesting substantial shareholder discontent with the Company’s management team and Board. Given her apparent conflicts of interest,3 prior and future discussions with Chairman and CEO Carissa Rodeheaver have been and likely would continue to be unproductive, making Mr. McCullough the next appropriate point of contact between shareholders and the Board. However, rather than assuaging our concerns, Mr. McCullough appears to have been absent from any dialogue with shareholders. Why is Mr. McCullough avoiding shareholders? What is the purpose of appointing a Lead Director who seems to shirk critical duties at a time when they are needed the most--when the Chairman is conflicted and seems unwilling to act in the best interest of shareholders? If Mr. McCullough is physically incapable of serving as Lead Director, we believe he should be replaced immediately.
·Lack of Transparency from Chairman and CEO Carissa Rodeheaver: how many of her relatives are employed by First United? As CEO and Chairman, Ms. Rodeheaver wields unequaled influence over the conduct of First United’s business and affairs. Shareholders have a right to know the full extent of Ms. Rodeheaver’s relationship with First United to understand the depth and breadth of any potential conflicts of interest, including how many of her relatives are employed by the Company, which we believe should not be considered a family business. I have specifically asked both Ms. Rodeheaver and Tonya Strum, First United’s CFO, whether Phil Rodeheaver, First United’s Market President, is related to Ms. Rodeheaver, and received no response. Please clarify whether Mr. Rodeheaver is related to Ms. Rodeheaver and disclose the full extent of Ms. Rodeheaver’s family relationships with employees of First United.
·Ms. Rodeheaver’s Stock Loan. The Proxy Statement discloses that Ms. Rodeheaver owned 9,165 shares of First United common stock as of February 28, 2019, of which 5,000 shares were “pledged to secure a loan.” But Exhibit 99.1 to the 8-K filed yesterday suggests that Ms. Rodeheaver increased her ownership to 14,988 shares, with no mention of any pledge. Please indicate whether the loan for which Ms. Rodeheaver’s shares served as collateral as of February 28, 2019 was extended by First United and, if so, whether that loan has been repaid in full or is currently secured by other collateral.
·Ms. Rodeheaver’s Stock Ownership. Based on the closing price of $24.23 per share on December 16, 2019, it appears that Ms. Rodeheaver now owns $363,159 worth of First United stock, less than her total compensation of $393,505 in 2018 as disclosed in the Proxy Statement. This is despite Ms. Rodeheaver having served as an officer of First United for more than 13 years and as an employee since 1992. Please explain how Ms. Rodeheaver’s interests are aligned with shareholders given her seemingly meager stockholdings and comparatively greater economic interest in preserving her job.

Thank you for your prompt responses,

/s/ Abbott Cooper

J. Abbott R. Cooper
Managing Member
Driver Management Company LLC


3 Ms. Rodeheaver’s apparent conflicts include her interest in preserving her job as well as the perks of her position as Chairman and CEO, such as her rapidly expanding portfolio of positions within various bankers’ associations, which we do not believe would be available to her if she were not CEO.

 

 

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

Driver Management Company LLC, together with the other participants named herein (collectively, “Driver”), intend to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit votes for the election of its slate of highly-qualified director nominees at the 2020 annual meeting of stockholders of First United Corporation, a Maryland corporation (the “Corporation”).

DRIVER STRONGLY ADVISES ALL STOCKHOLDERS OF THE CORPORATION TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.

Participants in the Solicitation

The participants in the proxy solicitation are anticipated to be Driver Management Company LLC (“Driver Management”), Driver Opportunity Partners I LP (“Driver Opportunity”), J. Abbott R. Cooper, Michael J. Driscoll, Ed.D, Lisa Narrell-Mead and Ethan C. Elzen.

As of the date hereof, the participants in the proxy solicitation beneficially own in the aggregate 365,212 shares of Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”). As of the date hereof, Driver Opportunity beneficially owns directly 360,637 shares of Common Stock. Driver Management, as the general partner of Driver Opportunity, may be deemed to beneficially own the shares of Common Stock directly beneficially owned by Driver Opportunity. Mr. Cooper, as the Managing Member of Driver Management, may be deemed to beneficially own the shares of Common Stock directly beneficially owned by Driver Opportunity. As of the date hereof, Dr. Driscoll directly beneficially owns 3,500 shares of Common Stock. As of the date hereof, Ms. Narrell-Mead directly beneficially owns 650 shares of Common Stock. As of the date hereof, Mr. Elzen directly beneficially owns 425 shares of Common Stock.

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