P.O. Box 4887
One Penn Square
Lancaster, Pennsylvania 17604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MONDAY, MAY 7, 2007FRIDAY, APRIL 25, 2008
TO THE SHAREHOLDERS OF FULTON FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, the regular Annual Meeting of the shareholders of FULTON FINANCIAL CORPORATION will be held on Monday, May 7, 2007,Friday, April 25, 2008, at 12:00 noon, at the Hershey Lodge and Convention Center, West Chocolate Avenue and University Drive, Hershey, Pennsylvania, for the purpose of considering and voting upon the following matters:
| 1. | ELECTION OF DIRECTORS. To elect | ||
| 2. |
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OTHER BUSINESS. To consider such other business as may properly be brought before the meeting and any adjournments thereof. | |||
Only those shareholders of record at the close of business on March 19, 2007,February 29, 2008, shall be entitled to be given notice of, and to vote at, the meeting.
It is requested that you promptly execute the enclosed Proxy and return it in the enclosed postpaid envelope. Alternatively, you may vote by telephone or electronically through the Internet by following the instructions on the proxy card.You are cordially invited to attend the meeting, but you must RSVP that you will attend. Please see the proxyenclosed annual meeting response card for more information.information and to RSVP if you are going to attend the meeting in person.Your Proxy is revocable and may be withdrawn at any time before it is voted at the meeting.
A copy of the Annual Report on Form 10-K of Fulton Financial Corporation is also enclosed.
| Sincerely, | |
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 | |
| George R. Barr, Jr. | |
| Secretary | |
| Enclosures | |
PROXY STATEMENT
Dated and To Be Mailed on or about: April 2, 2007March 20, 2008
P.O. Box 4887, One Penn Square
Lancaster, Pennsylvania 17604
(717) 291-2411
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 7, 2007APRIL 25, 2008
| Pension Benefits Table | 34 |
| Nonqualified Deferred Compensation Table | 34 |
| Director Compensation Table | 35 |
| Compensation of Directors | 36 |
| INFORMATION CONCERNING DIRECTORS | |
| Meetings and Committees of the Board of Directors | |
| Compensation Committee Interlocks and Insider Participation | |
| Other Board Committees | |
| Executive Sessions | |
| Annual Meeting Attendance | |
| Related Person Transactions with Directors and Executive Officers | |
| Section 16(a) Beneficial Ownership Reporting Compliance | |
| Board Evaluations | 40 |
| RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS | |
| 41 | |
| | |
| ADDITIONAL INFORMATION | |
| OTHER MATTERS | 42 |
| EXHIBITS | 43 |
| Exhibit | |
GENERAL
Introduction
Fulton Financial Corporation, a Pennsylvania business corporation and registered financial holding company, (also herein referred to as “Fulton” or the “Corporation”), was organized pursuant to a plan of reorganization adopted by Fulton Bank and implemented on June 30, 1982. On that date, Fulton Bank became a wholly owned subsidiary of Fulton Financial Corporation and the shareholders of Fulton Bank became shareholders of Fulton Financial Corporation.Fulton. Since that time, Fulton Financial Corporation has acquired other banks and currentlytoday owns the following subsidiary banks: Delaware National Bank, FNB Bank, N.A., Fulton Bank, Hagerstown Trust Company, Lafayette Ambassador Bank, Lebanon Valley Farmers Bank, The Peoples Bank of Elkton, Resource Bank, Skylands Community Bank, Somerset Valley Bank, Swineford National Bank, The Bank, and The Columbia Bank.
In addition, Fulton Financial Corporation has several direct, non-banking subsidiaries including: Fulton Financial Advisors, National Association (which offers fiduciary and investment services), Fulton Insurance Services Group, Inc. (which operates an insurance agency selling life insurance and related insurance products), Fulton Financial Realty Company (which owns or leases certain properties on which certain branch and operational facilities are located), Fulton Reinsurance Company, Ltd. (which reinsures credit life, health and accident insurance that is directly related to extensions of credit by subsidiary banks of Fulton Financial Corporation)Fulton), Central Pennsylvania Financial Corp. (which owns, directly or indirectly, certain limited partnership interests, principally in low-moderate income and elderly housing projects), and FFC Management, Inc. (which holds certain investment securities and corporate owned life insurance policies).
RSVP, Date, Time and Place of Meeting
The regular annual meeting of the shareholders of Fulton Financial Corporation (“Annual Meeting”) will be held on Monday, May 7, 2007,Friday, April 25, 2008, at 12:00 noon, at the Hershey Lodge and Convention Center, West Chocolate Avenue and University Drive, Hershey, Pennsylvania. You are cordially invited to attend the Annual Meeting, but in order for Fulton to plan and prepare for the proper number of shareholders,you must RSVPand confirm that you will attend on your proxyby completing and returning the enclosed Annual Meeting response card.
The meeting to which thisThis Proxy Statement relates will be the twenty-fifthto Fulton’s twenty-sixth Annual Meeting of the shareholders of Fulton Financial Corporation.shareholders. Attendance at the Annual Meeting will be limited to shareholders as of record at the Record Date,close of business on February 29, 2008 (the “Record Date”), their authorized representatives and guests of Fulton Financial Corporation.Fulton.
Shareholders Entitled to Vote
Only those shareholders of record atas of the close of business on March 19, 2007 (the “Record Date”)Record Date shall be entitled to receive notice of, and to vote at, the meeting.Annual Meeting.
Purpose of Meeting
The shareholders will be asked to consider and vote upon the following matters at the meeting: (i) to elect threeseven directors for the terms specified herein;herein and on the proxy card; and (ii) to approve a proposal by the Board of Directors to amend the Employee Stock Purchase Plan for the purpose of increasing by 1,500,000 shares the number of shares of common stock for which options may be granted under the Employee Stock Purchase Plan; and (iii) to consider and vote upon such other business as may be properly brought before the meetingAnnual Meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of proxies, in the accompanying form, by the Board of Directors of Fulton Financial Corporation for use at the Annual Meeting of shareholders to be held at 12:00 noon on Monday, May 7, 2007,Friday, April 25, 2008, and any adjournments thereof. Fulton is making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing the notices and these proxy materials and soliciting votes. In addition to the mailing of the notices and these proxy materials, the solicitation of proxies or votes
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may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not affect a shareholder’sshareholder's right to attend the Annual Meeting and to vote in person. A shareholder may revoke any proxy given pursuant to this solicitation by delivering written notice of revocation to George R. Barr, Jr.,the Corporate Secretary of Fulton, Financial Corporation, at any time before the proxy is voted at the Annual Meeting. Unless revoked, any proxy given pursuant to this solicitation will be voted at the meeting in accordance with the instructions thereon of the shareholder giving the proxy. In the absence of instructions, all proxies will be votedFORthe election of the threeseven nominees identified in this Proxy Statement andFOR the amendment of the Employee Stock Purchase Plan.Statement. Although the Board of Directors knows of no other business to be presented, in the event that any other matters are properly brought before the meeting, any proxy given pursuant to this solicitation will be voted in accordance with the recommendations of the Board of Directors of Fulton Financial Corporation.Fulton.
Shares held for the account of shareholders who participate in the Dividend Reinvestment and Stock Purchase Plan and for the account of employees who participate in the Employee Stock Purchase Plan will be voted in accordance with the instructions of each shareholder as set forth in his or her proxy. If a shareholder who participates in these plans does not return a proxy, the shares held for the shareholder’sshareholder's account will not be voted.
Shares held for the account of employees of Fulton Financial Corporation and its subsidiaries who participate in the Fulton Financial Stock Fund of the Fulton Financial Corporation 401(k) Retirement Plan (the “401(k) Retirement Plan”), formerly known as the Fulton Financial Corporation Profit Sharing Plan, and Affiliateshares in any affiliate 401(k) Savings Planplan that was acquired by Fulton, will be voted by Fulton Financial Advisors, National Association (“FFA”), or the affiliate 401(k) plan trustee (the “Plan Trustee”) in accordance with the instructions of each participant as set forth in the separate voting instruction card sent to the participant with respect to such shares. To allow sufficient time for the Plan Trustee to vote, participants’ voting instructions must be received by April 27, 2007.15, 2008. Shares held underin the Fulton Financial Stock Fund with respect to which no voting instructions are received by April 27, 2007,15, 2008, will be voted by the Plan TrusteeFORthe election of the threeseven nominees identified in thethis Proxy Statement andFOR the amendment of the Employee Stock Purchase Plan.Statement.
Voting of Shares and Principal Holders Thereof
At the close of business on March 19, 2007,February 29, 2008, which is the Record Date for determination of shareholders entitled to receive notice of, and to vote at, the Annual Meeting and any adjournments thereof,Fulton Financial Corporation had 173,017,944173,649,334 shares of common stock outstanding and entitled to vote.vote. There is no other class of stock outstanding. As of the Record Date, 3,426,0883,005,941 shares of Fulton Financial Corporation common stock were held by Fulton Financial Advisors, National Association, a subsidiary of Fulton Financial Corporation,FFA, as sole fiduciary. The shares held by Fulton Financial Advisors, National AssociationFFA as sole fiduciary represent, in the aggregate, approximately 1.981.73 percent of the total shares outstanding and will be votedFORthe election of the threeseven nominees identified in this Proxy Statement andFOR the amendment of the Employee Stock Purchase Plan.Statement.
A majority of the outstanding common stock present in person or by proxy constitutes a quorum for the conduct of business. The judge of election will treat shares of Fulton Financial Corporation common stock represented by a properly signed and returned proxy as present at the Annual Meeting for purposes of determining a quorum, without regard to whether the proxy is marked as casting a vote or abstaining. Likewise, the judge of election will treat shares of common stock represented by “broker non-votes” (i.e.,broker non-votes1 as present for purposes of determining a quorum.
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1Broker non-votes are shares of common stock held in record name by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote, (ii) the broker or nominee does not have discretionary voting power under applicable rules of the National Association of Securities Dealers, Inc. or the instrument under which it serves in such capacity, and (iii) the record holder has indicated on the proxy or otherwise notified Fulton Financial Corporation that it does not have authority to vote such shares on that matter) as present for purposes of determining a quorum.matter.
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Each share is entitled to one vote on all matters submitted to a vote of the shareholders. A majority of the votes cast at a meeting at which a quorum is present is required in order to approve any matter submitted to a vote of the shareholders, except in cases where the vote of a greater number of shares is required by law or under Fulton Financial Corporation’sFulton’s Articles of Incorporation or Bylaws.
In the case of the election of directors, the threeseven candidates for the terms specified receiving the highest number of votes cast at the Annual Meeting shall be elected to the Board of Directors. Abstentions and broker non-votes will be counted as shares that are present at the meeting, but will not be counted as votes cast on the election of directors. Abstentions and broker non-votes will have no effect on the director election since only votes cast will be counted. A majority of the votes cast is necessary to approve the amendment of the Employee Stock Purchase Plan. Abstentions and broker non-votes will be counted as shares that are present at the meeting, but will not be counted as votes cast on the proposal to amend the Employee Stock Purchase Plan. Therefore, abstentions and broker non-votes will have no effect on the amendment of the Employee Stock Purchase Plan.
To the knowledge of Fulton, Financial Corporation,on the Record Date, no person or entity owned of record or beneficially on the Record Date more than five percent of the outstanding common stock of Fulton Financial Corporation.Fulton.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders voteFORthe election of the threeseven nominees identified in this Proxy Statement andFORfor the proposal to amend the Employee Stock Purchase Plan.terms specified.
Shareholder Proposals
Shareholder proposals intended to be presented at the 20082009 Annual Meeting must be received at the executive offices of Fulton Financial Corporation at One Penn Square, Lancaster, Pennsylvania not later than December 4, 2007,November 20, 2008, in order to be included in the proxy statement and proxy formcard to be prepared by Fulton Financial Corporation in connection with the 20082009 Annual Meeting. A shareholder may not submit more than one proposal, and the proposal, including any accompanying supporting statement, may not exceed 500 words.
In order to be eligible to submit a proposal, a shareholder must have continuously held at least $2,000 in market value of Fulton Financial Corporation common stock for at least one year before the date the proposal is submitted. The shareholder must continue to hold that stock through the date of the 20082009 Annual Meeting.
Any shareholder submitting a shareholder proposal to Fulton Financial Corporation must also provide Fulton Financial Corporation with a written statement verifying ownership of stock and confirming the shareholder’s intention to continue to hold the stock through the date of the 20082009 Annual Meeting. The shareholder, or a qualified representative, must attend the 20082009 Annual Meeting in person to present the proposal.
Contacting the Board of Directors
Any shareholder of Fulton Financial Corporation who desires to contact the Board of Directors may do so by writing to: Board of Directors, Fulton Financial Corporation, P.O. Box 4887, One Penn Square, Lancaster, PA 17604. These written communications will be provided to the Chair of the Executive Committee of the Board of Directors who will determine further distribution based on the nature of the information in the communication. For example, communications concerning accounting, internal accounting controls or auditing matters will be shared with the Chair of the Audit Committee of the Board of Directors.
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Code of Conduct
Fulton Financial Corporation has had a written Code of Conduct ("Code") for over two decades that governs the conduct of its directors, officers and employees. The Code was revised in 2004 to comply with the requirements of the Sarbanes-Oxley Act of 2002 and NASDAQ listing standards, and Fulton Financial Corporation provides the Code to each director, officer and employee. In 2006, Fulton Financial Corporation updated the Code to include a new process for filing anonymous complaints and to make other minor changes. AThe Code was last updated by Fulton in 2007, and a current copy of the Code can be obtained, without cost, by writing to the Corporate Secretary at: Fulton Financial Corporation, P.O. Box 4887, One Penn Square, Lancaster, PA 17604. The current Code is also posted and available on Fulton Financial Corporation’sFulton's website at www.fult.com.
SELECTION OF DIRECTORS
General Information
The Bylaws of Fulton Financial Corporation provide that the Board of Directors shall consist of not less than two nor more than thirty-five persons and that the directors shall be classified with respect to the time they shall severally hold office by dividing them into three classes, each consisting as nearly as possible of one-third of the number of the whole Board of Directors. The Bylaws do not require exact equality in the number of directors in each class. The Bylaws further provide that the directors of each class shall be elected for a term of three years, so that the term of office of one class of directors shall expire at the Annual Meeting each year. The Bylaws provide that the Board of Directors shall determine the number of directors. On December 18, 2007, Fulton amended and restated its Bylaws. As a result of the December 18, 2007 amendment and restatement of the Bylaws, beginning with the 2009 Annual Meeting, nominees elected to the Board of Directors shall be elected for one-year terms. Subject to Fulton's retirement provisions, directors in each classelected prior to the 2009 Annual Meeting shall serve the remainder of directors.their elected term, even if greater than one year.
A majority of the Board of Directors may increase or decrease the number of directors between meetings of the shareholders. Any vacancy occurring in the Board of Directors, whether due to an increase in the number of directors, resignation, retirement, death or any other reason, may be filled by appointment by the remaining directors. Any director who is appointed to fill a vacancy shall hold office until the next Annual Meeting of the shareholders and until a successor is elected and shall have qualified.
Fulton’s Bylaws limit the age of director nominees and no person shall be nominated for election as a director who will attain the age of seventy (70) years on or before the date of the Annual Meeting at which he or she is to be elected. There is also a mandatory retirement provision in the Bylaws, which states that the office of a director shall be considered vacant at the Annual Meeting of shareholders next following the director attaining the age of 70seventy (70) years. In addition, Fulton has adopted a Voluntary Resignation Policy for Non-Management Directors that generally requires a director to tender his or her resignation when the director’s effectiveness as a member of the board may be substantially impaired. This includes, but is not limited to: a director failing to attend at least 62.5% of meetings without a valid excuse; an extension of credit by a Fulton affiliate bank to a director or their related interest being classified as nonaccrual, past due, restructured or a potential problem; and relocation of a director’s residence or business outside of Fulton’s market area. While the Fulton policy sets forth events which might cause a director to tender his or her resignation, it also directs Fulton’s board to consider carefully on a case-by-case basis, whether or not Fulton should accept such a resignation.
On January 15, 2008, the Board of Directors increased the number of directors from fourteen to fifteen, effective March 17, 2008, and filled the vacancy with Dana A. Chryst, who is a nominee for election at the 2008 Annual Meeting.
Procedure for Shareholder Nominations
Section 3 of Article II of the Bylaws of Fulton Financial Corporation requires that nominations, other than those made by the Nominating Committee of the Board of Directors, shall be made in writing and shall be delivered or mailed to the Chief Executive OfficerChairman of the Board or the Corporate Secretary not less than the earlier of (a) one hundred twenty (120) days prior to any meeting of shareholders called for the election of directors or (b) the deadline for submitting shareholder proposals for inclusion in a proxy statement and form of proxy as calculated under Rule 14a-8(e) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as
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amended (or any successor provision thereto). The notice to the Chief Executive OfficerChairman of the Board or the Corporate Secretary of a nomination, other than one made by the Nominating Committee, shall set forth (i) the name and address of the shareholder who intends to make the nomination and a representation that the shareholder is a holder of record of stock of Fulton entitled to vote at such meeting and intends to be present in person or by proxy at such meeting to nominate the person or persons to be nominated, (ii) the name, age, business address and residence address of each nominee proposed in such notice, (ii)(iii) the principal occupation or employment of each such nominee, (iii)(iv) the number of shares of capital stock of Fulton Financial Corporation that are beneficially owned by each such nominee, and (iv)(v) a statement of qualifications of the recommendedproposed nominee and a letter from the nominee affirming that he or she will agree to serve as a director of Fulton Financial Corporation if elected by the shareholders.shareholders, (vi) a description of all arrangements or understandings between the shareholder submitting the notice and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder, and (vii) such other information regarding each nominee proposed by the shareholder as would have been required to be included in the proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated by or at the direction of the Board of Directors. The chairman of the meeting shall determine whether nominations have been made in accordance with the requirements of this Sectionthe Bylaws and, if the chairman determines that a nomination is defective, the nomination and any votes cast for the nominee shall be disregarded.
Director Qualifications
In considering any individual nominated for board membership, Fulton Financial Corporation considers a variety of factors, including whether the candidate is recommended by executive management; the individual’s professional and personal qualifications, including business experience, education and community and charitable activities; and the individual’s familiarity with the communities in which Fulton Financial Corporation is located or is seeking to locate. In 2004, the Board of Directors formed the Nominating Committee of the Board, whose members are independent and are responsible for recommending director nominees to the Board of Directors. The charter for the Nominating Committee is posted and available on Fulton Financial Corporation’sFulton’s website at www.fult.com.
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ELECTION OF DIRECTORS
General Information
The Board of Directors increased the number of directors from fourteen to fifteen as of March 17, 2008, and for the Annual Meeting, the Board of Directors has fixed the number of directors at fourteen as of May 7, 2007.fifteen. There are eleveneight continuing directors whose terms of office will expire at either the 20082009 Annual Meeting or the 2010 Annual Meeting. Beginning with the 2009 Annual Meeting.Meeting, nominees to the Board of Directors shall be elected for one-year terms. Subject to Fulton's retirement provisions, directors elected prior to the 2009 Annual Meeting shall serve the remainder of their elected term, even if greater than one year. The Board of Directors has nominated the following persons for election to the Board of Directors for thea term specified below:of three years, except for Ms. Chryst who has been nominated to serve for a two-year term:
For a Term of Three Years - Class of 20102008 Director Nominees
John M. Bond, Jr.
Dana A. Chryst
Patrick J. Freer
Carolyn R. Holleran
Donald M. Bowman,W. Lesher, Jr.George W. HodgesAbraham S. OpatutJohn O. ShirkGary A. Stewart
Each of the above nominees is presently a director of Fulton Financial Corporation.Fulton. Following the recommendation of the Nominating Committee, the Board of Directors approved their nomination at a meeting of the Board of Directors. The Board of Directors recommends that the shareholders voteFOR the election of the three nominees listed above.
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of Directors. In the event that any of the foregoing 2008 director nominees isare unable to accept nomination or election, any proxy given pursuant to this solicitation will be voted in favor of such other persons as the Board of Directors of Fulton Financial Corporation may recommend. However, the Board of Directors has no reason to believe that any of its director nominees will be unable to accept nomination or to serve as a director if elected.
Vote Required
The threeseven candidates receiving the highest number of votes cast at the Annual Meeting shall be elected to the Board of Directors. Abstentions and broker non-votes will be counted as shares that are present at the Annual Meeting, but will not be counted as votes cast on the election of directors.
Recommendation of The Board of Directors
The Board of Director’sDirector's recommends that the shareholders voteFORthe election of the threeseven nominees identified in this Proxy Statement.Statement for the terms specified.
Information about Nominees, Continuing Directors and Independence Standards
Information concerning the threeseven persons nominated by the Board for election to the Board of Directors of Fulton Financial Corporation at the 20072008 Annual Meeting and concerning the other continuing directors is set forth below, including whether they were determined by the Board of Directors to be independent for purposes of the NASDAQ listing standards.
Fulton Financial Corporation is a NASDAQ listed company and follows the NASDAQ listing standards for Board and committee independence. At its January 20072008 meeting with respect to Directors Albertson, Bowman, Dally, Freer, Hodges, Holleran, Kooyker, Lesher, Shirk and Stewart, and at its March 2008 meeting with respect to Ms. Chryst, the Board of Directors determined that teneleven of the Corporation’s fourteenFulton’s fifteen continuing directors wereare independent as defined in the applicable NASDAQ listing standards and pursuant to the definition contained in NASDAQ Stock Market Rule 4200(a)(15), including that each directorof these directors is free of any relationships that would interfere with his or her individual exercise of independent judgment. In addition, members of the Audit Committee of the Board of Directors meet the more stringent requirements for independence under the NASDAQ listing standards.standards for service on the Audit Committee. The Board of Directors considered the relationships and other arrangements, if any, withof each director when director independence was reviewed, including Fulton Financial Corporation’sFulton’s relationships with the law firms with which Directors ShirkAlbertson, Dally and DallyShirk are affiliated. The other types of relationships and transactions that were reviewed are more fully described in “Related"Related Person Transactions with Directors and Executive Officers”Officers" on page 34.38.
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NOMINEES
CLASS OF 2010
Director Nominees at the 2008 Annual Meeting and Continuing Directors(Three-Year Term)
  | JEFFREY G. ALBERTSON (Independent Director), age 67. Director of The Bank since 1989. Attorney, Albertson Law Office (law firm). - Director of Fulton since 1996 and current term ends 2009. | ||
 | JOHN M. BOND, JR., age 64. Chairman of the Board and Director of The Columbia Bank since 1987. Mr. Bond was Chief Executive Officer of The Columbia Bank until his retirement on December 31, 2006. Mr. Bond also serves as a director of the Federal Home Loan Bank of Atlanta. - Director of Fulton since 2006 and a Nominee for election at the Annual Meeting. | ||
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 | DONALD M. BOWMAN, JR. (Independent Director), age - Director of Fulton since | |||
 | DANA A. CHRYST (Independent Director), age 48. Director of Fulton Bank since 2003.Chief Executive Officer and owner of The Jay Group (a marketing fulfillment company). - Director of Fulton effective March 17, 2008 and a Nominee for election at the Annual Meeting. | |||
 | CRAIG A. DALLY (Independent Director), age 51. Director of Lafayette Ambassador Bank since 1990. Attorney, Pierce & Dally, LLP (law firm). Mr. Dally is a member of the Pennsylvania House of Representatives, serving District 138. - Director of Fulton since 2000 and current term ends 2009. | |||
 | PATRICK J. FREER (Independent Director), age 58. Director of Lebanon Valley Farmers Bankuntil it was combined with Fulton Bank in 2007. President, Strickler Insurance Agency, Inc. (insurance broker). - Director of Fulton since 1996 and a Nominee for election at the Annual Meeting. | |||
 | RUFUS A. FULTON, JR., age 67. Retired Chairman of the Board and Chief Executive Officer, Fulton Financial Corporation. Mr. Fulton also serves as a director of The Aerospace Corp. (research and development for the aerospace industry), Burnham Holdings, Inc. (manufacturer of boilers, furnaces, radiators and air conditioning systems), High Real Estate Group (real estate), and Highmark, Inc. (health insurance) - Director of Fulton since 1984 and current term ends 2009. | |||
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 | GEORGE W. HODGES (Independent Director), age | |||
 | CAROLYN R. HOLLERAN (Independent Director), age 69. Member of the Fulton Bank GreatValley Division Advisory Board. Retired Partner, Jerlyn Associates (real estate investments). - Director of Fulton since 1994 and a Nominee for election at the Annual Meeting. | |||
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 | WILLEM KOOYKER (Independent Director), age 65. Director of Somerset Valley Bank until it was combined with Skylands Community Bank in 2007. Chairman and Chief Executive Officer, Blenheim Capital Management, LLC (investment management company). - Director of Fulton since 2005 and current term ends 2009. | ||
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 | DONALD W. LESHER, JR. (Independent Director), age 63. Director of Lebanon Valley Farmers Bank until it was combined with Fulton Bank in 2007. Retired President, Lesher Mack Sales and Service (truck dealership). | ||
 | ABRAHAM S. OPATUT, age 60. Former Chairman of the Board and Director of First Washington State Bank, which was merged into The Bank in February 2007. Mr. Opatut is currently a Director of The Bank and a member of the First Washington Division Board. President, Colonial Marketing Associates (wholesale foods). - Director of Fulton since 2005 and a Nominee for election at the Annual Meeting. | ||
 | JOHN O. SHIRK (Independent Director), age - Director of Fulton since | ||
CONTINUING DIRECTORS
CLASS OF 2008
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CLASS OF 2009
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 | R. SCOTT SMITH, JR., age | |||
 | GARY A. STEWART (Independent Director), age 60. Partner, Stewart Associates (real estate developer). - Director of Fulton since 2001 and a Nominee for election at the Annual Meeting. | |||
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Security Ownership of Directors, Nominees and Management
The following table sets forth the number of shares of common stock beneficially owned as of the Record Date by each director, nominee for director and the named executive officers.officers, Messrs. Smith, Ashby, Nugent, Shreiner and Wenger (the "Executives" or “Senior Management” and individually the “Executive”). To the knowledge of Fulton, Financial Corporation, no person or entity owned of record or beneficially on the Record Date more than five percent of the outstanding common stock of Fulton Financial Corporation.Fulton. Unless otherwise indicated in a footnote, shares shown as beneficially owned by each nominee, continuing director or named executive officerthe Executives are held either (i) individually by the person indicated, (ii) individually by the person’sperson's spouse or children living in the same household, (iii) jointly with the person’sperson's spouse or children living in the same household, or (iv) in the name of a bank, broker or nominee for the account of the person, person’s children or the person’sperson's spouse. The directors, nominees and executive officers of Fulton Financial Corporation as a group owned of record and beneficially 5,668,2365,136,730(1) shares of Fulton Financial Corporation common stock, representing 3.242.94 percent of such shares then outstanding. Shares representing less than one percent of the outstanding shares are shown with a “*”"*" below.
| Number of | Number of | ||||||||||||||
| Common Shares | Common Shares | ||||||||||||||
| Name of | Beneficially | Percent of | Beneficially | Percent of | |||||||||||
| Beneficial Owner | Title | Owned(2) (3) | Class | Title | Owned(1) (2) (3) | Class | |||||||||
| Jeffrey G. Albertson | Director | 230,341 | (4) | * | Director | 230,341 | (4) | * | |||||||
| Richard J. Ashby, Jr. | Senior Executive Vice President | 326,359 | (5) | * | Senior Executive Vice President | 303,465 | (5) | * | |||||||
| John M. Bond, Jr. | Director | 540,790 | (6) | * | Nominee for Director | 540,789 | (6) | * | |||||||
| Donald M. Bowman, Jr. | Nominee for Director | 766,569 | (7) | * | Director | 961,900 | (7) | * | |||||||
| Dana A. Chryst | Nominee for Director | 3,356 | (8) | * | |||||||||||
| Craig A. Dally | Director | 169,807 | (8) | * | Director | 170,899 | (9) | * | |||||||
| Patrick J. Freer | Director | 70,505 | (9) | * | Nominee for Director | 71,270 | (10) | * | |||||||
| Rufus A. Fulton, Jr. | Director | 434,983 | (10) | * | Director | 261,493 | (11) | * | |||||||
| George W. Hodges | Nominee for Director | 9,463 | (11) | * | Director | 14,463 | (12) | * | |||||||
| Carolyn R. Holleran | Director | 40,003 | (12) | * | Nominee for Director | 41,884 | (13) | * | |||||||
| Thomas W. Hunt | Director | 442,854 | (13) | * | |||||||||||
| Willem Kooyker | Director | 356,596 | (14) | * | Director | 356,596 | (14) | * | |||||||
| Donald W. Lesher, Jr. | Director | 149,902 | (15) | * | Nominee for Director | 152,668 | (15) | * | |||||||
| Charles J. Nugent | Senior Executive Vice President and Chief Financial Officer | 375,657 | (16) | * | Senior Executive Vice President and Chief | 376,073 | (16) | * | |||||||
| Financial Officer | |||||||||||||||
| Abraham S. Opatut | Director | 410,149 | (17) | * | Nominee for Director | 427,425 | (17) | * | |||||||
| John O. Shirk | Nominee for Director | 52,153 | (18) | * | Director | 56,153 | (18) | * | |||||||
| James E. Shreiner | Senior Executive Vice President | 280,275 | (19) | * | Senior Executive Vice President | 266,709 | (19) | * | |||||||
| R. Scott Smith, Jr. | Director and Chairman of the Board, President and Chief Executive Officer | 467,345 | (20) | * | Director and Chairman of the Board, President | 455,864 | (20) | * | |||||||
| and Chief Executive Officer | |||||||||||||||
| Gary A. Stewart | Director | 345,749 | (21) | * | Nominee for Director | 245,749 | (21) | * | |||||||
| E. Philip Wenger | Senior Executive Vice President | 198,736 | (22) | * | Senior Executive Vice President | 199,633 | (22) | * | |||||||
| TOTAL OWNERSHIP | DIRECTORS AND OFFICERS AS A GROUP | 5,668,236 | 3.24% | DIRECTORS AND OFFICERS AS A GROUP | 5,136,730 | 2.94 | % | ||||||||
Footnotes
| (1) | Includes | |
| (2) | As of the Record Date, none of the listed individuals had pledged Fulton | |
| (3) | Fulton | |
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| (4) | Mr. | |||
| (5) | Mr. | |||
| (6) | Mr. | |||
| (7) | Mr. | |||
| (8) | Ms. Chryst joined Fulton's board effective March 17, 2008. | |||
| (9) | Mr. | |||
Mr. | ||||
Mr. | ||||
| (12) | Mr. Hodge's ownership includes 8,103 shares which may be acquired pursuant to the exercise of vested stock options. | |||
| ||||
Mrs. | ||||
| ||||
| (14) | Mr. | |||
| (15) | Mr. | |||
| (16) | Mr. | |||
| (17) | Mr. | |||
| (18) | Mr. | |||
| (19) | Mr. | |||
| (20) | Mr. | |||
| (21) | Mr. | |||
| (22) | Mr. | |||
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INFORMATION CONCERNING COMPENSATION
Named Executive Officers
The following persons are the named executive officers of Fulton Financial Corporation forincluded in this proxy statement:1 (1)
| Name | Age | Office Held and Term of Office | ||
| R. Scott Smith, Jr. | Chairman of the Board, President and Chief Executive Officer of Fulton Financial Corporation since January 2006; previously President and Chief Operating Officer of Fulton Financial Corporation from 2001 to 2005; and Executive Vice President of Fulton Financial Corporation and Chairman, President and Chief Executive Officer of Fulton Bank from 1998 to 2001. | |||
| Charles J. Nugent | Senior Executive Vice President and Chief Financial Officer of Fulton Financial Corporation since January 2001; previously Executive Vice President and Chief Financial Officer of Fulton Financial Corporation from 1992 to 2001. | |||
| Richard J. Ashby, Jr. | Senior Executive Vice President of Fulton Financial Corporation since January 2006 and Chairman | |||
| James E. Shreiner | Senior Executive Vice President of Fulton Financial Corporation since January 2006; previously Executive Vice President of Fulton Financial Corporation and Executive Vice President of Fulton Bank from 2000 to 2005. | |||
| E. Philip Wenger | Senior Executive Vice President of Fulton Financial Corporation since January 2006 and Chairman of Fulton Bank since October 2006; previously Chairman and Chief Executive Officer of Fulton Bank from January 2006 to October 2006; President and Chief Operating Officer of Fulton Bank from 2003 to 2006; and Senior Executive Vice President of the Lancaster, York and Chester | |||
(1)
1 Craig H. Hill, age 52,53, Senior Executive Vice President of Fulton Financial Corporation - Human Resources since November 2005 and Executive Vice President/Director of Human Resources from 1992 to November 2005, is a Fulton Financial Corporation executive officer, but is not required to be included as a named executive officer in this proxy statement and thus is not included in compensation tables or other parts of this document.
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Compensation Discussion and Analysis
Introduction and OverviewExecutive Summary
Objectives. The primary objectives of the Fulton Financial CorporationFulton’s overall executive compensation program are to:
-Provide a competitiveis designed to enable the Corporation to achieve its compensation objectives, as discussed below. Under Fulton’s executive compensation structure, the mix of base salary, incentive bonus and equity compensation varies depending upon the Executive’s position. Fulton believes that the compensation of Senior Management, the level of executive compensation;
-Provide compensation that promotes Fulton Financial Corporation's fundamental business objectives and strategy;
-Provide executives with forms of compensation, including equity compensation, that alignmanagement having the interestsgreatest ability to influence Fulton’s performance, should be predominately performance-based, while lower levels of management withshould receive a greater portion of their compensation in base salary.
Fulton Financial Corporation’s shareholders;
-Provide appropriate allocations between short-term and long-termbelieves that it needs to offer competitive compensation and equity and non-equity compensation; and
-Improve Fulton Financial Corporation’s abilityin order to attractrecruit and retain keyqualified officers and employees, and that executive talent as it continues to grow outsidecompensation should reflect Fulton's overall performance and the contribution of its historical footprintExecutives to that performance. Taking into moreconsideration the variable compensation bonus plan for the Executives introduced in 2006 and discussed below (“Variable Compensation Bonus Plan” or “Variable Plan”), and based on the January 2007 review of base salaries, Fulton concluded that its compensation program was competitive markets.
Committee Membership and Role. Each memberwell balanced between cash, non-cash and incentive elements and that the base salaries of the Executives were generally appropriate based on their level of experience, positions, responsibilities and recent performance. Fulton’s compensation program also included employment agreements entered into with its Executives which are designed to provide reasonable severance benefits in specified circumstances. For 2007, the Board of Directors determined the compensation for the Executives, after receiving recommendations from the Executive Compensation Committee (“Compensation Committee” or “Committee”). The recommendations of the Committee were based upon external salary comparisons of selected peer institutions and an evaluation of the individual performance of each Executive. Fulton’s executive compensation program is based, to a significant degree, on peer information, as discussed in “Use of Peer Groups“ on page 15 below, and on the recommendations of the Committee’s compensation consultant.
Compensation Philosophy
Objectives.Fulton’s executive compensation philosophy and program are intended to achieve three objectives:
·Align interests of the Executives with shareholder interests- Fulton believes that the interests of the Executives should be closely aligned with those of its shareholders. Fulton attempts to align these interests by evaluating the Executives’ performances in relation to key financial measures which it believes correlate to consistent long-term shareholder value and increasing profitability, without compromising Fulton’s conservative company culture and overall risk profile.
·Link pay to performance– Fulton believes in a close link between pay to the Executives and the overall performance of Fulton on both a short-term and long-term basis. It seeks to reward the Executives’ contributions to the achievement by Fulton of its financial and non-financial goals and to differentiate rewards to individuals, based on their contributions.
·Attract, motivate and retain talent- Fulton believes its long-term success is closely tied to the attraction, motivation and retention of highly talented employees and a strong management team. While setting its overall compensation package at a competitive level is essential in competing for talent in a competitive market, Fulton also believes that non-monetary factors, such as a desirable work environment and successful working relationships between employees and managers, are critical to providing a rewarding employee experience.
To achieve these three objectives, Fulton provides the following elements of executive compensation:
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·Base Salary- Fulton pays competitive base salaries in line with the market median at comparable peer companies. Base salaries are set to reflect job responsibilities, individual experience and tenure.
·Annual Performance Awards- Annual incentives are designed to motivate performance and focus the attention of the Executives on the achievement of business goals. Fulton believes that earnings per share (“EPS”) growth relative to its peers is a critical measure for future success. Although Fulton believes in paying near the median in total cash compensation for expected performance, annual performance awards provide the Executives with the opportunity to earn cash compensation above the median for superior performance under the Variable Plan.
·Equity Awards- Fulton believes in providing long-term incentives in the form of equity in order to focus the Executives on delivering long-term performance and shareholder value. The long-term incentive program is designed to provide the Executives with a long-term wealth-building opportunity, while balancing potential market volatility and risk. Fulton believes in equity award levels that are fair and market competitive, but not excessive.
·Benefits- Fulton believes in providing benefits that are competitive in the marketplace and that encourage the Executives to remain with the Corporation. Retirement benefits are designed to provide reasonable long-term financial security.
·Perquisites- Consistent with its conservative culture, Fulton believes in providing basic perquisites that are necessary for conducting business.
Committee Membership and Role
Each member of the Compensation Committee qualifies as an independent director under the NASDAQ listing standards. The Compensation Committee is currently comprised of fivesix independent directors, including a committeethe Committee Chair and Vice Chair, all of whom are elected annually by Fulton Financial Corporation’sFulton’s Board of Directors. There are no interlocking relationships, as defined in the regulations of the Securities and Exchange Commission (“SEC”), involving members of the Compensation Committee. For a further discussion on director independence, see the “Information about Nominees, Continuing Directors and Independence Standards” section on page 56 of this proxy statement.
Pursuant to its charter, which is available on Fulton Financial Corporation’sFulton’s website at www.fult.com, and consistent with NASDAQ rules, the role of the Compensation Committee is to assist the Board of Directors of Fulton Financial Corporation in evaluating and setting salaries, bonuses and other compensation of Messrs. Smith, Ashby, Nugent, Shreiner and Wenger (“Senior Management” or the "Executives" and individually the “Executive”),Executives, to administer Fulton Financial Corporation’sFulton’s equity and other compensation plans (except those plans in which all employees may participate), and to take such other actions, within the scope of its charter, as the Compensation Committee deems necessary and appropriate.
1 The Compensation Committee has the power to appoint subcommittees, but no subcommittee has any final decision-making authority on behalf of the Compensation Committee or the Board. The Compensation Committee relies upon such performance data, statistical information and other data regarding executive compensation programs, including information provided by Fulton Financial Corporation’sFulton’s Human Resources Department, Fulton Financial Corporation’sFulton’s officers and outside advisors, as it deems appropriate. The Compensation Committee has unrestricted access to individual members of management and employees and may ask them to attend any committeeCommittee meeting or to meet with any membersmember of the Compensation Committee. The Compensation Committee also has the power and discretion to retain, at Fulton Financial Corporation’sFulton’s expense, such independent counsel and other advisors andor experts, as it deems necessary or appropriate to carry out its duties.
____________________
Fulton Financial Corporation’s1The Human Resources Committee of the Board focuses on compensation and benefit plans in which all employees, or nearly all employees, are eligible to participate, including the holiday bonus program and Employee Stock Purchase Program. The Human Resource Committee also determines which non-executive officers receive change in control agreements. While the Human Resources Committee is a continuing process throughout the year,responsible for these broad based employee plans and actions, the Compensation Committee meets as oftenis responsible for compensation items with respect to Fulton’s CEO and at such times as the Chair or the Vice Chair (in the absence of the Chair) or a majority of the Committee determines. A special meeting of the Committee may be called by the Chair or the Vice Chair (in the absence of the Chair) or upon the request of any two Committee members to discuss compensation matters. other Executives.
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Management plays a significant role in recommending agenda items for these meetings and by gathering and producing information for committeeCommittee meetings. As requested, the Chief Executive Officer (“CEO”) and other members of Senior Management participate in committeeCommittee meetings to provide background information, compensation recommendations, performance evaluations and other items requested by the Chair orCommittee. As part of the performance evaluation process, all the Executives are asked to complete an annual self-assessment of their overall performance. The CEO’s self-assessment is reviewed by the Committee. The self-assessment forms prepared by the other membersExecutives are reviewed by the CEO, who is asked to provide the Committee with his comments and recommendations with respect to the performance of the Compensation Committee.
Compensation Philosophy.The overall compensation program is designedother Executives. Members of Senior Management are not present for the Committee’s deliberations and decisions with respect to enable Fulton Financial Corporation to achieve the compensation objectives listed above. For 2006, thetheir individual compensation. The Board of Directors determinedmakes all final determinations regarding the compensation of the Executives, after a recommendation by the Committee.
The Fulton executive compensation process consists of establishing targeted overall compensation for Senior Managementeach Executive and then allocating that compensation among base salary, incentive compensation and equity awards. Fulton does not have a policy or an exact formula with regard to the allocation of Fulton Financial Corporation after receiving recommendations fromcompensation between cash and non-cash elements. Consistent with Fulton’s compensation philosophy, the Compensation Committee based upon external salary comparisonsdetermines the amount of certain peer institutions and individual performance. Fulton Financial Corporation’seach type of compensation for the Executives by: reviewing publicly available executive compensation program is based, to a significant degree, oninformation of the companies in the peer information, becausegroups; consulting with outside advisors and experts; the Compensation Committee believes that Fulton Financial Corporation must offer competitive compensation in order to recruitjob complexity and retain qualified executive officers. The Compensation Committee endorsesscope of the philosophy that executive compensation should reflect Fulton Financial Corporation's overall performance and the contribution of its Executives to that performance. The executive compensation program is designed to support Fulton Financial Corporation’s core values and strategic objectives.
Use of Consultants.The Compensation Committee retained an external compensation consultant, the Hay Group, in 2005 and 2006 to review certain aspects of executive compensation and obtain recommendations for updates to Fulton Financial Corporation’s compensation programs. This included a base salary review and assistanceindividual’s position; consulting with the creation of a new performance based bonus plan. Compensation reviews like this one cover in detail only those individuals for whom compensation information is disclosed publicly. As a result, these studies typically include onlyCEO with respect to the most highly compensated members of a company’s senior management. The overall results of this information provided the starting pointother Executives; assessing possible demand for the Compensation Committee analysis. Several of these recommendations were implemented in 2006, including new employment agreements with Senior ManagementExecutives by competitors and a variable bonus compensation plan (“Variable Compensation Bonus Plan”) that are both described in more detail below.
Evaluation of Executives. In making recommendations to the Board of Directors regarding the appropriate levels of executive compensation for 2006, the Compensation Committee considered the individual performance factors established for each Executive under the Variable Compensation Bonus Plan. With regard toother companies; and evaluating the compensation paidappropriate to the Executives other than the Chief Executive Officer, the Compensation Committee considered its own perceptions of the performance of each Executive, and reviewed information provided by the Chief Executive Officer asattract executives to each executive officer's level of individual performance, attainment of performance goals, contribution toLancaster, Pennsylvania.
For 2007, the organization, and salary history during the past four years. With regard to the compensation paid to the Chief Executive Officer, the Compensation Committee considered his performance level, attainment of performance goals, results of management decisions made by the Chief Executive Officer, the earnings of Fulton Financial Corporation during the previous year and other factors. The Compensation Committee reviewed the amounts payable under each individual element of compensation, as well as in the aggregate, for each member of Senior ManagementExecutive and concluded that the individual elements of, and total aggregate, compensation paid to each Executive were appropriate. The Compensation Committee expects to review the Executives’ 2008 base salary and other elements of compensation in the second quarter of 2008.
Use of Consultants
The Compensation Committee has retained a single external compensation consultant. The Hay Group was retained by the Committee at various times from 2005 to 2008 to review certain aspects of executive compensation, as more particularly described below, and the consultant reported its recommendations directly to the Committee. Fulton does not have a policy that limits the other services that an executive compensation consultant can perform, but Fulton has not engaged the Hay Group for any other projects except for those directed by the Committee, and which were limited to engagements involving the compensation of the Executives and Fulton’s directors. Specific instructions and directions given to the consultant and fees to be paid were outlined in individual engagement letters with respect to the scope and performance of its duties under each project. In general, however, the Hay Group was instructed and directed to compare Fulton’s current compensation practices with its peers, and based on that comparison, to recommend changes in Fulton’s compensation practices that were consistent with Fulton’s compensation philosophy and objectives.
The 2005 and 2006 engagements of the Hay Group included base salary reviews, assistance with the creation of a performance based bonus plan for the Executives, and recommendations with respect to new employment agreements and change in control arrangements for the Executives. Several of these recommendations were implemented in 2006, including the adoption of the Variable Plan and new employment agreements with the Executives, as described in more detail below on pages 16 and 22.
In 2007, the Hay Group was retained by the Compensation Committee to perform a board of director fee peer review, and to provide assistance in the preparation of Fulton’s Compensation Discussion and Analysis. In 2008, the Hay Group was engaged to assist the Committee in refining and better articulating
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Fulton’s compensation philosophy, and to provide advice and recommendations regarding possible changes in Fulton’s long-term incentive plans.
Use of Peer Groups.Groups
The Compensation Committee has used peer groups of different bank holding companies over the last few years for purposes of making a comparative analysis of compensation of Fulton Financial Corporation and its peers andpeers. The Committee believes that by focusing more on performance pay opportunities for otherthe Executives, as it does in the Variable Plan described below, it can more closely align Fulton’s compensation program purposes.with shareholder interests. Fulton utilizes two peer groups. The peerfirst group includes bank holding companies that are members of the peer group used by Fulton Financial Corporation for purposes of the Performance Graph included inshowing the 2006total return performance for the last five years on page 15 of the Fulton Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “Performance Peer Group”) and. The Performance Peer Group is also used to determine the annual option awards as discussed below.below, and to determine whether the performance threshold for the Variable Plan have been achieved. The Performance Peer Group includes bank holding companies that, at the time of selection in 2004, were comparable to Fulton Financial Corporation in terms of asset size, although they were not necessarily comparable in terms of financial performance.
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For the evaluation of the base salaries of the Executives, the Hay Group developedassisted in the development of a second, smaller peer group (the “Comparator Peer Group”), which. This second peer group consists of several of the members from the Performance Peer Group plus other financial service companies. The Comparator Peer Group members were selected because eachthey were: similar to Fulton in asset size based on 2006 data, geographically in the same markets, comparable to Fulton in areas such as lines of business similar to Fulton’s business or in competition with Fulton for executive talent or customers. The Comparator Peer Group, as a group, had a median total asset size of approximately $15.5 billion similar to Fulton Financial Corporation based on 2006 data, and were closer geographically or in other respects comparable to Fulton Financial Corporation. The2006. In setting the base salaries of the Executives, the Compensation Committee considered compensation paid by members of the Comparator Peer Group was used to determine competitive compensation for executives in organizationsofficers with similar in sizejob content and scope to Fulton Financial Corporation.responsibilities. When a peer group member announces that it is being acquired, it is eitherFulton has historically deleted the company from the Performance Peer Group and Comparator Peer Group, or replaced, as appropriate.Group. The current members of these two peer groups are:as of December 31, 2007 were:
Fulton Peer Group Table*Table
| Peer Group Member (Stock Symbol) | Performance | Comparator | |
| Associated Bancorp (ASBC) | X | X | |
| Bancorp South, Inc. (BXS) | X | ||
| Bank of Hawaii Corporation (BOH) | X | ||
| BOK Financial Corporation (BOKF) | X | ||
| Citizens | X | ||
| City National Corporation (CYN) | X | ||
| The Colonial BancGroup, Inc. (CNB) | X | ||
| Commerce Bancshares, Inc. (CBSH) | X | X | |
| Compass Bancshares, Inc. (CBSS) | X | ||
| Cullen/Frost Bankers, Inc. (CFR) | X | ||
| First Citizens BancShares, Inc. (FCNCA) | X | X | |
| First Horizon National Bank (FHN) | X | ||
| First Midwest Bancorp, Inc. (FMBI) | X | ||
| First | |||
| X | |||
| International Bancshares Corporation (IBOC) | X | ||
| Northwest Bancorp, Inc. (NWSB) | X | ||
| Old National Bancorp (ONB) | X | ||
| The South Financial Group, Inc. (TSFG) | X | X | |
| Susquehanna Bancshares, Inc. (SUSQ) | X | X |
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| TCF Financial Corporation (TCB) | X | X | |
| Trustmark Corporation (TRMK) | X | ||
| UMB Financial Corporation (UMBF) | X | ||
| United Bankshares, Inc. (UBSI) | X | X | |
| Valley National Bancorp (VLY) | X | ||
| Webster Financial Corp. (WBS) | X | ||
| Whitney Holding Corporation (WTNY) | X | ||
| Wilmington Trust Corporation (WL) | X | X |
13* Citizens Banking Corporation (CBCF) changed its name in 2007 to Citizens Republic Bancorp, Inc. (CRBC)
Elements of Executive Compensation
The Fulton Financial Corporation compensation review process consists of establishing targeted overall compensation for each member of Senior Management and then allocating that compensation among base salary, incentive compensation and equity awards. The Compensation Committee determined the amount of each type of compensation for Senior Management by reviewing publicly available information regarding other companies for base salary; by assessing possible demand for the Executives by competitors and other companies; by evaluating the compensation appropriate to attract executives to Lancaster, Pennsylvania; by consulting with outside compensation consulting firms; and by consulting with the Chief Executive Officer with respect to the other Executives. After the Variable Compensation Bonus Plan was introduced, and based on the January 2007 review of base salaries, the Compensation Committee concluded that Fulton Financial Corporation's program was well balanced between cash, non-cash and incentive elements and that the base salaries of the Executives were generally appropriate. Under Fulton Financial Corporation’s compensation structure, the mix of base salary, bonus and equity compensation varies depending upon the Executive’s level. Fulton Financial Corporation does not have a policy with regard to the allocation between cash and non-cash compensation. In allocating compensation among these elements, Fulton Financial Corporation believes that the compensation of Senior Management, the level of management having the greatest ability to influence Fulton Financial Corporation’s performance, should be predominately performance-based, while lower levels of management should receive a greater portion of their compensation in base salary.
Fulton Financial Corporation’sFulton’s executive compensation program currently provides a mix of base salary, incentive bonus, plans, equity based plans, profit sharing, health plans and other benefits as follows:
Base Salary.Base salary is a critical element of executive compensation because it provides Executives with a base level of monthly income. Fulton Financial Corporation wantsseeks to provide Senior Managementthe Executives with a level of assuredregular cash compensation in the form of base salary appropriate for the person and position. In 2005 and 2006, the Compensation Committee retained the Hay Group for a review of the annual base pay of the Executives to insure athat the Corporation was offering competitive market pay position.pay. This review compared each Executive’s level of compensation to similar executives in the Comparator Peer Group discussed above. The methodology utilized by the Hay Group also considered salary data from its financial services database. In December 2005, after ana review and analysis and review by the Compensation Committee of the Hay Group report, the 2006 salaries for the Executives were set. In making recommendations to the Board of Directors regarding the appropriate levels of executive compensation for 2007, the Committee considered the individual performance factors established for each Executive under the Variable Plan. With regard to the compensation paid to the Executives other than the CEO, the Committee considered information provided by the CEO as to each Executive’s level of individual performance, attainment of performance goals, contribution to the organization and salary history during the past four years, as well as its own perceptions of the performance of each Executive. With regard to the compensation paid to the CEO, the Committee considered his performance level based on a scorecard that includes the attainment of performance goals, results of management decisions made by the CEO, earnings of Fulton during the previous year and other factors such as the Committee members’ perspective of his overall performance. The 2006 and 2007 annual base salaries for the Executives were reviewed and set in January 2007. The 2006 base salaries as of December 31, 2006, and the 2007 base salaries effective as of January 1, 2007, are noted belowappear in the Summary Compensation Table on page 24.27.
Holiday Bonus.In 2006, as in prior years and as recommended by the Human Resources Committee, Fulton Financial Corporation’s Board of Directors awarded a broad based holiday bonus to all employees. Some affiliate banks such as Resource Bank, The Columbia Bank and Somerset Valley Bank, were excluded in 2006 because employees of these affiliate banks received payments under certain bonus programs that existed prior to the acquisition of the affiliate banks and which Fulton Financial Corporation agreed to continue for a specified period after the merger. The holiday bonus consists of a two-week bonus payment paid during a pay period in December. New employees hired during 2006 who started before October 1st participated in the program on a pro rata basis. The Executives participated in this bonus plan in 2006, and the amounts paid to each are reflected in the bonus column of the Summary Compensation Table below. The Compensation Committee has decided to discontinue this practice for the Executives and other officers who participate in the Variable Compensation Bonus Plan. However, the Human Resources Committee will continue to review annually the payment for all other eligible officers and employees and approve a holiday bonus payment if appropriate.
Variable Compensation Bonus Plan.The Compensation Committee believes that annual performance-based incentive bonuses are valuable in recognizing and rewarding individual achievement. On May 30, 2006, Fulton Financial Corporation’sFulton’s Board of Directors approved, with the recommendation of the Compensation Committee, a cash incentive compensation structure, the Variable Plan, that rewards the Executives for achieving individual goals andif Fulton achieves a designated earnings per shareEPS threshold compared to Fulton Financial Corporation’s Fulton’s Performance Peer Group.
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Prior to the approval of the Variable Plan in 2006, the Compensation Committee, with the assistance and recommendations from the Hay Group, discussed the use of various performance threshold measures. Fulton’s Variable Plan is designed so that no incentive bonus is paid unless Fulton achieves the predetermined EPS performance threshold metric compared to the Performance Peer Group. This peer groupFor 2006, a threshold performance target was established that required Fulton’s 2006 EPS growth to be in the top two-thirds of the Performance Peer Group in order for the Executives to be eligible for a payment under the Variable Plan. The Committee viewed this performance target as a reachable target, but not a target which guarantees payment of an incentive bonus. The Committee used the same threshold performance target in 2007. In future years, however, a different threshold performance target may be used. The Performance Peer Group was selected because it represents nationally a broad, national cross section of companies similar in size to Fulton Financial Corporation.Fulton.
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Under the Variable Compensation Bonus Plan, if the earnings per sharepredetermined EPS threshold is achieved, each Executive is eligible to receive a payout of an established percentage of base salary for fiscalprior year 2006 of at least a pre-set minimum,performance, with the possibility of achieving a higher amount for superior performance, up to a pre-set maximum. IfThese payouts are based on the results of each Executive’s individual scorecard of critical performance trigger is met,factors that are tailored to his position and job responsibilities. Generally, performance factors that are more directly aligned with the interests of shareholders are given greater weight. Based upon the recommendation from Fulton’s compensation consultant and a market review, when the Variable Plan was approved originally, the Compensation Committee determined that the threshold, target and maximum bonus foramounts payable to the each Executive should be a percentage of the Executive’s base salary. For Mr. Smith, isthe percentages are 25% of base salary,, 50% of base salary for a target bonus and 100% of base salary, and for a maximum bonus. For the other membersExecutives 17.5%, 35% and 60%, respectively.
Although the Compensation Committee understands that stock price performance is subject to a variety of Senior Management,factors, many of which are outside Fulton’s control, it selected the EPS performance metric because it believes it best promotes Fulton’s fundamental business objectives and strategy. At its March 5, 2008 meeting, the Committee determined that Fulton had not achieved the 2007 EPS threshold of being in the top two-thirds of the Performance Peer Group. As a result, no payments under the Variable Plan were awarded to the Executives for 2007.
Although the threshold bonus is 17.5% of base salary, 35% of base salaryperformance metric for a target bonus2007 was not achieved and 60% of each officer’s base salary for a maximum bonus. However,no payment under the Variable Plan will be made to the Executives 2006 base salary calculation includesin 2008, the 2006 holiday bonus, which was discontinued after 2006following is a summary of the critical performance factors on the individual scorecards for the Executives. The final amountExecutives, plus the methodology to be earned byused in determining the scorecard performance of the Executives.
Mr. Smith’s 2007 scorecard contained four critical performance factors with each Executive isfactor weighted according to importance. The first factor was Superior Financial Performance that included five equally weighted sub-categories: Earnings per Share growth vs. Peers; Five-year average total shareholder return vs. Peers; Net interest income vs. Peers; Net Charge offs to Average Loans vs. Peers; and Investment Portfolio Performance. The second factor was Superior Customer Experience that included the following equally weighted subcategories: Growth in Deposits vs. Peers; Growth in Loans vs. Peers; Growth in Fee Income vs. Peers; and Customer Service Measurements. The third factor was Superior Operating Performance that included the following equally weighted subcategories: Regulatory Compliance, Efficiency Ratio vs. Peers, and Return on Assets vs. Peers. The fourth and last performance factor was Superior Employee Satisfaction that included the following equally weighted subcategories: Management Succession; Corporate Diversity; Corporate Reward Systems; Employee Morale/Strategic People Initiatives; and Community Involvement.
In the first two performance factors of financial performance and customer experience, Mr. Smith’s result was to be primarily determined objectively by Fulton Financial Corporation’s performance compared toFulton’s quartile ranking in its Performance Peer Group in certain predetermined financialfor each subcategory. The last two factors involved both objective and subjective measurements. For the objectively measured performance categories, Mr. Smith, depending upon Fulton’s quartile ranking among its peers, could receive a rating of “Excellent Results” (1st Quartile and thea numerical score of “4”), “What is expected” (2nd Quartile and a numerical score of “3”), “Making Progress” (3rd Quartile and a numerical score of “2”), or “Below Expectations” (4th Quartile and a numerical score of “1”). The Compensation Committee, based on its subjective determination, uses the same four rankings for determining Mr. Smith’s achievement of the other performance factors. The weighting given to each of the performance factors for Mr. Smith appears in the chart below.
The scorecard critical performance factors for Mr. Ashby were different from the scorecards of the other Executives. His performance factors were tailored to his position as Chairman, and for part of 2007 as CEO, of Fulton Financial Advisors (“FFA”) and focused on FFA’s performance. Only the customer service factor for Mr. Ashby’s scorecard was similar to that of the other Executives. For Mr. Ashby, however, his customer service factor focused on the satisfaction of customers of FFA, as opposed to those of Fulton as a whole. Mr. Ashby’s four other performance factors were: Pre Tax Income; New Assets; Investment Products;
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and Regulatory Compliance. Measurement of the first three of these factors was based upon a comparison in each area of FFA’s 2006 results to the results for 2007. All four of his performance factors can be determined objectively, either based upon a comparison with prior year results or actual results.
The scorecards for each of the other Executives were similar to Mr. Smith’s scorecard. Except for Mr. Shreiner, the Financial Performance factor was given the greatest weight. Because Mr. Shreiner is responsible for Fulton’s risk management this critical performance factor was given the most weight for him. As shown in the chart below, except for Mr. Ashby, each of the Executives had similar critical performance factors. However, each Executive’s scorecard was tailored to their specific position and corresponding job responsibilities through different weights given to each Executive’s performance factors and by the specific subcategories included in each Executive’s performance factors.
Although several subcategories of each Executive’s performance in certain non-financial categories suchfactors were similar, there were some differences. For example, for Mr. Wenger, his financial performance factor included a subcategory of net income growth compared to Fulton's budget, not to a peer group. Similarly, for Mr. Nugent, his risk management factor included subcategories for interest rate risk and total risk based capital compared to Fulton's written guidelines for these two areas, as employee and customer satisfaction and community involvement. Basedopposed to a comparison to peers. Another subcategory measured Mr. Nugent on the recommendationstrength of Fulton's internal controls and financial reporting.
For all of the Compensation Committee, Senior Management has extended participation in this planExecutives, the methodology used to certain other officersdetermine scorecard performance was to craft performance measurement parameters for each factor so their actual performance could be measured for the most part based on specific objective measurements. However, some subcategories required a subjective measure.
The following is a tabular summary of Fulton Financial Corporationthe critical performance factors and its subsidiaries.the weights assigned to each Executive’s 2007 Variable Plan scorecards.
| 2007 Variable Plan Scorecard for Executives | Smith | Nugent | Ashby | Shreiner | Wenger |
| Critical Performance Factors | Weight | Weight | Weight | Weight | Weight |
| · Superior Financial Performance | 50% | 60% | - | 20% | 60% |
| · Superior Customer Experience | 20% | - | 20% | 20% | 15% |
| · Superior Operating Performance | 15% | - | - | - | - |
| · Risk Management | - | 20% | - | 40% | 15% |
| · Superior Employee Satisfaction | 15% | 20% | - | 20% | 10% |
| · Fulton Financial Advisors Pre Tax Income | - | - | 30% | - | - |
| · Fulton Financial Advisors New Assets | - | - | 20% | - | - |
| · Fulton Financial Advisors Investment Products | - | - | 20% | - | - |
| · Fulton Financial Advisors Regulatory Compliance | - | - | 10% | - | - |
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the Performance Peer Group asGroup. This process for determining the number of shares available for grant in a particular year is outlined in sectionSection 5.04 of the 2004 Option Plan.Plan, as follows:
The number of Shares available for Awards in any calendar year shall be determined depending upon the performance of the Corporation measured in terms of Total Shareholder Return (“TSR”) relative to a Peer Group, determined at the sole discretion of the Compensation Committee, for the five-year period immediately preceding the grant of the Award. The number of Shares available for Awards shall be determined in accordance with the following schedule:
| Company’s TSR Ranking among the | Percent of Total Outstanding Shares | |
| Peer Group | Available for Awards | |
| for Prior Five-Year Period | for Plan Year | |
| Top Quartile | 1.00% | |
| Second Quartile | 0.75% | |
| Third Quartile | 0.50% | |
| Fourth Quartile | At the Discretion of the Committee | |
| but limited to no more than 0.50% |
The individual awards of stock options made to the Executives and other eligible officers of Fulton Financial Corporation during 20062007 were determined by the Board of Directors based on recommendations of the Compensation Committee and management. In making such recommendations, the Compensation Committee considered the total number of options to be granted and the profitability of Fulton Financial Corporation, as well as information provided by the Chief Executive Officer concerning the level of individual performance and contribution to the organization of each of the other Executives. The Compensation Committee did not establish specific target levels for individual performance or corporate profitability.profitability for equity awards. The Compensationnumber of options awarded to each Executive is primarily at the discretion of the Committee. Factors that the Committee believes, however, thatconsiders in determining the number of options to be awarded to each Executive include the CEO’s recommendations for the other Executives, previous stock option awards to each Executive, Fulton’s performance and achievement of the Executive’s individual goals. Fulton granted a total of 861,800 options in 2007, with 166,000 granted to the Executives and 695,000, or approximately 81% of the stock options, and restricted stockgranted to other Fulton employees. Fulton believes that equity awards are an appropriate means of compensating the Executives and other officers based on the performance of Fulton, Financial Corporation because the combination hasequity compensation awards have enabled Fulton Financial Corporation to retain key management people and recruit effectively for qualified outside candidates. Fulton believes that, through its broad-based 2004 Option Plan, the economic interests of its key officers, including the Executives, are more closely aligned to those of the shareholders.
Generally, the 2004 Option Plan provides for vesting of options on a three-year cliff basis. In orderthe case of termination of employment by reason of retirement, an option recipient who retires at age fifty five or older with five or more years of consecutive employment shall be able to remain competitive, however,exercise his or her currently exercisable options for up to two years from the Compensation Committee continuesretirement date (but not beyond the date when the option would otherwise expire). For option recipients who retire at age sixty or older with ten or more years of consecutive employment, unexercisable options shall become exercisable on the retirement date. Such retirees are able to monitorexercise their options for up to two years from their retirement date (but not beyond the compensation offereddate when the option would otherwise expire). The 2004 Option Plan also provides that unvested restricted stock grants become vested on the retirement date if the recipient retires at age sixty or older with ten or more years of consecutive employment. Upon a change in control, as defined in the 2004 Option Plan, options not previously exercisable and restricted stock subject to the Executives.restrictions become vested.
Employee Stock Purchase Plan.The Employee Stock Purchase Plan is(“ESPP”) was designed to advance the interests of Fulton Financial Corporation and its shareholders by encouraging Fulton Financial Corporation’sFulton’s employees and the employees of its affiliates to acquire a stake in the future of Fulton Financial Corporation by purchasing shares of the common stock of Fulton Financial Corporation. The Employee Stock Purchase Plan is proposedFulton. In 2007, Fulton’s shareholders approved an amendment to be amended and restatedthe ESPP to add an additional 1,500,000 shares to the
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plan. More detail concerningThe Human Resources Committee administers the Employee Stock Purchase Plan proposal is containedESPP. Currently Fulton limits payroll deduction and annual employee participation in the “Amendment of the Employee Stock Purchase Plan” section at page 36 of this proxy statement.ESPP to $7,500.
Profit Sharing Plan – 401(k) Retirement Plan.Fulton Financial Corporation maintains a qualified defined contribution plan (the “Profit Sharing Plan”) under which. Through December 31, 2007 employer contributions arewere based on a formula providing for an amount not to exceed 15% of each eligible employee’s annual salary (10% for employees hired subsequent to January 1, 1996). All of the Executives participate in the Profit Sharing Plan. Prior to 2007, participants were 100% cliff vested in balances after five years of eligible service.
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Because of recent changes in laws and regulations, the Profit Sharing Plan was amended, effective January 2,1, 2007, to provide for vesting of all participants on a graded vesting schedule ofresulting in 25% vested in balancesvesting after two years, 50% vested in balancesvesting after three years, 75% vested in balancesvesting after four years and 100% vested in balances after five years of eligible service. In addition, the Profit Sharing Plan includes a 401(k) feature, which allows employees to defer a portion of their pre-tax salary on an annual basis, with no employer match. Employee contributions under this feature are 100% vested. The Profit Sharing Plan covers substantially all eligible employees of Fulton Financial Corporation and its wholly owned subsidiaries, including the Executives, who are not covered under Fulton Financial Corporation’sFulton’s other defined benefit and 401(k) plans and who have either (1) completed one year of service upon attainingand attained age 21; or (2) have completed three years of service. The Profit Sharing Plan is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended. Participants direct the investment of their contributions into various investment options offered by the Profit Sharing Plan, including Fulton common stock.
Effective January 1, 2008, the Profit Sharing Plan was re-named the Fulton Financial Corporation common stock.401(k) Retirement Plan (the “401(k) Retirement Plan”) and was amended to provide for employer matching contributions that satisfy a non-discrimination “safe-harbor” available to 401(k) retirement plans. This safe-harbor employer matching contribution will be equal to 100% of each dollar a participant elects to contribute to the 401(k) Retirement Plan, but the amount of contributions that will be matched by Fulton will be limited to 5% of eligible plan compensation. In addition, certain employees are eligible for an employer profit sharing contribution under the 401(k) Retirement Plan, which for 2008 will be equal to 5% of compensation. Eligibility for this profit sharing contribution is limited to (1) employees hired prior to July 1, 2007, by a Fulton entity that was a 401(k) Retirement Plan employer as of June 30, 2007, and who were not excluded from participation under the 401(k) Retirement Plan prior to January 1, 2008, because of participation under another qualified retirement plan of their employer, and who further have attained age 21 and completed one year of service for eligibility purposes, and (2) employees who were active participants as of December 31, 2007, in the Fulton Financial Affiliates’ Defined Benefit Pension Plan, and who, as of such date, ceased accruing additional benefits because of the amendment to the Pension Plan freezing additional accruals.
Deferred Compensation Agreements.In July 2006, the Board of Directors of Fulton Financial Corporation approved changes to Fulton Financial Corporation’s nonqualified deferred compensation plans prompted by new nonqualified deferred compensation rules under Internal Revenue Code Section 409A. Fulton Financial Corporation’sFulton’s nonqualified deferred compensation plans include (1) the Fulton Financial Corporation Deferred Compensation Plan, under which Directorsdirectors and advisory board members can elect to defer receipt of fees and select management employees can elect to defer receipt of cash compensation, and (2) a series of essentially identical Supplemental Executive Retirement Plan Agreements entered into with a select group of senior managers, including Senior Management,the Executives, for the purpose of crediting them with full contributions each year equal to the contributions they would have otherwise been eligible to receive under the Fulton Financial Corporation Profit Sharing401(k) Retirement Plan, except for Internal Revenue Code limits on the amount of compensation that can be taken into account under a tax-qualified retirement plan. Fulton’s contributions for 2007 are stated in footnote 6 in the “Summary Compensation Table” on page 27. Effective January 1, 2006, the deferred compensation plan accounts of each participant were held and invested under the newly-established Fulton Financial Corporation Nonqualified Deferred Compensation Benefits Trust with Fulton Financial Advisors serving as the Trustee. The participants are permitted to direct individually the investment of the deferred amounts into various investment options inunder the Nonqualified Deferred Compensation Benefits Trust.
Due to changes made effective January 1, 2008 to the underlying 401(k) Retirement Plan, it was necessary to make certain conforming changes to the design of the Deferred Compensation Plan and the Supplemental Executive Retirement Plan Agreements. The Deferred Compensation Plan was amended primarily for the purpose of enabling a participant to receive the employer matching contribution that would
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have been available under the 401(k) Retirement Plan but for the Internal Revenue Code limit on compensation that can be taken into account for the purposes of the employee matching contribution. The Supplemental Executive Retirement Plan Agreements have been amended primarily to reflect the change in profit sharing contribution levels in the 401(k) Retirement Plan.
Defined Benefit Pension Plans.Fulton Financial Corporation and Fulton Bank dohas not havehad an historical practice of using defined benefit pension plans to provide employees with retirement benefits, but some defined benefit plans have been acquired in different merger transactions (the “Affiliate Plan”) byover time and any such acquired plans that were continued for the plan participants were consolidated under the Fulton Financial Corporation.Affiliates’ Defined Benefit Pension Plan (the “Affiliates’ Plan”). Contributions are determined actuarially and funded annually, and AffiliateAffiliates’ Plan assets are invested in money markets, fixed income securities, including corporate bonds, U.S. Treasury securities and common trust funds, and equity securities, including common stocks and common stock mutual funds. The Affiliate Plan is closed to new participants, but existing participants continue to accrue benefits according to the terms of the Affiliate Plan. Employees covered under the Affiliate Plan are also eligible to participate in the Fulton Financial Affiliate 401(k) Savings Plan, which allows employees to defer a portion of their pre-tax salary on an annual basis. At its discretion, Fulton Financial Corporation may also make a matching contribution up to 3%. Participants are 100% vested in Fulton Financial Corporation’s matching contributions after three years of eligible service. Mr. Ashby is the only Executive who has participated in the AffiliateAffiliates’ Plan, but he no longer accrues benefits in the Pension Plan, andAffiliates’ Plan. Mr. Ashby does not participateAshby’s present value of accumulated benefit is reflected in the Fulton Financial Affiliate 401(k) Savings Plan.“Pension Benefits Table” on page 34.
Survivors’ Benefit Life Insurance and Other Death Benefits.Officers of Fulton Financial Corporation and certain of its bank subsidiaries, as of April 1, 1992, who had been employed by Fulton Financial Corporation for at least five years as of that date,April 1, 1992, are eligible to participate in a survivors' benefit program. This program provides the employee's spouse, in the event of the employee's death prior to retirement, with an annual income equal to the lesser of $25,000 or 25twenty-five percent of the employee's final annual salary. This benefit is paid from the date of death until the employee's 65thsixty-fifth birthday with a minimum of ten annual payments. Messrs. Smith, Ashby, Shreiner and Wenger participate in this program. In addition, after an initial probationary period, most employees, but not the Executives, are automatically eligible to participate in a company paid group term life insurance and/or accidental death insurance program with a death benefit of
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twice salary while employed with Fulton Financial Corporation. The estates of thethese Executives would receiveare eligible for a similar twicetwo times salary payment (plus an amount equal to applicable individual income taxes due on such amounts) from Fulton Financial Corporation pursuant to individual Death Benefit Agreements between Fulton Financial Corporation and each Executive, should the Executive die while actively employed by Fulton Financial Corporation. The benefit payable by Fulton Financial Corporation under the Death Benefit Agreements is such amount after the assessment of individual income taxes at all taxation levels to which the benefit is subject and twice the annual base salary of the Executive at the time of his death.Fulton. Upon the Executive’s retirement, the post retirement benefit payable upon the individual’s death is reduced to $5,000.
Health, Dental and Vision Benefits.At a level equal to all employees, Fulton Financial Corporation offers a comprehensive benefits package for health, dental and vision insurance coverage to all full time employees, including the Executives, their spouses and children. Fulton Financial Corporation pays a portion of the premiums for the coverage selected, and the amount paid varies with each health, dental and vision plan. All of the Executives have elected one of the standard coverage plans available.
Retiree Benefit Payments.Fulton Financial Corporation does not provide post retirement medical, dental and vision benefits to full time employees of Fulton Financial Corporation and its affiliates who were hired or acquiredjoined Fulton as a result of a merger after December 31, 1997. Employees who were hired or acquiredjoined prior to January 1, 1998, and who retire on or after the attainment of age 55fifty-five with at least 10ten years of full time service are eligible for post retirement benefits. Post retirement benefits include health insurance coverage plus life insurance benefits. The level of coverage and the cost to the retiree depends on the retiree’s date of retirement and completed years of service after attainment of age 40.forty. As a result of their length of service with Fulton, Financial Corporation, the Executives are eligible to receive these post retirement benefits at an annual cost to the Executive similar to other employees with the same years of service.
Other Executive Benefits.Fulton Financial Corporation provides the Executives with perquisites and other personal benefits that the Compensation Committee believes are reasonable and consistent with the overall compensation program for the Chief Executive OfficerCEO and the other Executives. The 20062007 amounts are included in the All Other Income column of the Summary Compensation Table on page 2427 of this proxy statement. These benefits enable Fulton Financial Corporation to attract and retain talented senior executive employees for key positions, as well as provide Executives and other senior officers with opportunities to be involved in their communities and directly interact with current and prospective customers of Fulton Financial Corporation.Fulton. The Executives are provided with Fulton Financial Corporationcompany owned automobiles, club memberships and other executive benefits consistent with their office and position. In addition, if
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spouses accompany an Executive when traveling on business or attending a corporate event, Fulton Financial Corporation pays the travel and other expenses associated with spousal travel for the Executive. These additional spousal travel items are included as part of the Executive’s reported W-2 income, and the Executive pays income taxes on the amounts.
Employment Agreements and Severance Agreements
Senior Management and other employees have built Fulton Financial Corporation into the successful enterprise that it is today, and the Compensation Committee believes that it is important to protect them in the event of a change in control. Further, Fulton Financial Corporation believes that the interests of shareholders will be best served if the interests of Senior Management are aligned with them, and providing change in control benefits should eliminate or mitigate any reluctance of Senior Management to pursue potential change in control transactions that may be in the best interests of shareholders. Fulton Financial Corporation believes that these potential change in control benefits are reasonable relative to the overall value of Fulton Financial Corporation.
Fulton Financial Corporation believes that companiesa company should provide reasonable severance benefits to employees. These severance arrangements are intended to provide the Executives and other employees with a sense of security in making the commitment to dedicate their professional careers to the success of Fulton Financial Corporation.Fulton. With respect to Senior Management,the Executives, these severance benefits should reflect the fact that it may be difficult for them to find comparable employment within a reasonable period of time. Fulton provides severance benefits upon a change in control. The levels of these benefits for the Executives in the change of control context are discussed below under “Termination Without Cause or for Good Reason - Upon or After a Change in Control”.
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On May 30, 2006, Fulton Financial Corporation’sFulton’s Board of Directors approved, with the recommendation of the Compensation Committee and the Hay Group, a form of employment agreement to be used for Fulton Financial Corporation’sFulton’s current and future senior executive officers, including its Chief Executive Officer,CEO, President, Chief Financial Officer and Senior Executive Vice Presidents. The form of employment agreement may be givenwas filed as an exhibit to other senior officers of Fulton Financial Corporation and its subsidiaries inFulton’s Quarterly Report on Form 10-Q for the future. Fulton Financial Corporation previously had entered into severance agreements with the Executives. Under the terms of those prior severance agreements, certain severance benefits were payable in the event an Executive resigns or is discharged other than for cause following, and for reasons relating to, a change in control of Fulton Financial Corporation. Specifically, in the event of such a discharge or resignation, the Executive would have been entitled to receive from Fulton Financial Corporation for a specific period of time, benefits consisting of his then effective base salary, certain fringe benefits in lieu of coverage under employee benefit plans and a supplemental retirement benefit in lieu of his continuing participation in Fulton Financial Corporation’s employee retirement plans.quarter ended June 30, 2006.
Effective June 1, 2006, all the Executives entered into new employment agreements (“Employment Agreements”) with Fulton Financial Corporation that replaced the abovetheir existing severance agreements. The form of Employment Agreement was filed as an exhibit to Fulton Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. The term of eachEach Executive’s Employment Agreement commenced when the agreement was executed, and continues until terminated according to its terms. The individual agreement with each Executive does not have a specific term of years.years and continues until terminated. The Employment Agreements provide that the Executive receivesis to receive a base salary, which is set annually, and is entitled to participate in Fulton Financial Corporation’sFulton’s incentive bonus and incentive compensation programs as in effect from time to time. The Executive also is entitled to participate in Fulton Financial Corporation’sFulton’s retirement plans, welfare benefit plans and other benefit programs.1 In addition, Mr. Ashby’s Employment Agreement incorporates a Deferred Compensation Agreement dated April 7, 1992, filed as an exhibit to Fulton Financial Corporation’sFulton’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which providedprovides Mr. Ashby an additional non-qualified retirement benefit while he was an employee ofrelating to his employment by Lafayette Ambassador Bank from 1992 to 1998.
IfIn their Employment Agreements, Messrs. Smith, Nugent and Ashby have agreed to restrictions on the sharing of confidential information as well as non-competition and non-solicitation covenants for two years. The Employment Agreements with Messrs. Shreiner and Wenger contain restrictions on the sharing of confidential information as well as non-competition and non-solicitation covenants for one year. The non-competition and non-solicitation covenants will not apply if the Executive leaves for good reason or if his employment is terminated without cause, as defined below.
The following tables and narratives set forth the potential post termination benefits payable to the Executives under their Employment Agreements, in a lump sum or over a period of time, upon certain termination events assuming that the Executive’s employment was terminated as of December 31, 2007.
Voluntary Termination.In the event an ExecutiveExecutive's employment is voluntarily terminates his employment,terminated by the Executive other than for “Good Reason,” as defined inFulton’s obligations are limited to the Employment Agreements, or retirement at age 65,payment of the Executive is entitled to receive hisExecutive's base salary through the effective date of the Executive's termination plusdate, together with any applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plan terms. plans. No other payments are required. Good Reason is defined in the Employment Agreement to include a breach by Fulton of its material obligations without remedy, a significant change in the Executive’s authority, duties, compensation or benefits, or a relocation outside a certain distance where the Executive previously was based.
____________________
1 Similar employment agreements have been executed with other senior officers of Fulton and its subsidiaries.
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Termination For Cause.If an Executive's employment is terminated for “Cause,” Fulton is not thereafter obligated to make any further payments to the Executive under the Employment Agreement, other than amounts (including salary, expense reimbursement, etc.) accrued under the Employment Agreements as of the date of such termination. Cause is defined in the Employment Agreement to include an act of dishonesty constituting a felony, use of alcohol or other drugs which interferes with the performance by the Executive of the Executive’s duties, intentional refusal by the Executive to perform duties, or conduct that brings public discredit on or injures the reputation of the Corporation.
Termination Without Cause or for Good Reason - Before a Change in Control.If an Executive terminates his employment for “Good Reason”Good Reason or his employment is terminated without cause, asby Fulton “Without Cause,” defined in the Employment Agreements, heAgreement to include any reason other than Cause, the Executive is entitled to receive his base salary for a specified period of time and, in the sole discretion of Fulton, Financial Corporation, he also may receive an additional cash bonus, for a specified period of time.bonus. For Messrs. Smith, Nugent and Ashby, thatthe specified period of time is two years. For the other Executives, that period is one year. TheAfter a termination Without Cause or for Good Reason, the Executive also would continue to participate in employee health and other benefit plans for which they arehe is eligible during the specified time period. If the Executive is not eligible to continue to participate in any employee benefit plan, he will be compensated on an annual basis for such plan at Fulton Financial Corporation’sFulton’s cost plus a gross up for any taxes applicable thereto. Assuming that each Executive's employment was terminated Without Cause or for Good Reason as of December 31, 2007, with no discretionary cash bonus awarded to the Executives, each would have received the following post termination benefits:
| Name | Salary Lump Sum | Health Benefits Estimate | Total | ||||||
| ($) | ($) | ($) | |||||||
| R. Scott Smith, Jr. | 1,526,426 | 24,000 | 1,550,426 | ||||||
| Charles J. Nugent | 956,800 | 24,000 | 980,800 | ||||||
| Richard J. Ashby, Jr. | 810,000 | 24,000 | 834,000 | ||||||
| James E. Shreiner | 306,000 | 12,000 | 318,000 | ||||||
| E. Philip Wenger | 350,000 | 12,000 | 362,000 | ||||||
Termination Without Cause or for Good Reason - Upon or After a Change in Control.The Employment Agreements also provideExecutives and other employees have built Fulton into the successful enterprise that following an Executive’s total disability or death during the term, the Executive’s employment will terminate,it is today, and Fulton Financial Corporation will pay the Executive all amounts accrued under the agreement as of the date of such termination. Inbelieves that it is important to protect them in the event of the Executive’s disability, Fulton Financial Corporation must pay the Executive at least six months’ base salary. Thereafter, for as long as the Executive continues to be disabled, Fulton Financial Corporation will continue to pay the Executive at least 60% of the base salary until the earlier of the Executive’s death or December 31 of the calendar year in which the Executive attains age 65. To the extent it does not duplicate benefits already being provided, an Executive will also receive those benefits customarily provided by Fulton Financial Corporation to disabled former employees, which benefits shall include, but shall not be limited to, life, medical, health, accident insurance and a survivor's income benefit.
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The Employment Agreements with Messrs. Shreiner and Wenger contain restrictions on the sharing of confidential information as well as non-competition and non-solicitation covenants for one year. Messrs. Smith, Nugent and Ashby in their Employment Agreements have agreed to restrictions on the sharing of confidential information as well as non-competition and non-solicitation covenants for two years. The non-competition and non-solicitation covenants will not apply if the Executive leaves for “Good Reason” or if his employment is terminated without cause.
If, during the ninety day period before a “Change in Control,Control.” asFurther, Fulton believes that the interests of shareholders will be best served if the interests of the Executives are aligned with them, and providing Change in Control benefits should eliminate or mitigate any reluctance of the Executives to pursue potential Change in Control transactions that may be in the best interests of shareholders. Based on the recommendations and review of typical Change in Control provisions performed by the Hay Group in 2006, Fulton believes that these potential Change in Control benefits it offers are typical for the financial services industry and reasonable relative to the overall value of Fulton.
A Change in Control is defined in the Employment Agreements to include the acquisition of the beneficial ownership of twenty percent or more of the outstanding shares of the voting stock of Fulton by any one person, a significant change in the composition of the Board of Fulton during any period of two consecutive years or Fulton’s merger or consolidation with another corporation.If, during the period beginning ninety days before a Change in Control and ending two years after such Change in Control, thean Executive is terminated by Fulton Financial Corporation without causeWithout Cause or thean Executive resigns for good reason,Good Reason, Fulton Financial Corporation willis required to pay the Executive a multiple of the sum of histhe Executive’s: (i) base salary immediately before the Change in ControlControl; and (ii) the highest annual cash bonus or other incentive compensation awarded over the prior three years. The multipleExecutive also is three for Messrs. Smith, Nugent and Ashby. The multiple is two for the other Executives. Fulton Financial Corporation will also pay that portion, if any, of Fulton Financial Corporation’s contribution to the Executive’s 401(k), profit sharing, deferred compensation or other similar individual account plan which is not vested as of the date of termination of the Executive’s employment, plus a gross up for any taxes applicable thereto. The Executive would continue to be eligibleentitled to receive all employee benefits that the Executive was receiving immediately before such termination for a number of yearsan aggregate amount equal to the multiple applicable to such Executive following termination. Fulton Financial Corporation will pay the Executive that same number of additional years of retirement plan contributions for the multiple period under each tax qualified or nonqualified defined contribution type of retirement plan in which the Executive was a participant immediately prior to the Executive's termination. The Committee set the Change in Control payment multiple at three years in the Employment Agreements for Messrs. Smith, Nugent and Ashby, because this was the
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multiple used in their prior severance agreements. For Messrs. Shreiner and Wenger, the Committee set the multiple at two years. The Employment Agreements also provide for certain other post termination benefits such as up to $10,000 for outplacement services.
The table below uses the 2006 Variable Plan bonus award to calculate the cash bonus lump sum. Assuming that, as of December 31, 2007, each Executive’s employment was terminated upon or after a Change in Control Without Cause or for Good Reason, each would have received the following post termination or resignation and equal to the actuarial present value of such years of benefit accruals.benefits:
| Name | Salary | Cash | Lump Sum of | Tax Gross | Health | Clubs, | Value of | Total |
| Lump | Bonus | Future | Up | Benefits | Cars & | Option | ||
| Sum | Lump | Qualified and | Estimate | Other | Vesting | |||
| Sum | Non-qualified | Benefits | ||||||
| Plans | Estimate | |||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |
| R. Scott Smith, Jr. | 2,289,639 | 1,144,821 | 343,446 | 1,467,756 | 36,000 | 58,000 | 0 | 5,339,662 |
| Charles J. Nugent | 1,435,200 | 502,320 | 193,752 | 830,244 | 36,000 | 58,000 | 0 | 3,055,516 |
| Richard J. Ashby, Jr. | 1,215,000 | 425,250 | 164,025 | 691,770 | 36,000 | 58,000 | 0 | 2,590,045 |
| James E. Shreiner | 612,000 | 204,104 | 81,610 | 328,622 | 24,000 | 42,000 | 0 | 1,292,336 |
| E. Philip Wenger | 700,000 | 224,660 | 92,466 | 381,003 | 24,000 | 42,000 | 0 | 1,464,129 |
The Employment Agreements provide that, in the event any payment or distribution by Fulton Financial Corporation to or for the benefit of an Executive would be subject to excise tax as a “golden parachute,” the Executive will be entitled to receive an additional payment equal to the total excise tax imposed. The determination that a "gross up" payment is required and its amount shallis to be made by an accounting firm, and Fulton Financial Corporation is responsible for the accounting firm's fees and expenses.
Post Termination Benefits
The following tables and narratives set forthHay Group advised the potential post termination benefits payable to the Executives, in a lump sum or over a period of time, upon certain termination events assuming that the Executive’s employment was terminated as of December 31, 2006. The Compensation Committee maythat this ‘gross up provision” has become a typical provision in the future, and at its discretion, revise, increase or decrease certain benefitssuch agreements. In keeping with Fulton’s objectives to the Executives listed below if it deems advisable.
Termination For Cause. If an Executive's employment is terminated for "Cause" as definedoffer a competitive contract, this provision was included in the Employment Agreements Fulton Financial Corporation shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under the Employment Agreements asfor all of the date of such termination.
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Termination Without Cause or for Good Reason - Before a Change in Control.If an Executive terminates his employment for “Good Reason” as defined in the Employment Agreements, or his employment is terminated by Fulton Financial Corporation “Without Cause” as defined in the Employment Agreements, he would be entitled to receive his base salary and, in the sole discretion of Fulton Financial Corporation, an additional cash bonus, for a specified period of time. For Messrs. Smith, Nugent and Ashby, that period is two years. For the other Executives, that period is one year. The Employment Agreements also provide for other post termination benefits such as medical, dental and vision benefits. Assuming that each Executive's employment was terminated Without Cause orfor Good Reason as of December 31, 2006, and assuming that Fulton Financial Corporation did not award a bonus, each would have received the following post termination benefits:
| Name | Salary | Health Benefits | Total | |||
| Lump Sum | Estimate | |||||
| ($) | ($) | ($) | ||||
| R. Scott Smith, Jr. | 1,469,892 | 24,000 | 1,493,892 | |||
| Charles J. Nugent | 921,364 | 24,000 | 945,364 | |||
| Richard J. Ashby, Jr. | 780,000 | 24,000 | 804,000 | |||
| James E. Shreiner | 280,777 | 12,000 | 292,777 | |||
| E. Philip Wenger | 309,056 | 12,000 | 321,056 | |||
Voluntary Termination.In the event an Executive's employment is voluntarily terminated by the Executive other than for “Good Reason” as defined in the Employment Agreements, Fulton Financial Corporation is only obligated to pay the Executive's base salary through the effective date of Executive's termination date, together with any applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. No other payments are required.Executives.
Retirement.In the event an Executive terminates his employment due to retirement upon attaining age 65,sixty-five, Fulton Financial Corporation is obligated to pay the Executive's base salary through the effective date of the Executive's retirement, together with any applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. AssumingFulton would have no further obligation under the Employment Agreement, however, assuming that each Executive attained the age of 65sixty-five and retired December 31, 2006,2007, each would have received a lump sum payment of $25 for each year of service, a payment made to all retiring employees, plus each would have received retiree health benefits, as a supplement to the Executives’ Medicare benefits at sixty-five, at an annual estimated cost to Fulton Financial Corporation of approximately $3,100.$3,600.
In the event an Executive terminates his employment due to retirement upon attaining age sixty, and the Executive has ten or more years of consecutive service with Fulton, unvested options and restricted shares awarded under Fulton’s option plans would automatically vest as a result of the Executive’s retirement. None of the Executives have been awarded restricted shares. Assuming that all the Executives attained the age of sixty and retired December 31, 2007, their individual unvested options would not have had any value because they have option exercise prices above the $11.22 closing price of Fulton common stock on December 31, 2007.
With respect to Mr. Ashby, who will retire on March 28, 2008, the Compensation Committee approved, on his retirement, the transfer to him of the company car he uses and the continuation of his club benefits for one year. These retirement benefits are not included in Mr. Ashby’s agreement, nor under any Fulton plan. Fulton estimates the value of these benefits to be $21,000 as of his actual retirement date.
Disability.Following an Executive's “Total Disability” asDisability,” defined in the Employment Agreements to be a continuous medically determinable physical or medical impairment, the employment of the Executive willwould terminate automatically, in which event Fulton Financial Corporation is not thereafter obligated to make any further payments thereunderunder
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the Employment Agreement, other than amounts (including salary, expense reimbursement, etc.) accrued as of the date of such termination, plus an amount equal to at least six months' base salary in effect immediately prior to the date of the disability.Total Disability. Thereafter, for as long as the Executive continues to be disabled, Fulton Financial Corporation shallwill continue to pay an amount equal tothe Executive at least 60% of the base salary in effect immediately prior to the date of the Total Disability until the earlier of the Executive'sExecutive’s death or December 31 of the calendar year in which the Executive attains age 65. Followingsixty-five. To the extent it does not duplicate benefits already being provided, an Executive will also receive those benefits customarily provided by Fulton to disabled former employees, which benefits shall include, but are not limited to, life, medical, health, accident insurance and a disability, Fulton Financial Corporation is only required to provide health benefits for 18 months.survivor's income benefit. Assuming that each Executive was disabled as of December 31, 2006,2007, and the Total Disability lasted 18 months, each would have received the following disability benefits:
| Salary | Total Annual Disability | Estimated Health | Salary | Total Annual Disability | Estimated Health | |||||||||||||||
| Name | First Six Months | Payments Until 65 | Benefits for 18 Months | Total | First Six Months | Payments Until 65 | Benefits for 18 Months | Total | ||||||||||||
| ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
| R. Scott Smith, Jr. | 367,473 | 440,968 | 18,000 | 826,441 | 381,607 | 457,928 | 18,000 | 857,535 | ||||||||||||
| Charles J. Nugent | 230,341 | 276,409 | 18,000 | 524,750 | 239,200 | 287,040 | 18,000 | 544,240 | ||||||||||||
| Richard J. Ashby, Jr. | 195,000 | 234,000 | 18,000 | 447,000 | 202,500 | 243,000 | 18,000 | 463,500 | ||||||||||||
| James E. Shreiner | 140,389 | 168,467 | 18,000 | 326,856 | 153,000 | 183,600 | 18,000 | 354,600 | ||||||||||||
| E. Philip Wenger | 154,528 | 185,434 | 18,000 | 357,962 | 175,000 | 210,000 | 18,000 | 403,000 | ||||||||||||
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Death.In the event of a termination of employment as a result of an Executive's death, the Executive's dependents, beneficiaries or estate, as the case may be, willwould receive such survivor's income and other benefits as they may be entitled to under the terms of Fulton Financial Corporation’sFulton’s benefit programs, which includes the $25,000 Survivors Benefit Life Insurance and the twice base salary amount plus tax under the Death Benefit Agreementdescribed above. Assuming that each Executive died as of December 31, 2006,2007, each of their estates or beneficiaries would have received the following death benefits:
| Survivors Benefit Life | Death Benefit | Estimated Death | ||||||
| Name | Insurance | Agreement Payment | Benefit Tax Gross Up | Total | ||||
| ($) | ($) | ($) | ($) | |||||
| R. Scott Smith, Jr. | 25,000 | 1,469,892 | 1,001,345 | 2,496,237 | ||||
| Charles J. Nugent | 25,000 | 921,364 | 627,667 | 1,574,031 | ||||
| Richard J. Ashby, Jr. | 25,000 | 780,000 | 531,365 | 1,336,365 | ||||
| James E. Shreiner | 25,000 | 561,554 | 382,551 | 969,105 | ||||
| E. Philip Wenger | 25,000 | 618,112 | 421,081 | 1,064,193 | ||||
Upon or After a Change in Control - Termination Without Cause or for Good Reason.If, during the ninety day period before a “Change in Control” as defined in the Employment Agreements and ending two years after such Change in Control, the Executive is terminated by Fulton Financial Corporation without cause or the Executive resigns for good reason, Fulton Financial Corporation will pay the Executive a multiple of the sum of his base salary immediately before the Change in Control and the highest annual cash bonus or other incentive compensation awarded over the prior three years. The multiple is three for Messrs. Smith, Nugent and Ashby. The multiple is two for the other Executives. The Employment Agreements provide for certain other post termination benefits such as up to $10,000 for outplacement services, which are included in the table below. Assuming that, as of December 31, 2006, each Executive was terminated upon or after a Change in Control without cause or for good reason, each would have received the following post termination benefits:
| Survivors Benefit Life | Death Benefit | Estimated Death | ||||||||||||||||||||||||||
| Name | Salary | Cash | Lump Sum of | Tax Gross | Health | Clubs, | Value of | Total | Insurance | Agreement Payment | Benefit Tax Gross Up | Total | ||||||||||||||||
| Lump | Bonus | Future | Up | Benefits | Cars & | Option | ||||||||||||||||||||||
| Sum | Lump | Qualified and | Estimate | Other | Vesting | |||||||||||||||||||||||
| Sum | Non-qualified | Benefits | ||||||||||||||||||||||||||
| Plans | Estimate | |||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||
| R. Scott Smith, Jr. | 2,204,838 | 1,229,622 | 289,275 | 1,531,506 | 36,000 | 58,000 | 16,268 | 5,365,509 | 25,000 | 1,526,426 | 1,039,858 | 2,591,284 | ||||||||||||||||
| Charles J. Nugent | 1,382,046 | 555,474 | 181,324 | 865,250 | 36,000 | 58,000 | 12,732 | 3,090,826 | 25,000 | 956,800 | 651,808 | 1,633,608 | ||||||||||||||||
| Richard J. Ashby, Jr. | 1,170,000 | 470,250 | 153,504 | 727,972 | 36,000 | 58,000 | 12,732 | 2,628,458 | 25,000 | 810,000 | 551,802 | 1,386,802 | ||||||||||||||||
| James E. Shreiner | 561,554 | 225,702 | 76,147 | 337,066 | 24,000 | 42,000 | 8,488 | 1,274,957 | 25,000 | 612,000 | 416,917 | 1,053,917 | ||||||||||||||||
| E. Philip Wenger | 618,112 | 248,434 | 83,816 | 379,761 | 24,000 | 42,000 | 8,488 | 1,404,611 | 25,000 | 700,000 | 476,866 | 1,201,866 | ||||||||||||||||
Determination of Amounts and Formula for Each Element of Compensation
Executive total compensation is based on the job complexity and scope of the individual positions. As discussed above, base salary ranges have been set based upon a market analysis of similar positions in peer companies and in consultation with an outside compensation consultant. The formula for Mr. Smith’s Variable Compensation Bonus Plan is based on a “scorecard” of four unequally weighted critical performance factors. After an annual self-assessment by Mr. Smith, his overall performance was reviewed and ranked by the Compensation Committee according to the following four categories: (i) below expectations; (ii) making progress; (iii) what is expected; and (iv) excellent results. The four critical performance factors for Mr. Smith for 2006 were:
Financial Performance and Business Model - takes into account Fulton Financial Corporation's earnings growth compared to the Performance Peer Group, its five-year total shareholder return and its organic growth. The Financial Performance and Business Model factor carried a 50% weight.
Risk Management - involves an assessment of net charge offs to average loans, investment portfolio performance, and regulatory compliance. The Risk Management factor carried a 20% weight.
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Customer Centricity - includes evaluation of a customer service measurement and Fulton Partners’ fee income. The Customer Centricity factor carried a 15% weight.
Corporate Culture - consists of an evaluation of management succession, corporate diversity, corporate reward strategy, employee morale/strategic people initiatives and community involvement. The Corporate Culture factor carried a 15% weight.
Mr. Smith’s payout under this non-equity incentive plan was based upon a percentage of his 2006 annual salary of $763,213. For 2006 the Executives base salary calculation includes the 2006 holiday bonus, which was discontinued after 2006 for the Executives. The bonus plan is designed so that no bonus is paid unless Fulton Financial Corporation achieves a threshold performance metric as compared to the Performance Peer Group and Mr. Smith meets certain threshold requirements of his scorecard. Mr. Smith’s 2006 bonus plan was designed to pay 25% of base salary if threshold minimum requirements were met, 50% if target and expected items were attained, and 100% (the maximum payout) for exceptional performance.
The other Executives had similar scorecards for their 2006 Variable Compensation Bonus Plans with four unequally weighted critical performance factors, except that their scorecards included items related to their positions. After an annual self-assessment by each other Executive, overall performance was reviewed and ranked by the Chief Executive Officer, then reported to the Compensation Committee. After reviewing and discussing the proposed payouts recommended by the Chief Executive Officer, the Compensation Committee decided the amount of the bonus for each Executive. The threshold minimum, target and maximum 2006 payouts for each of the Executives are provided in the Grants of Plan Based Awards Table.
On March 19, 2007, the Compensation Committee of the Board of Directors of Fulton Financial Corporation confirmed that Fulton Financial Corporation had achieved the designated earnings per share threshold compared to the Performance Peer Group set for the Variable Compensation Bonus Plan approved in 2006. The Compensation Committee then reviewed the 2006 scorecard for the Chief Executive Officer and his individual critical performance factors pursuant to the Variable Compensation Bonus Plan. The Compensation Committee also discussed the Chief Executive Officer's recommendations with regard to the other Executives, and asked the Chief Executive Officer about the individual performance of each other Executive in general and under his individual 2006 scorecard. Based on the Compensation Committee’s review of the Executives’ 2006 performance, and taking into consideration the Chief Executive Officer's recommendations to the Compensation Committee with regard to the other Executives, the Compensation Committee approved the Variable Bonus Compensation Plan cash incentive compensation at the "target" level amounts previously set for each of the Executives.
On March 20, 2007, the Compensation Committee reported to the Board of Directors their decision regarding the 2006 Variable Compensation Bonus Plan cash incentive compensation to the Executives. The independent directors of the Board of Directors approved the recommendations of the Compensation Committee and the 2006 Variable Compensation Bonus Plan award payments to each of the Executives are as listed in the Summary Compensation Table on page 24.
Other Elements and Conclusion
162(m) and Tax Consequences.Although Fulton Financial Corporation takes into account deductibility of compensation, tax deductibility is not a primary objective of its compensation programs. Section 162(m) of the Internal Revenue Code disallows the deductibility by Fulton Financial Corporation of any compensation over $1 million per year paid to certain members of Senior Management unless certain criteria are satisfied.
409A Changes.Section 409A of the Internal Revenue Code, effective January 1, 2005, defines what constitutes a “nonqualified deferred compensation plan”, conditions income tax deferrals under such plans on their compliance with certain distribution, acceleration, election and funding restrictions, and also imposes penalty tax and interest penalties for noncompliance. In order to preserve intended tax deferrals and to avoid the imposition of taxes and penalties, Fulton’s intent is to identify all such nonqualified deferred compensation plans it maintains and to timely amend each, where necessary, to meet the Section 409A requirements, and to
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alter the administration of each, where necessary, to comply with Section 409A. This amendment and compliance process is ongoing. With respect to Senior Management, in particular, the deferred compensation agreements and the employment and severance agreements summarized above have been amended for Section 409A compliance.
Discussion of option grant timing.Option Grant Timing.Fulton Financial Corporation does not have a formal policy on option granting or required grant dates. However, the Compensation Committee and Board of Directors historically have met in June of each year to consider and award options to the Executives and other officers. Fulton Financial Corporation does not back date options or grant them retroactively, and does not coordinate option grants with the release of positive or negative corporate news. The 2004 Option Plan does not permit the award of discounted options, the reload of stock options or the re-pricing of stock options. Pursuant to the terms of the 2004 Option Plan, option prices are determined based on the average of the high and low trading price on the grant date. Historically, Fulton Financial Corporation has granted options on or about July 1, and not onas opposed to the date of the June meeting when action is taken by the Compensation Committee and Board of Directors to grant each award.
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Stock Ownership Guidelines.Fulton Financial Corporation believes that broad based stock ownership by directors, officers and employees is an effective method to align the interests of its shareholders with the interests of its directors, officers and employees. However, Fulton Financial Corporation does not have a formal share ownership requirement defined for directors, or any group of officers or employees, at the present time.
Conclusion.Senior Management Succession.The topic of Senior Management succession is discussed and reviewed from time to time at Fulton. At the December 2007 Executive Committee meeting, seniors officers in Fulton’s Human Resources department discussed and reviewed the succession planning processes used by management to identify successors for each member of Senior Management at Fulton, middle management at Fulton, senior management at each of Fulton’s bank subsidiaries, and within each division for those banks with divisions.
Compensation Committee Report
The Compensation Committee believesreviewed and discussed the Compensation Discussion and Analysis with management at their March 2008 meeting and, based on the review and discussions, the members of the Compensation Committee present at the meeting recommended to the Board of Directors that the amountCompensation Discussion and typesAnalysis above be included with or incorporated in Fulton's Annual Report on Form 10-K for the year ended December 31, 2007, and the 2008 annual proxy statement, as applicable.
Executive Compensation Committee
Patrick J. Freer, Chair
John O. Shirk, Vice Chair
Jeffrey G. Albertson
Donald M. Bowman, Jr.
George W. Hodges
Donald W. Lesher, Jr.
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SUMMARY COMPENSATION TABLE
| Name and Principal | Year | Salary1 | Bonus2 | Stock | Option | Non-Equity | Change in | All Other | Total |
| Position | Awards | Awards3 | Incentive | Pension | Compensation6 | ||||
| Plan | Value and | ||||||||
| Compensation4 | Nonqualified | ||||||||
| Deferred | |||||||||
| Compensation | |||||||||
| Earnings5 | |||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||
| R. Scott Smith, Jr. | 2007 | 763,213 | 0 | 0 | 225,840 | 0 | 0 | 133,718 | 1,122,771 |
| Chairman, President and | 2006 | 734,946 | 28,267 | 0 | 70,713 | 381,607 | 0 | 142,667 | 1,358,200 |
| Chief Executive Officer | |||||||||
| of Fulton Financial | |||||||||
| Corporation | |||||||||
| Charles J. Nugent | 2007 | 478,400 | 0 | 0 | 147,152 | 0 | 0 | 95,655 | 721,207 |
| Senior Executive Vice | 2006 | 460,682 | 17,718 | 0 | 59,396 | 167,440 | 0 | 97,645 | 802,881 |
| President and Chief | |||||||||
| Financial Officer of | |||||||||
| Fulton Financial | |||||||||
| Corporation | |||||||||
| Richard J. Ashby, Jr.7 | 2007 | 405,000 | 0 | 0 | 173,463 | 0 | 0 | 79,163 | 657,626 |
| Senior Executive Vice | 2006 | 390,000 | 15,000 | 0 | 52,059 | 141,750 | 0 | 96,225 | 695,034 |
| President of Fulton | |||||||||
| Financial Corporation; | |||||||||
| Chairman of Fulton | |||||||||
| Financial Advisors, N.A. | |||||||||
| James E. Shreiner | 2007 | 306,000 | 0 | 0 | 61,850 | 0 | 0 | 57,625 | 425,475 |
| Senior Executive Vice | 2006 | 280,777 | 10,799 | 0 | 42,043 | 102,052 | 0 | 53,863 | 489,534 |
| President of Fulton | |||||||||
| Financial Corporation - | |||||||||
| Administrative Services | |||||||||
| E. Philip Wenger | 2007 | 350,000 | 0 | 0 | 58,715 | 0 | 0 | 79,729 | 488,444 |
| Senior Executive Vice | 2006 | 309,056 | 11,887 | 0 | 42,043 | 112,330 | 0 | 79,629 | 554,945 |
| President of Fulton | |||||||||
| Financial Corporation – | |||||||||
| Community Banking; | |||||||||
| Chairman of Fulton Bank | |||||||||
____________________
1 Represents the 2006 and 2007 annual base salary for each of compensation providedthe Executives named in this table.
2Represents a two-week holiday bonus paid in 2006 to the Executives are appropriate, competitive and suitableother Fulton employees. The Compensation Committee has decided to facilitatediscontinue the payment of this bonus for the Executives and other officers who participate in the Variable Plan. The Executives were not eligible to receive the holiday bonus in 2007.
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3Amounts represent the compensation expense for stock option awards recognized in Fulton’s Consolidated Statements of Income in 2007 and 2006, under the provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS 123R). The per-option fair value of options granted in 2007, 2006 and 2005 was $1.78, $2.39 and $2.40, respectively. A discussion of the significant assumptions used to determine these fair values can be found in Note M, which starts on page 78 in the Notes to Consolidated Financial Statements, "Stock-Based Compensation Plans and Shareholders' Equity" located in the Fulton Financial Corporation’s shortCorporation Annual Report on Form 10-K for the year ended December 31, 2007. There were no forfeitures of options during 2006 and long-term objectives. The compensation programs approved and implemented2007 by the Compensation Committee were designed to provide an incentive to the Executives on both a short-term and long-term basis so they are motivated to perform at a level necessary to achieve these objectives. As needed, these programs have been tailored to Fulton Financial Corporation’s market, the individual Executives, their position and their performance so that the various elements of compensation combine to align the interests of our shareholders and thoseany of the Executives, and the expense being recognized for grants also assumes that none of the options will be forfeited. There can be no assurance that the Executives will ever realize these values in orderthe future, or that the options will ever be exercised. Under Fulton’s Stock Option Plan, options vest 36 months following their grant date. In 2007, the Stock Option Plan was amended to maximize shareholder value.allow for immediate vesting of options upon retirement if the holder of the options has attained both age 60 and 10 years of continuous service with Fulton. This amendment was applicable to options granted in 2007 and 2006. As required by SFAS 123R, compensation expense is recognized evenly over the 36-month vesting period or over the period from the date of grant to the period when the option holder attains both age 60 and 10 years of continuous service, if shorter.
The following table provides additional detail on the compensation expense recognized in 2007 for stock option awards of the Executives.
(This space intentionally left blank.)
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| SUMMARY COMPENSATION TABLE | |||||||||
| Name and Principal | Year | Salary1 | Bonus2 | Stock | Option | Non-Equity | Change in | All Other | Total |
| Position | Awards | Awards3 | Incentive | Pension | Compensa- | ||||
| Plan | Value and | tion6 | |||||||
| Compensa- | Nonquali- | ||||||||
| tion4 | fied | ||||||||
| Deferred | |||||||||
| Compen- | |||||||||
| sation | |||||||||
| Earnings5 | |||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||
| R. Scott Smith, Jr. | 2006 | 734,946 | 28,267 | 0 | 70,713 | 381,607 | 2,769 | 142,6677 | 1,360,969 |
| Chairman, President and | |||||||||
| Chief Executive Officer | |||||||||
| of Fulton Financial | |||||||||
| Corporation | |||||||||
| Charles J. Nugent | 2006 | 460,682 | 17,718 | 0 | 59,396 | 167,440 | 9,418 | 97,6458 | 812,299 |
| Senior Executive Vice | |||||||||
| President and Chief | |||||||||
| Financial Officer of | |||||||||
| Fulton Financial | |||||||||
| Corporation | |||||||||
| Richard J. Ashby, Jr. | 2006 | 390,000 | 15,000 | 0 | 52,059 | 141,750 | 0 | 96,2259 | 695,034 |
| Senior Executive Vice | |||||||||
| President of Fulton | |||||||||
| Financial Corporation; | |||||||||
| Chairman and Chief | |||||||||
| Executive Officer of | |||||||||
| Fulton Financial | |||||||||
| Advisors, N.A. | |||||||||
| James E. Shreiner | 2006 | 280,777 | 10,799 | 0 | 42,043 | 102,052 | 1,193 | 53,86310 | 490,727 |
| Senior Executive Vice | |||||||||
| President of Fulton | |||||||||
| Financial Corporation - | |||||||||
| Administrative Services | |||||||||
| E. Philip Wenger | 2006 | 309,056 | 11,887 | 0 | 42,043 | 112,330 | 0 | 79,62911 | 554,945 |
| Senior Executive Vice | |||||||||
| President of Fulton | |||||||||
| Financial Corporation – | |||||||||
| Community Banking; | |||||||||
| Chairman of Fulton Bank | |||||||||
| Name | 2007 Option Grant - | 2006 Option Grant - | 2005 Option Grant - | Total 2007 | Grant Date Fair Value |
| Compensation Expense | Compensation Expense | Compensation Expense | Stock | of 2007 Stock Options | |
| Recognized in 2007 | Recognized in 2007 | Recognized in 2007 | Option | (d) | |
| (a) | (b) | (c) | Expense | ||
| ($) | ($) | ($) | ($) | ($) | |
| R. Scott Smith, Jr. | 81,926 | 91,502 | 52,412 | 225,840 | 81,926 |
| Charles J. Nugent | 42,744 | 59,334 | 45,074 | 147,152 | 64,116 |
| Richard J. Ashby, Jr. | 64,116 | 71,610 | 37,737 | 173,463 | 64,116 |
| James E. Shreiner | 10,259 | 19,096 | 32,495 | 61,850 | 42,744 |
| E. Philip Wenger | 7,124 | 19,096 | 32,495 | 58,715 | 42,744 |
| Messrs. Smith and Ashby had attained age 60 and 10 years of continuous service when stock options were granted in July 2007. Accordingly, the entire grant date fair value was recognized as compensation expense in 2007. Mr. Nugent | ||
| |||
| |||
| |||
| |||
| |||
| |||
24
| |||
| Represents compensation expense related to options granted in July 2005, which is being recognized evenly over the 36 month vesting period for | ||
| |||
| Plan-Based Awards Table”. See also “Outstanding Equity Awards at Fiscal Year-End Table.” | ||
4Amounts listed for 2006 are Non-Equity Incentive Plan Compensation cash payments approved by the Executive Compensation Committee on March 19, 2007 for 2006 performance pursuant to Fulton’s Variable Plan. The Executive Compensation Committee determined at its March 5, 2008 meeting that because Fulton did not achieve the 2007 performance threshold established for the Variable Plan, no Non-Equity Incentive Plan Compensation cash payments would be paid to the Executives for 2007.
5Fulton has determined that the Executives did not receive above-market earnings and such amounts did not need to be reported in this table column for 2006 and 2007. All participants in the non-qualified deferred compensation plan, which also includes senior managers other than the Executives, are permitted to select various investment options listed in footnote 2 of the “Nonqualified Deferred Compensation Table” on page 34 below. The rate of return for an individual participant’s account is based on the performance of the various standard investment options selected by each participant.
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6All Other Compensation includes Fulton’s payments for Qualified Profit Sharing Plan Contributions, Non-Qualified Profit Sharing Plan Contributions, club membership fees, use of company provided automobiles and certain travel expenses where spouses traveled with the executives and attended Fulton events. The methodology to calculate the aggregate incremental cost of perquisites and other personal benefits was to use the amount disbursed for the items. Where a benefit involved assets owned by Fulton, an estimate of the incremental cost was used. Amounts for vehicles include the cost of related items attributed to the company provided vehicle including an insurance premium of $1,075 for each vehicle. The “Other Perquisites” column includes spousal travel and other small benefits that individually are less than ten percent of all perquisites received by the Executive. The breakdown and total of all other compensation for each Executive for 2006 and 2007 is shown in the table below:
| Qualified Profit | Non-Qualified | Club | Use of | Other | Total All | ||
| Name | Year | Sharing Plan | Profit Sharing | Memberships | Company | Perquisites | Other |
| Company | Plan Company | Provided | Compensation | ||||
| Contribution | Contribution | Automobiles | |||||
| ($) | ($) | ($) | ($) | ($) | ($) | ||
| R. Scott Smith, Jr. | 2007 | 33,750 | 80,732 | 10,562 | 7,158 | 1,516 | 133,718 |
| 2006 | 33,000 | 77,242 | 15,275 | 13,454 | 3,696 | 142,667 | |
| Charles J. Nugent | 2007 | 33,750 | 38,010 | 11,096 | 12,583 | 216 | 95,655 |
| 2006 | 33,000 | 36,102 | 10,623 | 14,223 | 3,697 | 97,645 | |
| Richard J. Ashby, Jr. | 2007 | 33,750 | 27,000 | 10,301 | 5,857 | 2,255 | 79,163 |
| 2006 | 33,000 | 25,500 | 20,950 | 13,941 | 2,834 | 96,225 | |
| James E. Shreiner | 2007 | 33,750 | 12,150 | 8,251 | 3,016 | 458 | 57,625 |
| 2006 | 33,000 | 9,117 | 7,649 | 3,263 | 834 | 53,863 | |
| E. Philip Wenger | 2007 | 33,750 | 18,750 | 14,090 | 12,001 | 1,138 | 79,729 |
| 2006 | 33,000 | 13,358 | 18,834 | 13,424 | 1,013 | 79,629 |
7Mr. Ashby will retire as an executive officer of Fulton effective March 28, 2008.
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GRANTS OF PLAN BASED AWARDS
| Name | Grant | Approval | Estimated Future or Possible | Estimated Future or | All Other | All Other | Exercise | Closing | Grant Date | ||||
| Date1 | Date2 | Payouts Under Non-Equity | Possible Payouts Under | Stock | Option | or Base | Price on | Fair Value | |||||
| Incentive Plan Awards3 | Equity Incentive Plan | Awards: | Awards: | Price of | Grant | of Stock and | |||||||
| Awards | Number | Number of | Option | Date5 | Option | ||||||||
| Thresh- | Target | Maxi- | Thresh- | Target | Maxi- | of Shares | Securities | Awards4 | Awards6 | ||||
| old | mum | old | mum | of Stock | Underlying | ||||||||
| or Units | Options | ||||||||||||
| ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($/Sh) | ($) | |||
| R. Scott Smith, Jr. | 7/1/2006 | 6/21/06 | - | - | - | - | - | - | - | 46,000 | 15.89 | 15.92 | 109,802 |
| R. Scott Smith, Jr. | - | 5/30/06 | 190,803 | 381,607 | 763,213 | - | - | - | - | - | - | - | - |
| Charles J. Nugent | 7/1/2006 | 6/21/06 | - | - | - | - | - | - | - | 36,000 | 15.89 | 15.92 | 85,932 |
| Charles J. Nugent | - | 5/30/06 | 83,720 | 167,440 | 287,040 | - | - | - | - | - | - | - | - |
| Richard J. Ashby, Jr. | 7/1/2006 | 6/21/06 | - | - | - | - | - | - | - | 36,000 | 15.89 | 15.92 | 85,932 |
| Richard J. Ashby, Jr. | - | 5/30/06 | 70,875 | 141,750 | 243,000 | - | - | - | - | - | - | - | - |
| James E. Shreiner | 7/1/2006 | 6/21/06 | - | - | - | - | - | - | - | 24,000 | 15.89 | 15.92 | 57,288 |
| James E. Shreiner | - | 5/30/06 | 51,026 | 102,052 | 174,946 | - | - | - | - | - | - | - | - |
| E. Philip Wenger | 7/1/2006 | 6/21/06 | - | - | - | - | - | - | - | 24,000 | 15.89 | 15.92 | 57,288 |
| E. Philip Wenger | - | 5/30/06 | 56,165 | 112,330 | 192,566 | - | - | - | - | - | - | - | - |
| Name | Grant | Approval | Estimated Future or | Estimated Future or | All Other | All Other | Exercise | Closing | Grant Date | ||||
| Date1 | Date2 | Possible Payouts Under | Possible Payouts Under | Stock | Option | or Base | Price on | Fair Value | |||||
| Non-Equity Incentive Plan | Equity Incentive Plan | Awards: | Awards: | Price of | Grant | of Stock and | |||||||
| Awards3 | Awards | Number | Number of | Option | Date5 | Option | |||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | of Shares | Securities | Awards4 | Awards6 | ||||
| of Stock | Underlying | ||||||||||||
| or Units | Options | ||||||||||||
| ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($/Sh) | ($) | |||
| R. Scott Smith, Jr. | 7/1/2007 | 6/18/2007 | - | - | - | - | - | - | - | 46,000 | 14.415 | 14.42 | 81,926 |
| Charles J. Nugent | 7/1/2007 | 6/18/2007 | - | - | - | - | - | - | - | 36,000 | 14.415 | 14.42 | 64,116 |
| Richard J. Ashby, Jr. | 7/1/2007 | 6/18/2007 | - | - | - | - | - | - | - | 36,000 | 14.415 | 14.42 | 64,116 |
| James E. Shreiner | 7/1/2007 | 6/18/2007 | - | - | - | - | - | - | - | 24,000 | 14.415 | 14.42 | 42,744 |
| E. Philip Wenger | 7/1/2007 | 6/18/2007 | - | - | - | - | - | - | - | 24,000 | 14.415 | 14.42 | 42,744 |
____________________
1Pursuant to the terms of the 2004 Stock Option and Compensation Plan, since the July 1, 2007, grant date was not a NASDAQ trading day, the fair market value was determined based on the average of the highest and lowest trading price of Fulton stock on the next preceding trading day, which was Friday, June 29, 2007. 30 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END ____________________ 1The number of securities underlying the options and the option exercise price have been adjusted for stock dividends and stock splits that have occurred since the grant date. OPTION EXERCISES AND STOCK VESTED ____________________ 33 PENSION BENEFITS ____________________ 1Except for Mr. Ashby, none of the Executives participates in or has account balances in any qualified or non-qualified defined benefit plans sponsored by Fulton. Mr. Ashby was a Fulton employee when he accepted a position in 1992 with Lafayette Ambassador Bank, a Fulton affiliate bank. Mr. Ashby’s participation in this plan ended in 1998 when he accepted a new position at Fulton and started participation in the Fulton Profit Sharing Plan. NONQUALIFIED DEFERRED COMPENSATION ____________________ 1 Fulton’s contributions toward nonqualified deferred compensation for each of the Executives are listed in this column. See the table contained in footnote 6 of the Summary Compensation Table on page 27. Amounts listed as registrant contributions in this Nonqualified Deferred Compensation Table are also included as part of the Executives’ “Total All Other Compensation” in the Summary Compensation Table. 2007 contributions were credited to each of the Executive’s accounts in January 2008. DIRECTOR COMPENSATION ____________________ 1 Directors listed represent all the non-management directors of Fulton during 2007. Mr. Smith, who was compensated as an officer of Fulton, did not receive any additional compensation for his service as a director of Fulton. 35 Compensation of Directors Each member of the Board of Directors of Fulton As disclosed in the Director Compensation Table and footnotes above, certain Fulton INFORMATION CONCERNING DIRECTORS Meetings and Committees of the Board of Directors The Board of Directors of Fulton Compensation Committee Interlocks and Insider Participation In March 2004, the Executive Compensation Committee was formed, and its membership consists only of independent directors. More information regarding the Executive Compensation Committee can be found in "Compensation Discussion and Analysis" on page Other Board Committees All members of the Audit Committee meet the experience and independence requirements of the NASDAQ listing standards, and the rules and regulations of the SEC. 37 audit 1 Pursuant to2As consistent with past option award practice, Fulton approved the 2007 options at the terms of the 2004 Stock Option and Compensation Plan, since the July 1, 2006 Grant Date was not a NASDAQ trading day, the fair market value was determined based on the average of the highest and lowest trading price of Fulton Financial Corporation stock on the next preceding trading day, which was Friday, June Executive Compensation Committee and Board meetings both held on June 18, 2007, with a future grant date of July 1, 2007. The low trading, high trading, closing, and average of high/low trading prices of Fulton stock on June 18, 2007 were $14.71, $15.10, $14.75 and $14.905, respectively.
3The Executives will not receive a cash bonus payment under the Variable Plan for 2007.
4Determined pursuant to the terms of the 2004 Stock Option and Compensation Plan as the average of the highest and lowest trading price of Fulton stock on the grant date. The June 29, 2007 high trading and low trading prices were $14.52 and $14.31, respectively.
5Closing price of Fulton stock on June 29, 2007, the next preceding day before the July 1, 2007 grant date, was $14.42.
6FAS 123R Fair Value. There can be no assurance that the Executives will ever exercise the options or realize the amounts listed in the future. 2006.2 As consistent with past option award practice, Fulton Financial Corporation approved the 2006 options at the June Compensation Committee and Board meetings both held on June 21, 2006, with a future Grant Date of July 1, 2006. The low trading, high trading, closing, and average of high/low trading prices of Fulton Financial Corporation stock on June 21, 2006 were $15.55, $15.79, $15.71 and $15.67, respectively.3 Represents the possible range of payout awards to the named executives under the 2006 Variable Compensation Bonus Plan.4 Determined pursuant to the terms of the 2004 Stock Option and Compensation Plan as the average of the highest and lowest trading price of Fulton Financial Corporation stock on the Grant Date. The June 30, 2006 high trading and low trading prices were $16.00 and $15.78, respectively.5 Closing price of Fulton Financial Corporation stock on June 30, 2006, the next preceding day before the July 1, 2006 Grant Date, was $15.92.6FAS 123R Fair Value. There can be no assurance that the Executive will ever exercise the options or realize the amounts in the future.25 Option Awards1 Stock Awards2 Option Awards1 Stock Awards2 Name Number Number of Equity Option Option Number of Market Equity Equity Number Number of Equity Option Option Number of Market Equity Equity of Securities Incentive Exercise Expiration Shares or Value of Incentive Incentive Securities Underlying Plan Awards: Price Date Units of Shares or Plan Plan Awards: of Securities Incentive Exercise Expiration Shares or Value of Incentive Incentive Underlying Unexercised Number of Stock That Units of Awards: Market or Securities Underlying Plan Awards: Price Date Units of Shares or Plan Plan Awards: Unexercised Options Securities Have Not Stock That Number of Payout Value Underlying Unexercised Number of ($) Stock That Units of Awards: Market or Options (#) Underlying Vested Have Not Unearned of Unearned Unexercised Options Securities Have Not Stock That Number of Payout Value (#) Unexercisable3 Unexercised Vested Shares, Shares, Units Options (#) Underlying Vested Have Not Unearned of Unearned Exercisable Unearned Units or or Other (#) Unexercisable3 Unexercised (#) Vested Shares, Shares, Units Options Other Rights That Exercisable Unearned ($) Units or or Other Rights That Have Not Options Other Rights That Have Not Vested (#) Rights That Have Not Vested Have Not Vested Vested ($) (#) (#) (#) ($) (#) ($) (#) ($) (#) R. Scott Smith, Jr. 24,936 0 0 9.90 6/30/2007 0 0 0 0 36,172 0 0 11.32 6/30/2008 0 0 0 0 R. Scott Smith, Jr. 36,172 0 0 11.32 6/30/2008 0 0 0 0 32,907 0 0 10.45 6/30/2009 0 0 0 0 R. Scott Smith, Jr. 32,907 0 0 10.45 6/30/2009 0 0 0 0 30,580 0 0 10.38 6/30/2010 0 0 0 0 R. Scott Smith, Jr. 30,580 0 0 10.38 6/30/2010 0 0 0 0 41,603 0 0 11.32 6/30/2011 0 0 0 0 R. Scott Smith, Jr. 41,603 0 0 11.32 6/30/2011 0 0 0 0 41,530 0 0 13.35 6/30/2012 0 0 0 0 R. Scott Smith, Jr. 41,530 0 0 13.35 6/30/2012 0 0 0 0 41,344 0 0 14.44 6/30/2013 0 0 0 0 R. Scott Smith, Jr. 41,344 0 0 14.44 6/30/2013 0 0 0 0 72,189 0 0 15.38 6/30/2014 0 0 0 0 R. Scott Smith, Jr. 72,189 0 0 15.38 6/30/2014 0 0 0 0 0 65,625 0 17.12 6/30/2015 0 0 0 0 R. Scott Smith, Jr. 0 65,625 0 17.12 6/30/2015 0 0 0 0 0 46,000 0 15.89 6/30/2016 0 0 0 0 R. Scott Smith, Jr. 0 46,000 0 15.89 6/30/2016 0 0 0 0 0 46,000 0 14.415 6/30/2017 0 0 0 0 Charles J. Nugent 23,291 0 0 9.90 6/30/2007 0 0 0 0 33,758 0 0 11.32 6/30/2008 0 0 0 0 Charles J. Nugent 33,758 0 0 11.32 6/30/2008 0 0 0 0 30,911 0 0 10.45 6/30/2009 0 0 0 0 Charles J. Nugent 30,911 0 0 10.45 6/30/2009 0 0 0 0 28,679 0 0 10.38 6/30/2010 0 0 0 0 Charles J. Nugent 28,679 0 0 10.38 6/30/2010 0 0 0 0 35,815 0 0 11.32 6/30/2011 0 0 0 0 Charles J. Nugent 35,815 0 0 11.32 6/30/2011 0 0 0 0 35,742 0 0 13.35 6/30/2012 0 0 0 0 Charles J. Nugent 35,742 0 0 13.35 6/30/2012 0 0 0 0 35,832 0 0 14.44 6/30/2013 0 0 0 0 Charles J. Nugent 35,832 0 0 14.44 6/30/2013 0 0 0 0 63,001 0 0 15.38 6/30/2014 0 0 0 0 Charles J. Nugent 63,001 0 0 15.38 6/30/2014 0 0 0 0 0 56,437 0 17.12 6/30/2015 0 0 0 0 Charles J. Nugent 0 56,437 0 17.12 6/30/2015 0 0 0 0 0 36,000 0 15.89 6/30/2016 0 0 0 0 Charles J. Nugent 0 36,000 0 15.89 6/30/2016 0 0 0 0 0 36,000 0 14.415 6/30/2017 0 0 0 0 Richard J. Ashby, Jr. 19,177 0 0 9.90 6/30/2007 0 0 0 0 25,927 0 0 10.45 6/30/2009 0 0 0 0 Richard J. Ashby, Jr. 27,838 0 0 11.32 6/30/2008 0 0 0 0 23,930 0 0 10.38 6/30/2010 0 0 0 0 Richard J. Ashby, Jr. 25,927 0 0 10.45 6/30/2009 0 0 0 0 29,846 0 0 11.32 6/30/2011 0 0 0 0 Richard J. Ashby, Jr. 23,930 0 0 10.38 6/30/2010 0 0 0 0 29,738 0 0 13.35 6/30/2012 0 0 0 0 Richard J. Ashby, Jr. 29,848 0 0 11.32 6/30/2011 0 0 0 0 30,319 0 0 14.44 6/30/2013 0 0 0 0 Richard J. Ashby, Jr. 29,738 0 0 13.35 6/30/2012 0 0 0 0 52,501 0 0 15.38 6/30/2014 0 0 0 0 Richard J. Ashby, Jr. 30,319 0 0 14.44 6/30/2013 0 0 0 0 0 47,250 0 17.12 6/30/2015 0 0 0 0 Richard J. Ashby, Jr. 52,501 0 0 15.38 6/30/2014 0 0 0 0 0 36,000 0 15.89 6/30/2016 0 0 0 0 Richard J. Ashby, Jr. 0 47,250 0 17.12 6/30/2015 0 0 0 0 0 36,000 0 14.415 6/30/2017 0 0 0 0 2631Richard J. Ashby, Jr. 0 36,000 0 15.89 6/30/2016 0 0 0 0 James E. Shreiner 14,791 0 0 9.90 6/30/2007 0 0 0 0 21,479 0 0 11.32 6/30/2008 0 0 0 0 James E. Shreiner 21,479 0 0 11.32 6/30/2008 0 0 0 0 17,949 0 0 10.45 6/30/2009 0 0 0 0 James E. Shreiner 17,949 0 0 10.45 6/30/2009 0 0 0 0 16,333 0 0 10.38 6/30/2010 0 0 0 0 James E. Shreiner 16,333 0 0 10.38 6/30/2010 0 0 0 0 20,260 0 0 11.32 6/30/2011 0 0 0 0 James E. Shreiner 20,260 0 0 11.32 6/30/2011 0 0 0 0 21,706 0 0 13.35 6/30/2012 0 0 0 0 James E. Shreiner 21,706 0 0 13.35 6/30/2012 0 0 0 0 20,673 0 0 14.44 6/30/2013 0 0 0 0 James E. Shreiner 20,673 0 0 14.44 6/30/2013 0 0 0 0 45,939 0 0 15.38 6/30/2014 0 0 0 0 James E. Shreiner 45,939 0 0 15.38 6/30/2014 0 0 0 0 0 40,687 0 17.12 6/30/2015 0 0 0 0 James E. Shreiner 0 40,687 0 17.12 6/30/2015 0 0 0 0 0 24,000 0 15.89 6/30/2016 0 0 0 0 James E. Shreiner 0 24,000 0 15.89 6/30/2016 0 0 0 0 0 24,000 0 14.415 6/30/2017 0 0 0 0 E. Philip Wenger 9,591 0 0 9.90 6/30/2007 0 0 0 0 13,808 0 0 11.32 6/30/2008 0 0 0 0 E. Philip Wenger 13,808 0 0 11.32 6/30/2008 0 0 0 0 12,962 0 0 10.45 6/30/2009 0 0 0 0 E. Philip Wenger 12,962 0 0 10.45 6/30/2009 0 0 0 0 13,295 0 0 10.38 6/30/2010 0 0 0 0 E. Philip Wenger 13,295 0 0 10.38 6/30/2010 0 0 0 0 18,090 0 0 11.32 6/30/2011 0 0 0 0 E. Philip Wenger 18,090 0 0 11.32 6/30/2011 0 0 0 0 19,898 0 0 13.35 6/30/2012 0 0 0 0 E. Philip Wenger 19,898 0 0 13.35 6/30/2012 0 0 0 0 20,673 0 0 14.44 6/30/2013 0 0 0 0 E. Philip Wenger 20,673 0 0 14.44 6/30/2013 0 0 0 0 45,939 0 0 15.38 6/30/2014 0 0 0 0 E. Philip Wenger 45,939 0 0 15.38 6/30/2014 0 0 0 0 0 40,687 0 17.12 6/30/2015 0 0 0 0 E. Philip Wenger 0 40,687 0 17.12 6/30/2015 0 0 0 0 0 24,000 0 15.89 6/30/2016 0 0 0 0 E. Philip Wenger 0 24,000 0 15.89 6/30/2016 0 0 0 0 0 24,000 0 14.415 6/30/2017 0 0 0 0
2There are no outstanding restricted stock awards to the Executives.
3Options with an expiration date of June 30, 2015 will vest July 1, 2008, options with an expiration date of June 30, 2016 will vest July 1, 2009, and options with an expiration date of June 30, 2017 will vest July 1, 2010.1 The number of securities underlying the options and the option exercise price have been adjusted for stock dividends and stock splits that have occurred since the date of grant.2 There are no outstanding stock awards to the named executive officers.3 Options with an expiration date of June 30, 2015 will vest July 1, 2008 and options with an expiration date of June 30, 2016 will vest July 1, 2009.2732 Option Awards1 Stock Awards2 Option Awards1 Stock Awards Name Number of Value Realized Number of Value Realized Number of Value Realized Number of Value Realized Shares on Exercise Shares on Vesting Acquired Acquired on Exercise on Vesting Shares on Exercise Shares on Vesting Acquired Acquired (#) ($) (#) ($) on Exercise on Vesting (#) ($) (#) ($) R. Scott Smith, Jr. 10,500 108,2003 0 0 3,000 16,8902 0 0 R. Scott Smith, Jr. 7,000 72,2704 0 0 11,837 53,2073 0 0 R. Scott Smith, Jr. 7,350 76,1325 0 0 10,099 51,7444 0 0 Charles J. Nugent 22,366 235,2706 0 0 4,000 22,5205 0 0 Charles J. Nugent 6,000 32,4306 0 0 Charles J. Nugent 3,192 16,0407 0 0 Charles J. Nugent 10,099 51,8088 0 0 Richard J. Ashby, Jr. 19,177 113,1449 0 0 Richard J. Ashby, Jr. 3,301 35,3397 0 0 8,832 35,85810 0 0 Richard J. Ashby, Jr. 15,748 167,0788 0 0 19,006 73,93311 0 0 James E. Shreiner 14,909 145,1399 0 0 10,099 53,12112 0 0 James E. Shreiner 4,692 24,68513 0 0 E. Philip Wenger 8,280 88,08710 0 0 9,591 57,69014 0 0 1 The number of securities underlying the options and the option exercise price have been adjusted for stock dividends and stock splits that have occurred since the date of grant.2 The named executive officers in this table did not have any stock awards which vested in 2006.3 Options exercised on February 10, 2006.4 Options exercised on February 13, 2006.5 Options exercised on February 14, 2006.6 Options exercised on February 15, 2006.7 Options exercised on January 27, 2006.8 Options exercised on January 31, 2006.9 Options exercised on June 2, 2006.10 Options exercised on January 30, 2006.281The numbers of securities underlying the options and the option exercise price have been adjusted for stock dividends and stock splits that have occurred since the date of grant.
2Options exercised on January 19, 2007.
3Options exercised on April 3, 2007.
4Options exercised on May 31, 2007.
5Options exercised on January 19, 2007.
6Options exercised on March 1, 2007.
7Options exercised on March 14, 2007.
8Options exercised on June 15, 2007.
9Options exercised on January 29, 2007.
10Options exercised on August 9, 2007.
11Options exercised on September 19, 2007.
12Options exercised on May 31, 2007.
13Options exercised on June 4, 2007.
14Options exercised on February 12, 2007.Name1 Plan Name Number of Years Present Payments During Last Plan Name Number of Years Present Payments During Credited Service Value of Accumulated Fiscal Year Credited Service Value of Accumulated Last Fiscal Year Benefit Benefit (#) ($) ($) (#) ($) ($) R. Scott Smith, Jr. 0 0 0 0 NA - - - Charles J. Nugent 0 0 0 0 NA - - - Richard J. Ashby, Jr. Fulton FinancialAffiliate's Defined Benefit PensionPlan 7 211,390 02 Fulton Financial Affiliate's Defined 7 292,161 0 Benefit Pension Plan James E. Shreiner 0 0 0 0 NA - - - E. Philip Wenger 0 0 0 0 NA - - - 1Except for Mr. Ashby, none of the named executive officers currently participates in or has account balances in any qualified or non-qualified defined benefit plans sponsored by Fulton Financial Corporation.2Prior to 1992, Mr. Ashby was a Fulton Financial Corporation employee when he accepted a position with Lafayette Ambassador Bank, a Fulton Financial Corporation affiliate bank. After seven years of service as an employee of Lafayette Ambassador Bank, his participation in this plan ended in 1998 when Mr. Ashby accepted a new position at Fulton Financial Corporation and started participation in the Fulton Financial Corporation Profit Sharing Plan.Name Executive Registrant Aggregate Earnings Aggregate Aggregate Balance Executive Registrant Aggregate Earnings Aggregate Aggregate Balance Contributions in Last Contributions in Last in Last FY Withdrawals/ at Last Contributions in Last Contributions in Last in Last FY2 Withdrawals/ at Last FYE3 FY FY Distributions FYE FY FY1 Distributions ($) ($) ($) ($) ($) ($) ($) ($) ($) R. Scott Smith, Jr. 0 77,242 24,357 0 468,121 0 80,732 42,290 0 591,143 Charles J. Nugent 0 36,102 21,704 0 266,396 0 38,010 15,255 0 319,661 Richard J. Ashby, Jr. 30,000 25,500 6,959 0 429,5351 50,0004 27,000 22,754 0 529,2185 James E. Shreiner 0 9,117 2,755 0 38,379 0 12,150 3,923 0 54,452 E. Philip Wenger 0 13,358 649 0 28,107 0 18,750 1,403 0 48,260 12The Executives direct the investment of their nonqualified deferred compensation contributions into various standard investment options offered from a set menu of investment funds. In 2007, the available investment funds included Goldman Sachs Financial Square Money Market Fund, Goldman Sachs Core Fixed Income I Fund, Vanguard Windsor II Fund, T. Rowe Price Growth Stock Fund, Vanguard 500 Index Fund, Goldman Sachs Growth Opportunity I Fund, Vanguard Small Cap Index Fund, Fidelity Adv Small Cap I Fund and Fidelity Adv Div International I Fund. The Executives may change their individual elections by completing a new election form. There is a discussion of the Deferred Compensation Agreements and Defined Benefit Pension Plans on pages 20 and 21.
3Balances include the 2007 contributions made by Fulton and credited to the Executives’ accounts in January 2008.
4Mr. Ashby was the only individual to make personal contributions in 2007 to a nonqualified deferred compensation account and this amount is not included in the “Total All Other Compensation” amount in the Summary Compensation Table and was not additional compensation paid to him by Fulton.
5Amount listed does not include approximately $99,000$54,000 potentially available as of December 31, 20062007 under Mr. Ashby'sAshby’s April 7, 1992 Deferred Compensation Agreement described on page 18.20. Neither Mr. Ashby nor Fulton made any contributions to this plan in 2007. Based on an actuarial calculation, this amount decreased by $45,000 since the December 31, 2006 actuarial estimate.2934Name1 Fees Stock Option Non-Equity Change in All Other Total Fees Stock Option Non-Equity Change in Pension All Other Total Earned or Awards Awards Incentive Plan Pension Compensation2 Earned or Awards Incentive Plan Value and Compensation2 Paid in Compensation Value and Paid in Compensation Nonqualified Cash Nonqualified Cash Deferred Deferred Compensation Compensation Earnings Earnings ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) Jeffrey G. Albertson 31,000 0 0 0 0 9,2503 40,250 42,750 0 0 0 10,8333 53,583 Donald M. Bowman Jr. 38,500 0 0 0 0 7,5004 46,000 John M. Bond 40,750 0 04 0 0 30,0005 70,750 Donald M. Bowman, Jr. 47,000 0 0 0 0 8,0006 55,000 Dana A. Chryst7 0 0 0 0 0 12,0008 12,000 Craig A. Dally 32,000 0 0 0 0 8,8005 40,800 40,750 0 0 0 0 10,0009 50,750 Clark S. Frame6 27,333 0 0 0 0 16,2007 43,533 Patrick J. Freer 37,000 0 0 0 0 8,5008 45,500 51,000 0 0 0 0 8,50010 59,500 Rufus A. Fulton Jr. 31,000 0 09 0 0 48,70810 79,708 38,750 0 011 0 0 14,66612 53,416 Eugene H. Gardner11 24,893 0 0 0 0 3,33312 28,226 George W. Hodges 54,250 0 013 0 0 0 54,250 58,750 0 013 0 0 0 58,750 Clyde W. Horst14 15,667 0 0 0 0 0 15,667 Carolyn R. Holleran 32,000 0 0 0 0 6,00015 38,000 41,750 0 0 0 0 6,00014 47,750 Thomas W. Hunt16 36,000 0 017 0 0 47,50018 83,500 Thomas W. Hunt15 10,333 0 016 0 0 0 10,333 Willem Kooyker 36,000 0 0 0 0 12,15019 48,150 45,750 0 0 0 0 16,50017 62,250 Donald W. Lesher Jr. 37,500 0 0 0 0 8,50020 46,000 50,250 0 0 0 0 4,95818 55,208 Joseph J. Mowad, MD21 11,333 0 0 0 0 2,00022 13,333 Abraham S. Opatut 29,000 0 023 0 0 153,60024 182,600 38,750 0 0 0 0 163,60019 202,350 Mary Ann Russell25 13,333 0 0 0 0 0 13,333 John O. Shirk 31,000 0 0 0 0 10,66726 41,667 41,750 0 0 0 0 12,00020 53,750 Gary A. Stewart 31,000 0 0 0 0 2,35027 33,350 41,750 0 0 0 0 0 41,750
2Unless otherwise noted, excludes perquisites and other personal benefits with an aggregate value of less than $10,000. Fulton’s methodology to calculate the aggregate incremental cost of perquisites and other personal benefits was to use the amount disbursed for the item. Where a benefit involved assets owned by Fulton, an estimate of the incremental cost was used.1 Directors listed represent all the non-management directors of Fulton Financial Corporation during 2006. Excluded are Mr. Smith, who was compensated as an officer of Fulton Financial Corporation, and Mr. Bond, who was compensated as Chairman and Chief Executive Officer of The Columbia Bank. Mr. Bond retired as an officer at the end of 2006. In 2007, Mr. Bond will be compensated as a non-management director. In 2006, neither Mr. Smith nor Mr. Bond received any additional compensation for their service as directors of Fulton Financial Corporation.3Represents the annual retainer fee Mr. Albertson received for service on the Board of Directors of The Bank.
4Fulton directors did not receive options as part of their 2007 compensation, however, as of December 31, 2007, Mr. Bond had 196,851 exercisable options and 21,513 options not vested that previously were awarded to him by Columbia Bancorp, which was acquired by Fulton in February 2006.
5Represents the annual retainer fee Mr. Bond received for service as non-employee Chairman of The Columbia Bank.
6Represents the annual retainer fee Mr. Bowman received for service on the Board of Directors of Hagerstown Trust Company.
7Ms. Chryst became a director effective March 17, 2008.
8Represents the annual retainer fee Ms. Chryst received for service on the Board of Directors of Fulton Bank.
9Represents the annual retainer fee Mr. Dally received for service on the Board of Directors of Lafayette Ambassador Bank.
10Represents the annual retainer fee Mr. Freer received for service on the Board of Directors of Lebanon Valley Farmers Bank and the Fulton Bank Lebanon Valley Division Board.
11Fulton directors did not receive options as part of their 2007 compensation. However, as of December 31, 2007, Mr. Fulton had 85,314 exercisable options that were awarded to him prior to his retirement as an officer of Fulton. Since these options were not exercised, they expired on 1/1/08 by the terms of the option plan and option agreements issued.
12Includes $10,346 for club fees, $2,340 office use and $1,980 for other perquisites that are individually less that ten percent of the total perquisites received by Mr. Fulton in 2007.2 Unless otherwise noted, excludes perquisites and other personal benefits with an aggregate value of less than $10,000. Fulton Financial Corporation’s methodology to calculate the aggregate incremental cost of perquisites and other personal benefits was to use the amount disbursed for the item. Where a benefit involved assets owned by Fulton Financial Corporation, an estimate of the incremental cost was used.3 Represents the annual retainer fee Mr. Albertson received for service on the Board of Directors of The Bank.4 Represents the annual retainer fee Mr. Bowman received for service on the Board of Directors of Hagerstown Trust Company.5 Represents the annual retainer fee Mr. Dally received for service on the Board of Directors of Lafayette Ambassador Bank.6 Mr. Frame resigned as a member of the Fulton Financial Corporation Board of Directors effective 12/18/2006. Retainer fees for the director were pro rated based on the date board service ended.7 Represents fees Mr. Frame received for service on the Board of Directors of Premier Bank, which includes a $5,000 retainer and $400 for each board and committee meeting attended.8 Represents the annual retainer fee Mr. Freer received for service on the Board of Directors of Lebanon Valley Farmers Bank.9 Fulton Financial Corporation directors did not receive options as part of their 2006 compensation, however, as of December 31, 2006, Mr. Fulton had 184,851 exercisable options that were awarded to him prior to his retirement as an officer of Fulton Financial Corporation.10 Includes $16,080 for club fees, $28,270 for the gift of a vehicle used by Mr. Fulton while he was an officer and $4,358 for company provided cell phone, office and parking expense in 2006.3013Fulton directors did not receive options as part of their 2007 compensation. However, as of December 31, 2007, Mr. Hodges had 8,103 exercisable options that previously were awarded to him by Drovers Bancshares Corporation, which was acquired by Fulton in July 2001.
14Represents the annual retainer fee Mrs. Holleran received for service on the Regional Board of the Fulton Bank Great Valley Division.
15Mr. Hunt decided to not stand for reelection as a director, and his term as a director and a member of the Audit and Nominating Committees of Fulton ended on May 7, 2007. Retainer fees for Mr. Hunt were pro rated based on the date his service ended.
16Fulton directors did not receive options as part of their 2007 compensation. However, as of December 31, 2007, Mr. Hunt had 3,942 exercisable options that previously were awarded to him by Resource Bankshares Corporation, which was acquired by Fulton in April 2004.
17Represents fees Mr. Kooyker received for service on the Board of Directors of Somerset Valley Bank, which includes a $5,000 retainer, $650 for each Board meeting attended and $200 for each committee meeting attended. Also includes $12,700 for service on the Somerset Valley Bank Regional Board.
18Represents the annual retainer fee Mr. Lesher received for service on the Board of Directors of Lebanon Valley Farmers Bank and the Fulton Bank Lebanon Valley Division Board.
19Includes $153,600 in fees Mr. Opatut received for service as Chairman of the Board of Directors of First Washington State Bank and the First Washington Division Board. First Washington State Bank was merged into The Bank in 2007. Mr. Opatut is now a director of The Bank and in 2007 he received $10,000 in retainer fees for service as a director of The Bank.
2011 At Fulton Financial Corporation’s 2006 Annual Meeting on May 2, 2006, Mr. Gardner retired in accordance with the Fulton Financial Corporation's policy and bylaws establishing a mandatory retirement age of 70 years for directors. Fees for the director were pro rated based on the date board service ended.12 Represents pro rated retainer fee Mr. Gardner received for service on the Board of Directors of Fulton Bank.13 Fulton Financial Corporation directors did not receive options as part of their 2006 compensation, however, as of December 31, 2006, Mr. Hodges had 8,103 exercisable options that previously were awarded to him by Drovers Bancshares Corporation which was acquired by Fulton Financial Corporation in July 2001.14 Mr. Horst resigned as a member of the Fulton Financial Corporation Board of Directors effective July 21, 2006. Fees for the director were pro rated based on the date board service ended.15 Represents the annual retainer fee Mrs. Holleran received for service on the Advisory Board of the Fulton Bank Great Valley Division.16 Mr. Hunt has decided to not stand for reelection as a director. Therefore, his term as a director and a member of the Audit and Nominating Committees of Fulton Financial Corporation will end on May 7, 2007 at the Annual Meeting.17 Fulton Financial Corporation directors did not receive options as part of their 2006 compensation, however, as of December 31, 2006, Mr. Hunt had 49,422 exercisable options that previously were awarded to him by Resource Bankshares Corporation which was acquired by Fulton Financial Corporation in April 2004.18 Represents fees Mr. Hunt received for service on the Board of Directors of Resource Bank, which includes a $17,000 retainer, $1,000 for each Board meeting attended and $500 for each committee meeting attended.19 Represents fees Mr. Kooyker received for service on the Board of Directors of Somerset Valley Bank, which includes a $5,000 retainer $650 for each Board meeting attended and $200 for each committee meeting attended.20 Represents the annual retainer fee Mr. Lesher received for service on the Board of Directors of Lebanon Valley Farmers Bank.21 At Fulton Financial Corporation’s 2006 Annual Meeting on May 2, 2006, Dr. Mowad retired in accordance with Fulton Financial Corporation's policy and bylaws establishing a mandatory retirement age of 70 years for directors. Retainer fees for the director were pro rated based on the date board service ended.22 Represents the pro rated retainer fee Dr. Mowad received for service on the Board of Directors of FNB Bank, NA.23 Fulton Financial Corporation directors did not receive options as part of their 2006 compensation, however, as of December 31, 2006, Mr. Opatut had 102,387 exercisable options that previously were awarded to him as a director of First Washington Financial Corp. which was acquired by Fulton Financial Corporation in December 2004. These options were exercised on March 1, 2007.24 Represents fees Mr. Opatut received for service as Chairman of the Board of Directors of First Washington State Bank, which includes a $138,000 retainer and $650 for each meeting attended.25 At Fulton Financial Corporation's 2006 Annual Meeting on May 2, 2006, Mrs. Russell retired in accordance with Fulton FinancialCorporation's policy and bylaws establishing a mandatory retirement age of 70 years for directors. Retainer fees for the director were pro rated based on the date board service ended.26Represents the annual retainer fee Mr. Shirk received for service on the Board of Directors of Fulton Bank.27 Represents the annual retainer fee Mr. Stewart received for service on the Advisory Board of the Fulton Bank York Division.31Financial Corporation is paid an annuala retainer fee of $20,000and meeting fees for his or her services as a director, except that no fee is paid to any director who is also a salaried officer of Fulton Financial Corporation or one of its subsidiary banks. Thus, Mr. Bond and Mr. Smith did not receive any director fees in 2006.2007 for serving as a member of the Board of Directors. For the first three quarters of 2007, non-management directors received a quarterly retainer of $5,000. After a study in 2007 by the Hay Group, an outside compensation consultant, and upon the recommendation of the Executive Compensation Committee, the Board of Directors on September 18, 2007 increased the non-employee director quarterly retainer to $8,750 effective October 1, 2007. In addition, directors are paid a fee of $1,000 for each Board of Directors meeting attended and $1,000 for each committee meeting attended on non-board meeting days. The chairperson of the Audit Committee is paid an annuala quarterly fee of $10,000$2,500 and the chairpersons of the Executive Committee and the Executive Compensation Committee are paid an annuala quarterly fee of $2,500.$625. Directors are also paid $1,000 for attendance at a semi-annual investment seminar,Fulton sponsored educational seminars, but this seminar isthese seminars are not counted to determineincluded for purposes of calculating director attendance rates since it isthey are a voluntary activity. Fulton Financial Corporation also reimburses directors for certain expenses incurred in the performance of their service as directors of Fulton Financial Corporation.Fulton. Certain directors have elected to participate in the Fulton Financial Corporation Deferred Compensation Plan, under which a director may elect not to receive the normal director's fees when earned, but instead, to receive them, together with interest, in a lump sum or in installments over a period of up to twenty (20) years following retirement. The only current non-management Fulton Financial Corporation directors that participate in the planwho have established accounts to defer fees are Mr.Directors Albertson, Mr. Bond, Chryst and Mrs. Holleran.Financial Corporation directors also serve on the boards of various Fulton Financial Corporation subsidiary banks, or advisoryother Fulton affiliate boards, and the directors are compensated with a retainer, meeting fees or both a retainer and meeting fees for their service on each of the individual boards.Compensation Committee Report36 Fulton Financial Corporation formed an Executive Compensation Committee (“Compensation Committee”) in March 2004. The Compensation Committee has a charter that is available on the Fulton Financial Corporation’s website at www.fult.com. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management at a meeting on March 19, 2007, and based on the review and discussions, the members of the Compensation Committee present at the meeting recommended to the Board of Directors that the Compensation Discussion and Analysis above be included with or incorporated in Fulton Financial Corporation's Annual Report on Form 10-K and the annual proxy statement, as applicable.Executive Compensation CommitteeDonald W. Lesher, Jr., ChairGeorge W. Hodges, Vice ChairDonald M. Bowman, Jr.Patrick J. FreerCarolyn R. Holleran32 Financial Corporation has a standing Executive Committee, Audit Committee, Nominating Committee, Executive Compensation Committee, Trust Committee and Human Resources Committee. The following table represents the membership on each Fulton Financial Corporation committee as of the Annual Meeting on May 7, 2007:date of this proxy statement: Executive Executive Nominating Audit Human Trust Compensation Resources Jeffrey G. AlbertsonAlbertson* Member Vice Chair Member Chair Member John M. Bond, Jr. Vice Chair Donald M. Bowman, Jr. Chair* Member Member Member Craig Dana A. DallyChryst* Chair ChairMember Patrick J. Freer Craig A. Dally* Member Member Patrick J. Freer* Member Chair Member Rufus A. Fulton, Jr. Chair George W. Hodges ** Vice Chair Member Chair Carolyn R. Holleran* Member Chair Willem Kooyker ** Member George Donald W. HodgesLesher, Jr.* Chair Member Vice Chair Chair Abraham S. Opatut Carolyn R. Holleran Member Member Vice Chair Willem Kooyker John O. Shirk* Member* Donald W. Lesher, Jr.Member Vice Chair Vice Chair Member Abraham S. Opatut Member John O. Shirk Member Member R. Scott Smith, Jr. Member *** *** Gary A. StewartStewart* Member Member * Independent Director ** Independent Director and Audit Committee Financial Expert *** Ex-officio member 11.12. There are no interlocking relationships, as defined in regulations of the SEC, involving members of the Executive Compensation Committee. DirectorDirectors Albertson and Bowman has thehave indirect relationships described in "Related Person Transactions with Directors and Executive Officers" on page 34.38, and there are similar relationships with law firms where other directors are employed. The Executive Compensation Committee is responsible for, among other things, recommending the compensation and stock option awards for Senior Management to the Board of Directors. The Executive Compensation Committee met sixnine times in 2006.2007. The Executive Compensation Committee is governed by a formal charter, which was last amended in 2008, and which is available on Fulton’s website at www.fult.com.DirectorDirectors Hodges and Kooyker waswere determined to qualify, and agreed to serve, as the Audit Committee's "financial expert"experts" as defined by the SEC regulations. The Audit Committee met twelvefourteen times during the year. The Audit Committee is governed by a formal charter, which was first adopted in 2004 and last amended in 2004.2007, and which is available on Fulton’s website at www.fult.com. The Audit Committee's pre-approval policy and procedure for audit and non-audit services is set forth in its charter. The functions of the Audit Committee include, among other things,things: sole authority to appoint or replace the independent auditor; direct responsibility for the compensation and oversight of the work of the independent auditor; oversight of the overall relationship with the independent auditor; meeting with the independent auditor to review the scope of audit services; reviewing and discussing with management and the independent auditor annual and quarterly financial statements and related disclosures; overseeing the internalfunction; reviewing holding company regulatory examination reportsfunction, including hiring and management's responses thereto;replacing the chief audit executive; reviewing periodic reports from the loan review function; reviewreviewing and approvalapproving of all changes to Fulton Financial Corporation'sFulton's Code of Conduct; reviewreviewing and approvalapproving of related person transactions; establishing procedures and handling complaints concerning accounting, internal accounting controls, or auditing matters and oversight of Fulton Financial Corporation'sFulton's risk management process.
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All the members of the Nominating Committee meet the independence requirements of the NASDAQ listing standards. The Nominating Committee met one time during the year. The Nominating Committee is responsible for, among other things, recommending to the Board of Directors the nominees for election to the Board of Directors. The Nominating Committee operates pursuant to its charter, which is available on Fulton’s website at www.fult.com.
The Executive Committee met twonine times during the year. Except for the powers expressly excluded in Section 5 of Article III of the Bylaws, the Executive Committee exercises the powers of the Board of Directors between board meetings.
The Trust Committee met eight times during the year. The Trust Committee is responsible for consulting with management of Fulton Financial Advisors, National Association, a subsidiary of Fulton, Financial Corporation, and overseeing all trust, investment, insurance and related financial services which Fulton Financial Corporation performs, directly or indirectly through an affiliate.
Fulton Financial Corporation’sFulton’s Board of Directors has delegated certain broad based compensation matters to the Human Resources Committee including, but not limited to, administration of Fulton Financial Corporation’sFulton’s Employee Stock Purchase Plan, Profit SharingFulton’s 401(k) Retirement Plan and 401(k) plans for affiliate banks, approving employment agreements for non-executive officers of Fulton Financial Corporation and fulfilling other broad based human resources duties. The Human Resources Committee met eight times during the year to review benefit and salary administration programs (except for Fulton employees other than Senior Management of Fulton, Financial Corporation) and other human resources matters affecting Fulton Financial Corporation and its subsidiaries.
There were tenthirteen meetings of the Board of Directors of Fulton Financial Corporation and forty-sevenforty-nine meetings of the standing committees of the Board of Directors of Fulton Financial Corporation during 2006.2007. No director attended fewer than 75% of the aggregate number of meetings of the Board of Directors and of the board committees on which he or she served.served in 2007.
Executive Sessions
�� The independent directors of the board met twothree times in executive session in 2006.2007. Director Lesher, as the Chairman of the Executive Committee, conducted these executive sessions of the independent directors of the board.
Annual Meeting Attendance
Fulton Financial Corporation does not have a formal policy requiring directorsthe individual members of the Board of Directors to attend the Annual Meeting. However,Meeting, although all directors are encouraged to attend the meeting in person. Fulton Financial Corporation held a special board meetingits 2007 Annual Meeting, which began at 9 a.m.,12:00 noon on May 2, 2006,7, 2007, at the Hershey Lodge and Convention Center, and all of the same date and locationFulton directors in office as of the 2006 Annual Meeting, which began at 12:00 noon. Directors Holleran and Stewart were unable to attend this special board meeting and did not attendday of the Annual Meeting were present in 2006.2007.
Related Person Transactions with Directors and Executive Officers
Financial Products and Services.Some of the directors and executive officers of Fulton Financial Corporation and the companies with which they are associated were customers of, andand/or had banking transactions with, Fulton Financial Corporation bank subsidiaries during 2006.2007. These transactions included deposit accounts, trust relationships and loans in the ordinary course of business with different Fulton Financial Corporation banksbank subsidiaries. All loans and commitments to
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lend made to such persons and to the companies with which they are associated were made in the ordinary course of bank business, on substantially the same terms, (includingincluding interest rates collateral and repayment terms)collateral, as those prevailing at the time for comparable transactionsloans with other persons not related to the lender, and did not involve more than a normal risk of collectibility or present other unfavorable features. It is anticipated that similar transactions will be entered into in the future. DirectorsBy using Fulton’s products and services, directors and officers have the opportunity to utilize Fulton Financial Corporation’s products and services to become familiar with the wide array of products and services offered by Fulton Financial CorporationFulton’s affiliate banks to its customers.
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Other Transactions.Applicable SEC regulations require Fulton Financial Corporation to disclose transactions with certain related persons where the amount involved exceeds $120,000. However, a person who has a position or relationship with a firm, corporation, or other entity that engages in a transaction with Fulton Financial Corporation is not deemed to have a material interest in a transaction where the interest arises only from such person’s position as a director of the other entity and/or arises only from the ownership by such person in the other entity if that ownership is under ten percent, excluding partnerships. Amounts paid to entities in which a related person does not have a material interest are not required to be disclosed.
Some of the directors of Fulton Financial Corporation are members of law firms which provided legal services to Fulton Financial Corporation or its subsidiaries in 20062007 and in prior years. It is expected that these firms will continue to provide services to Fulton Financial Corporation or its subsidiaries in the future. The law firm of Albertson Ward, Woodbury, New Jersey, has provided legal services to subsidiaries of Fulton Financial Corporation for several years. Director Albertson is a partner in this law firm with more than a ten percent interest in the firm. In 2006,2007, Fulton Financial Corporation paid Albertson Ward $136,727$152,835 in fees and expense reimbursements for such services.
In 2006,2007, affiliate bankingbank subsidiaries of Fulton Financial Corporation paid annual rent and related expenses of $98,772$101,534 for a branch office to The Bowman Group, LLP, and annual rent and related expenses of $131,740$120,236 for a branch office to Bowman 2000 LLC. Director Donald M. Bowman, Jr. is a limited partner in The Bowman Group, LLP and is the manager of Bowman 2000 LLC.
Fulton Financial Corporation considered all of the above related person transactions, and other similar transactions, when it made the determinationdeterminations that teneleven of Fulton Financial Corporation’s fourteenFulton’s fifteen nominees and continuing directors are independent in accordance with the NASDAQ listing standards. See “Information about Nominees, Continuing Directors and Independence Standards” on page 56 for more information.
Family Relationships.There are no family relationships among any of the directors and Senior Management of Fulton Financial Corporation.Fulton. However, family relationships do exist among Senior Management and some of the approximately 4,4003,680 employees of Fulton Financial Corporation and its subsidiaries. These employees participate in compensation, benefit and incentive plans on the same basis as other similarly situated employees. Item 404(a) of Regulation S-K requiresSEC regulations require disclosure of any transaction with a related person where the amount involved exceeds $120,000. In fiscal year 2006,2007, the only immediate family member of Senior Management who was compensated in excess of that amount was Mr. Craig A. Roda, the brother-in-law of Mr. Wenger. In 2006,2007, Mr. Roda received annual compensation consisting of base salary and cash bonus totaling $232,884,$308,750, plus other benefits on the same basis as other similarly situated employees. Mr. Roda became President and Chief Operating Officer of Fulton Bank in January 2006, and in October 2006 he became the President and Chief Executive Officer of Fulton Bank. He has been employed by Fulton Financial Corporation in various positions since 1979.
Related Person Transaction Policy and Procedures.Fulton Financial Corporation does not have a separate policy specific to related person transactions. Under Fulton Financial Corporation’sFulton’s Code of Conduct (“Code”), however, employees and directors are expected to recognize and avoid those situations where personal or financial interests or relationships might influence, or appear to influence, the judgment of the employee or director on matters affecting Fulton Financial Corporation.Fulton. The Code also requires thoughtful attention to the problem of conflicts and the exercise of the highest degree of good judgment. Under the Code, directors are tomust provide reasonable notice to Senior Management of all changed or new business activities, related person relationships and board directorships as they arise.
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In addition, Fulton Financial Corporation and its affiliate banks are subject to Federal Reserve Regulation O, which deals withgoverns loans by federally regulated banks to certain insiders, which includesincluding an executive officer, director or 10% controlling shareholder of the applicable bank or bank holding company, or an entity controlled by such executive officer, director or controlling shareholder (“Insiders”(an “Insider”). Each Fulton Financial Corporation affiliate bank follows a Regulation O policy that prohibits the affiliate bank from making loans to an Insider unless the loan (i) is made on substantially the same terms, (includingincluding interest rates and collateral)collateral, as and following credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions byloans with persons not related to the affiliate bank with other persons who are not subject to Regulation O and who are not employed by the affiliate bank;lender; and (ii) does not involve more than the normal risk of repayment or present other unfavorable features. Fulton Financial Corporation and its affiliate banks are examined periodically by different bank regulators for compliance with Regulation O. Internal controls exist within Fulton Financial Corporation and its affiliate banks to ensure that compliance with Regulation O is maintained on an ongoing basis.
In accordance with Fulton Financial Corporation'sFulton's Audit Committee Charter and NASDAQ listing standards, the Audit Committee is charged with the responsibility to review the terms of and approve related person transactions. This responsibility includes providingreviewing an annual report toregarding the Audit Committee disclosing related person transactions with each director and Executive during the prior year, if any. At the February 20072008 Audit Committee meeting, the Audit Committee reviewed all existing related person transactions involving Fulton Financial Corporation’sFulton’s directors and executive officers. The Audit Committee concluded that the loans and other banking services to the directors of Fulton, Executives and their related interests were provided in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with others. Further, theThe Audit Committee also conducted a review of all other related person transactions for any potential conflict of interest situations with the directors of Fulton and the Executives, and concluded that there were no conflicts present, and ratified and approved all the transactions reviewed.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the directors and certain officers of Fulton Financial Corporation to file with the Securities and Exchange Commission initial reports of ownership and reports of change in ownership of common stock and other equity securities of Fulton. Based solely on its review of copies of such reports, forms or written representations from certain reporting persons that no Form 5’s were required for those persons, Fulton Financial Corporation. To the knowledge of Fulton Financial Corporation,believes that all Section 16(a) filing requirements applicable to its directors and officers have been complied with and reports were timely filed except with respect to a Form 4 for Abraham S. Opatut filed one day late on February 28, 2006, for an acquisition of 279.9709 shares of Fulton Financial Corporation stock on February 23, 2006. The failure to file this report timely was inadvertent and occurred as a result of a delay in receiving the transaction information from the stock transfer agent.2007.
AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN
General InformationBoard Evaluations
On January 16, 2007, the Board of Directors of Fulton Financial Corporation approved amendmentsIn an effort to the Amendedimprove board, committee and Restated Employee Stock Purchase Plan (the “Plan”) to increase the number of shares for which options are authorized to be granted under the Plan and to make other changes to update the Plan document. The purposeindividual director performance, all of the Plan is to advance the interests of Fulton Financial Corporation and its shareholders by encouraging employees to acquire a stake in the future of Fulton Financial Corporation by purchasing shares of its common stock. Under the Plan, the Board of Directors is authorized to grant options to employees of Fulton Financial Corporation and its affiliates to purchase shares of the common stock of Fulton Financial Corporation with up to a 15% price discount.
The Plan originally was adopted and approved by the Board of Directors on February 18, 1986, and subsequently approved by the shareholders at the Annual Meeting of shareholders held on April 15, 1986. The Plan has been amended twice since then, to provide that the Plan would continue in existence until terminated by the Board of Directors, rather than terminating after ten years, and to increase the number of shares for which options may be granted.
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The Plan permits the Board of Directors to amend, modify, suspend or terminate the Plan at any time, although the Board may not, without the consent of the shareholders of Fulton Financial Corporation, make any amendment which increases the number of shares for which options may be granted, changes the class of eligible employees, or materially increases the benefits accruing to an employee under the Plan.
The Board of Directors originally was authorized to grant options to purchase up to 100,000 shares of the common stock of Fulton Financial Corporation. The Plan was amended in 1999 to increase by 550,000 the number of shares for which options may be granted. The number of shares for which options may be granted is subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and other changes in the capital structure of Fulton Financial Corporation. Nevertheless, it is anticipated that the number of shares of Fulton Financial Corporation common stock for which options may be granted under the Plan will soon be exhausted. The Board of Directors believes that it is in the best interests of Fulton Financial Corporation and its shareholders for the Plan to continue. The Board of Directors therefore approved an amendment to the Plan, which will be submitted to the shareholders for approval at the Annual Meeting, to increase by 1,500,000 shares the number of shares of common stock for which options are authorized to be granted, so that the Plan can continue its existence once the shares previously authorized are exhausted.
Summary of the Plan
A copy of the Plan is attached to this Proxy Statement as Exhibit A. The following is a summary of the more significant terms of the Plan:
The Plan authorizes the Board of Directors to grant options to purchase shares of Fulton Financial Corporation common stock to employees of Fulton Financial Corporation and its affiliates. The number of shares for which options may be granted is subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations, and other changes in the corporate structure of Fulton Financial Corporation. Since the shareholders originally approved the Plan, the adjustments for stock splits and stock dividends have increased the authorized shares to 2.6 million shares, of which of 116,130 shares are currently available. When an option is exercised, Fulton Financial Corporation delivers authorized but unissued shares or treasury shares.
The Plan is administered by the Human Resources Committee of the Board of Directors or those persons to which responsibility for administration of the Plan has been delegated by the Board of Directors (the “Committee”), provided that the Committee shall at all times consist of at least three directors who are not eligible to receive options under the Plan. The Committee has complete discretion to determine whether or not options will be granted under the Plan in any year and, if so, the total number of shares that will be optioned in such year. Each option expires on the date specified by the Committee at the time it is granted, except that all options granted under the Plan must expire no later than five years from the date of grant.
When options are granted under the Plan, options must be granted proportionately to all employees of Fulton Financial Corporation and its affiliates who were employed by Fulton Financial Corporation or any affiliate on December 31 of the year immediately preceding the year in which options are granted, except that the Committee may elect to exclude those employees who customarily work twenty hours or less per week. Only those members of the Board of Directors who are also employeeswere asked to complete a board evaluation questionnaire in December 2007. The results were compiled by the Corporate Secretary and presented to the Board of Fulton Financial Corporation or one of its affiliates are eligible to participate in the Plan. When options are granted, each eligible employee is granted an option to purchase the number of whole shares that can be purchased,Directors at the applicable option price established by the Committee, with a percentage of his or her total compensationJanuary 2008 meeting for the immediately preceding calendar year. The Committee may limitdirectors to discuss the number of shares that can be purchased pursuant to each option, and no employee may be grantedresults without management present. Initially all the directors were present, however, the independent directors continued the discussion during an option to purchase stock with an aggregate fair market value of more than $25,000 during any calendar year. The Committee may also place other limitations on options granted under the Plan, such as restricting transfer of the stock purchased under the Plan.
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The option price per share is determined by the Committee, but may not be less than the lesser of: (i) 85% of the fair market value of the stock on the day of the grant, or (ii) 85% of the fair market value of the stock on the date of exercise. An option which is exercised more than 27 months after the date of grant, however, must be exercised at a price equal to 85% of the fair market value of the shares on the date of exercise.
The Plan is designed to be a qualified employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code, as amended. Employees who purchase shares under the Plan may qualify for favorable tax treatment if they hold the shares for the longer of: (i) two years after an option to purchase is granted, or (ii) one year after the shares are purchased. If this holding period is complied with, the employee will not recognize any taxable income in connection with the shares in the year in which the shares are purchased, even if purchased at a discount. If the employee sells or otherwise disposes of the shares following the expiration of the holding period, the employee will have to include as compensation in his or her gross income for the taxable year in which the shares are sold or otherwise disposed of an amount equal to the lesser of: (i) the excess of the fair market value of the shares at the time the option was granted over the exercise price, or (ii) the excess of the fair market value of the shares at the time of disposition over the exercise price.
During the lifetime of an optionee, an option may be exercised only by the optionee and only if the optionee is an employee of Fulton Financial Corporation or one of its affiliates at the time of exercise. If an optionee’s employment terminates by reason of retirement, the option may be exercised by the optionee or the heirs or personal representatives of the optionee for a period of three months following retirement.
Vote Required
A majority of the votes cast is necessary to approve the amendment of the Employee Stock Purchase Plan. Abstentions and broker non-votes will be counted as shares that are present at the meeting, but will not be counted as votes cast on the proposal to amend the Employee Stock Purchase Plan.
Recommendationexecutive session of the Board of DirectorsDirectors.
The Board of Directors believes that the proposal to amend the Plan for the purpose of increasing by 1,500,000 shares the number of shares of common stock for which options are authorized to be granted under the Plan is in the best interests of Fulton Financial Corporation and its shareholders, and recommends thatthe shareholders voteFOR the amendment of the Employee Stock Purchase Plan.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 2007, and December 31, 2006, Fulton Financial Corporation engaged KPMG LLP ("KPMG"), independent certified public accountants, to audit Fulton Financial Corporation'sFulton's financial statements. The fees incurred for services rendered by KPMG for the years ended December 31, 20062007 and 20052006 are summarized in the following table.
| 2006 | 2005 | 2007 | 2006 | |||||||
| Audit Fees – Annual Audit and Quarterly Reviews(1) | $ | 1,601,600 | $ | 1,632,800 | $ | 1,707,825 | $ | 1,638,000 | ||
| Audit Fees – Issuance of Comfort Letters and Consents | 66,040 | 218,800 | 120,380 | 66,040 | ||||||
| Audit Fees Subtotal | 1,667,640 | 1,851,600 | 1,828,205 | 1,704,040 | ||||||
| Audit Related Fees – Student Loan Audit | 7,280 | 6,240 | ||||||||
| Tax Fees – Preparation of Tax Returns | 0 | 75,500 | ||||||||
| Audit Related Fees | 24,320 | 25,780 | ||||||||
| Tax Fees | 0 | 0 | ||||||||
| All Other Fees(2) | 19,310 | 118,622 | 122,062 | 19,310 | ||||||
| TOTAL | $ | 1,694,230 | $ | 2,051,962 | $ | 1,974,587 | $ | 1,749,130 | ||
(1) Amounts presented for 2006 are based upon the audit engagement letter. Final billings for 2006 may differ.
(2) All Other Fees were for services rendered to the trust subsidiary (primarily for a SAS 70 report on the processing of transactions by the retirement services area). Amounts totalling $253,500 in 2006 for audit and tax services rendered to Columbia Bancorp Inc. for periods prior to its acquisition have been excluded.
| (1) Amounts presented for 2007 are based upon the audit engagement letter and additional billings if applicable. Final billings for 2007 may differ. | |
| (2) All Other Fees were for services rendered to the trust subsidiary (primarily for a SAS 70 report on the processing of transactions by the retirement services area). Amounts totaling $12,000 in 2007 and $253,500 in 2006 for audit and tax services to Columbia Bancorp, Inc. for periods prior to its acquisition have been excluded. |
The appointment of KPMG for the currentfiscal year will be reviewed inended December 31, 2008 was approved by the second quarterAudit Committee of 2007.the Board of Directors of Fulton (the “Committee”) at a meeting on February 26, 2008. Representatives of KPMG are expected to be present at the 20072008 Annual Meeting with the opportunity to make a statement and to be available to respond to appropriate questions.
The Audit Committee of the Board of Directors of Fulton Financial Corporation (the “Committee”) has carefully considered whether the provision of the non-audit services described above which were performed by KPMG in 20062007 would be incompatible with maintaining the independence of KPMG in performing its audit services and has determined that, in its judgment, the independence of KPMG has not been compromised.
All fees paid to KPMG in 20062007 and 20052006 were preapproved by the Committee. The Committee preapproves all auditing and permitted non-auditing services, including the fees and terms thereof, to be performed by its independent auditor, subject to the de minimus exceptions fromfor non-auditing services permitted by the Securities Exchange Act of 1934. However, these types of services are approved prior to completion of the services. The Committee may form and delegate authority to subcommittees consisting of one or more members, when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services. Any decisions of such subcommittees to grant preapprovals are presented to the full Committee for ratification at its next scheduled meeting.
Based on its review and discussion of the audited 20062007 financial statements of Fulton Financial Corporation with management and Fulton Financial Corporation's auditor, KPMG, the Committee recommended to the Board of Directors that the financial statements be included in the Annual Report on Form 10-K for filing with the Securities and Exchange Commission. A copy of the report of the Audit Committee of its findings that resulted from its financial reporting oversight responsibilities is attached as Exhibit B.A.
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ADDITIONAL INFORMATION
A copy of the Annual Report of Fulton Financial Corporation on Form 10-K as filed with the Securities and Exchange Commission, including financial statements, is available without charge to shareholders upon written request addressed to the Corporate Secretary, Fulton Financial Corporation, P.O. Box 4887, Lancaster, Pennsylvania 17604.
Only one proxy statement is being delivered to multiple security holders sharing an address unless Fulton Financial Corporation has received contrary instructions from one or more of the security holders. Fulton Financial Corporation will promptly deliver, upon written or oral request, a separate copy of the proxy statement to a security holder at a shared address to which a single copy of the document was delivered. Such a request should be made to the Corporate Secretary, Fulton Financial Corporation, P.O. Box 4887, Lancaster, Pennsylvania 17604, (717) 291-2411. Requests to receive a separate mailing for future proxy statements should be made orally or in writing to the Corporate Secretary at the foregoing address or phone number.
The Fulton Financial Corporation Annual Report on Form 10-K for year endingended December 31, 20062007 and proxy statement are posted and available on Fulton's website at www.fult.com. Copies of the current governance documents and future updates, including but not limited to the Fulton Code of Conduct, Audit Committee Charter, Executive Compensation Committee Charter and Nominating Committee Charter, are also posted and available on Fulton Financial Corporation'sFulton's website atwww.fult.com. www.fult.com.
OTHER MATTERS
The Board of Directors of Fulton Financial Corporation knows of no matters other than those discussed in this Proxy Statement which will be presented at the 20072008 Annual Meeting. However, if any other matters are properly brought before the meeting, any proxy given pursuant to this solicitation will be voted in accordance with the recommendations of the Board of Directors of Fulton Financial Corporation.Fulton.
BY ORDER OF THE BOARD OF DIRECTORS | |
 | |
 | |
| R. SCOTT SMITH, JR. | |
| Chairman of the Board, President | |
| and Chief Executive Officer | |
| Lancaster, Pennsylvania | |
| March 20, 2008 | |
Lancaster, PennsylvaniaApril 2, 2007
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