SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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[_] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule (S)240.14a12
FULTON FINANCIAL CORPORATION
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(Name of Registrant as specified in its Charter)
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(Name of person(s) filing Proxy Statement,
if other than the Registrant)
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Fulton Financial
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CORPORATION
P.O. Box 4887
One Penn Square
Lancaster, Pennsylvania 17604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 2003
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 Tuesday, April 15, 2003, 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 six directors for a term of three
years.
2. 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 February 25,
2003 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. Your Proxy is revocable
and may be withdrawn at any time before it is voted at the meeting.
A copy of the Annual Report of Fulton Financial Corporation is enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
GEORGE R. BARR, JR.
Secretary
Enclosures
March 13, 2003
PROXY STATEMENT
Dated and To Be Mailed: March 13, 2003
Fulton Financial
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CORPORATION
P.O. Box 4887, One Penn Square
Lancaster, Pennsylvania 17604
(717) 291-2411
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 15, 2003
TABLE OF CONTENTS
PAGE
GENERAL .............................................................................. 2
Introduction ..................................................................... 2
Date, Time and Place of Meeting .................................................. 2
Shareholders Entitled to Vote .................................................... 2
Purpose of Meeting ............................................................... 3
Solicitation of Proxies .......................................................... 3
Revocability and Voting of Proxies ............................................... 3
Voting of Shares and Principal Holders Thereof ................................... 3
Shareholder Proposals ............................................................ 4
Recommendation of the Board of Directors ......................................... 4
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS .............................. 4
General Information .............................................................. 4
Information about Nominees and Continuing Directors .............................. 5
Executive Officers and Stock Ownership ........................................... 11
Executive Compensation ........................................................... 13
Performance Graph ................................................................ 17
Meetings and Committees of the Board of Directors ................................ 18
Compensation of Directors ........................................................ 19
Transactions with Directors and Executive Officers ............................... 19
Section 16(a) Beneficial Ownership Reporting Compliance .......................... 19
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS ..................................... 20
Audit Fees ....................................................................... 21
Financial Information Systems Design and Implementation Fees ..................... 21
All Other Fees ................................................................... 21
ADDITIONAL INFORMATION ............................................................... 21
OTHER MATTERS ........................................................................ 22
EXHIBITS ............................................................................. 23
Exhibit A - Report of Audit Committee ................................................ 23
Exhibit B - Fulton Financial Corporation Audit Committee Charter ..................... 24
1
GENERAL
Introduction
Fulton Financial Corporation, a Pennsylvania business corporation and
registered financial holding company, 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. Since that time, Fulton Financial Corporation has
acquired other banks and currently owns the following subsidiary banks: Fulton
Bank, Delaware National Bank, Lebanon Valley Farmers Bank, FNB Bank, N.A.,
Hagerstown Trust Company, Lafayette Ambassador Bank, Swineford National Bank,
The Bank (formerly The Bank of Gloucester County), The Peoples Bank of Elkton
and Skylands Community Bank. In addition, Fulton Financial Corporation has the
following direct, non-banking subsidiaries: 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),
Central Pennsylvania Financial Corp. (which owns, directly or indirectly,
certain limited partnership interests, principally in low-moderate income and
elderly housing projects), FFC Management, Inc. (which holds certain investment
securities and corporate owned life insurance policies), 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), Dearden, Maguire, Weaver
& Barrett, LLC (which is a registered investment advisor offering investment
management and advisory services), Pennbanks Insurance Company (which is a
reinsurance company), FFC Penn Square, Inc. (a holder of trust preferred
securities) and Drovers Capital Trust 1 (an issuer of trust preferred
securities).
On January 16, 2003, Fulton Financial Corporation entered into a merger
agreement to acquire Premier Bancorp, Inc. (Premier), of Doylestown,
Pennsylvania. Premier is a $600 million financial holding company whose primary
subsidiary is Premier Bank, which has seven community banking offices in Bucks,
Northampton and Montgomery Counties, Pennsylvania.
Under the terms of the merger agreement, each of the approximately 3.5
million shares of Premier's common stock will be exchanged for 1.34 shares of
Fulton Financial Corporation's common stock. In addition, each of the
outstanding options (304,000 as of January 16, 2003) to acquire Premier's stock
will be converted to options to purchase Fulton Financial Corporation's stock.
The acquisition is subject to approval by bank regulatory authorities and
Premier's shareholders and is expected to be completed in the third quarter of
2003.
As a result of the acquisition, Premier will be merged into Fulton
Financial Corporation and Premier Bank will become a wholly-owned subsidiary of
Fulton Financial Corporation.
The meeting to which this Proxy Statement relates will be the twenty-first
Annual Meeting of the shareholders of Fulton Financial Corporation.
Date, Time and Place of Meeting
The regular Annual Meeting of the shareholders of Fulton Financial
Corporation will be held on Tuesday, April 15, 2003, at 12:00 noon, at the
Hershey Lodge and Convention Center, West Chocolate Avenue and University Drive,
Hershey, Pennsylvania.
Shareholders Entitled to Vote
Only those shareholders of record at the close of business on February 25,
2003 shall be entitled to receive notice of, and to vote at, the meeting.
2
Purpose of Meeting
The shareholders will be asked to consider and vote upon the following
matters at the meeting: (i) to elect six directors for a term of three years;
and (ii) to consider and vote upon such other business as may be properly
brought before the meeting and any adjournment 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 Tuesday, April 15, 2003, and any adjournments thereof.
The expense of soliciting proxies will be borne by Fulton Financial
Corporation. In addition to the use of the mails, directors, officers and
employees of Fulton Financial Corporation and its subsidiaries may, without
additional compensation, solicit proxies personally or by telephone.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the meeting and to vote in person. Any proxy given
pursuant to this solicitation may be revoked by delivering written notice of
revocation to George R. Barr, Jr., Secretary of Fulton Financial Corporation, at
any time before the proxy is voted at the 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 voted FOR the election of the six
nominees identified in this Proxy 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.
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's account by the Plan Agent 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 Profit Sharing Plan and Affiliate 401(k) Savings
Plan will be voted by the Plan Trustee (Fulton Financial Advisors, National
Association) in accordance with the instructions of each participant as set
forth in the separate voting instruction sheet sent to the participant with
respect to such shares. Shares held under the Fulton Financial Stock Fund with
respect to which no voting instructions are received by the Plan Trustee will be
voted by the Plan Trustee FOR the election of the six nominees identified in the
Proxy Statement.
Voting of Shares and Principal Holders Thereof
At the close of business on February 25, 2003, which is the record date for
determination of shareholders entitled to receive notice of, and to vote at, the
meeting and any adjournment thereof, Fulton Financial Corporation had
outstanding 100,753,048 shares of common stock. There is no other class of stock
outstanding. As of the record date, 2,720,108 shares of Fulton Financial
Corporation common stock were held by Fulton Financial Advisors, National
Association, a subsidiary of Fulton Financial Corporation, as sole fiduciary.
The shares held by Fulton Financial Advisors, National Association as sole
fiduciary represent in the aggregate approximately 2.69 percent of the total
shares outstanding and will be voted FOR the election of the six nominees
identified in this Proxy Statement.
3
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., 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.
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 the Articles of Incorporation or Bylaws. In the case of
the election of directors, the six 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 outstanding,
but will not be counted or voted in favor of the election of directors.
To the knowledge of Fulton Financial Corporation, no person owned of record
or beneficially on the record date more than five percent of the outstanding
common stock of Fulton Financial Corporation.
Shareholder Proposals
Shareholder proposals intended to be presented at the 2004 Annual Meeting
must be received at the executive offices of Fulton Financial Corporation at One
Penn Square, Lancaster, Pennsylvania not later than November 4, 2003, in order
to be included in the proxy statement and proxy form to be prepared by Fulton
Financial Corporation in connection with the 2004 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 2004 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 2004 Annual
Meeting. The shareholder, or a qualified representative, must attend the 2004
Annual Meeting to present the proposal.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
election of the six nominees identified in this Proxy Statement.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
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 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
4
Meeting each year. The Bylaws provide that the number of directors in each class
of directors shall be determined by the Board of Directors.
A majority of the Board of Directors may increase 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. There is 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's attaining the age of 70 years.
The Board of Directors has fixed the number of directors at twenty-two.
There are sixteen continuing directors whose terms of office will expire at
either the 2004 Annual Meeting or the 2005 Annual Meeting. The Board of
Directors proposes to nominate the following six persons for election to the
Board of Directors for the term specified below:
For a Term of Three Years - Class of 2006
Jeffrey G. Albertson Eugene H. Gardner
Craig A. Dally Clyde W. Horst
Rufus A. Fulton, Jr. R. Scott Smith, Jr.
Each of the above nominees is presently a director of Fulton Financial
Corporation. In addition, except for Directors Fulton and Smith, each nominee
currently serves on one bank subsidiary board of directors and will continue to
serve on such board as follows: Directors Gardner and Horst - Fulton Bank;
Director Albertson - The Bank; and Director Dally - Lafayette Ambassador Bank.
In the event that any of the foregoing nominees is 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 nominees will be unable to accept nomination
or to serve as a director if elected.
Section 3 of Article II of the Bylaws of Fulton Financial Corporation
requires that nominations, other than those made by or on behalf of the existing
management of Fulton Financial Corporation, must be made in writing and must be
delivered or mailed to the Chief Executive Officer of Fulton Financial
Corporation not less than 14 days nor more than 50 days prior to the date of the
Annual Meeting; provided, however, that if less than 21 days' notice of the
meeting is given to the shareholders, such nominations must be mailed or
delivered to the Chief Executive Officer of Fulton Financial Corporation not
later than the close of business on the seventh day following the day on which
notice of the meeting was mailed. The required notice must set forth the name,
age, residence address and principal occupation of each nominee. The chairman of
the meeting is required to determine whether nominations have been made in
accordance with the requirements of the Bylaws and, if he determines that a
nomination is defective, the nomination and any votes cast for the nominee shall
be disregarded.
Information about Nominees and Continuing Directors
Information concerning the six persons to be nominated by the Board for
election to the Board of Directors of Fulton Financial Corporation at the 2003
Annual Meeting and concerning the sixteen continuing directors is set forth
below, including the number of shares of Fulton Financial Corporation common
stock beneficially owned, directly or indirectly, as of February 19, 2003 by
each of them. Unless otherwise indicated in a footnote, shares shown as
beneficially owned by each nominee or continuing director are held either (i)
individually by the person indicated, (ii) individually by the person's spouse
or children living in the same
5
household, (iii) jointly with the person'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 or the person's spouse. No nominee or continuing director owns
beneficially more than one percent of the outstanding common stock of Fulton
Financial Corporation, except Samuel H. Jones, Jr., who owns 1.40 percent. Years
of service as a director include service as a director of Fulton Bank prior to
the formation of Fulton Financial Corporation.
NOMINEES
CLASS OF 2006
(Three Year Term)
JEFFREY G. ALBERTSON, age 62. Attorney, Albertson Ward (law firm).
Director since 1996. Shares of stock beneficially owned: 138,819/1/
CRAIG A. DALLY, age 46. Attorney, Pierce & Dally, LLP (law firm).
Director since 2000. Shares of stock beneficially owned: 102,994 Mr.
Dally is a member of the Pennsylvania House of Representatives,
serving District 138.
RUFUS A. FULTON, JR., age 62. Chairman of the Board and Chief
Executive Officer, Fulton Financial Corporation. Director since 1984.
Shares of stock beneficially owned: 413,160/2/ Mr. Fulton also serves
as a director of Burnham Holdings, Inc.
EUGENE H. GARDNER, age 67. President, Gardner, Russo & Gardner
(investment advisor). Director since 1981. Shares of stock
beneficially owned: 33,917
CLYDE W. HORST, age 64. Chairman of the Board, The Horst Group, Inc.
(diversified holding company). Director since 1978. Shares of stock
beneficially owned: 71,830
6
R. SCOTT SMITH, JR., age 56. President and Chief Operating Officer,
Fulton Financial Corporation. Director since 2001. Shares of stock
beneficially owned: 301,925/3/
CONTINUING DIRECTORS
CLASS OF 2004
DONALD M. BOWMAN, JR., age 64. Partner, Bowman Group (trucking and
real estate business). Director since 1994. Shares of stock
beneficially owned: 415,728/4/
FREDERICK B. FICHTHORN, age 69. Chairman of the Board, F & M Hat
Company (manufacturer and distributor of felt and straw hats).
Director since 1993. Shares of stock beneficially owned: 108,624/5/
CHARLES V. HENRY, III, age 68. Attorney, Henry & Beaver, LLP (law
firm). Director since 1998. Shares of stock beneficially owned:
154,924/6/
GEORGE W. HODGES, age 52. President, The Wolf Organization, Inc.
(distributors of lumber and building supplies). Director since 2001.
Shares of stock beneficially owned: 20,606/7/ Mr. Hodges also serves
as a director of York Water Company, which is subject to the periodic
reporting requirements of Section 15(d) of the Securities Exchange Act
of 1934.
JOSEPH J. MOWAD, M.D., age 67. Director of Urology, Geisinger Medical
Center (urologist). Director since 1999. Shares of stock beneficially
owned: 38,347
JOHN O. SHIRK, age 59. Attorney, Barley, Snyder, Senft & Cohen, LLC
(law firm). Director since 1983. Shares of stock beneficially owned:
36,264/8/
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KENNETH G. STOUDT, age 59. President, The Stoudt Companies (employee
benefit consulting company). Director since 1987. Shares of stock
beneficially owned: 71,055
CLASS OF 2005
PATRICK J. FREER, age 53. President, Strickler Insurance Agency, Inc.
(insurance broker). Director since 1996. Shares of stock beneficially
owned: 49,975/9/
ROBERT D. GARNER, age 69. Retired Chairman of the Board, Fulton
Financial Corporation. Director since 1981. Shares of stock
beneficially owned: 124,605/10/
J. ROBERT HESS, age 68. Retired President, Lancaster Malleable
Castings Company (manufacturer of malleable iron castings). Director
since 1977. Shares of stock beneficially owned: 33,647
CAROLYN R. HOLLERAN, age 64. Partner, Jerlyn Associates (real estate
investments). Director since 1994. Shares of stock beneficially owned:
24,260
SAMUEL H. JONES, JR., age 69. Founder, S J Transportation Co.
(trucking company). Director since 1997. Shares of stock beneficially
owned: 1,414,443. Mr. Jones also serves as a director of Viewpoint
Corporation, which is subject to the periodic reporting requirements
of Section 15(d) of the Securities Exchange Act of 1934.
DONALD W. LESHER, JR., age 58. Retired, President, Lesher Mack Sales
and Service (truck dealership). Director since 1998. Shares of stock
beneficially owned: 103,685
STUART H. RAUB, JR., age 69. Retired Chairman of the Board, Industrial
Piping Systems, Inc. (distributor of industrial piping and related
items). Director since 1981. Shares of stock beneficially owned:
54,239/11/
MARY ANN RUSSELL, age 67. Retired President and Chief Executive
Officer, Maple Farm, Inc. (provider of health care services). Director
since 1991. Shares of stock beneficially owned: 23,902
8
GARY A. STEWART, age 55. Partner, Stewart Associates (real estate
developer). Director since 2001. Shares of stock beneficially
owned: 264,696/12/
As of February 19, 2003, Fulton Financial Corporation's directors and
executive officers, as a group, owned of record and beneficially 4,463,454/13/
shares of Fulton Financial Corporation common stock, representing 4.42 percent
of such shares then outstanding.
Footnotes
1. Includes 13,177 shares held in the Albertson Ward Profit Sharing Plan and
25,509 shares which may be acquired pursuant to the exercise of stock
options. Mr. Albertson disclaims beneficial ownership of any of the shares
held in the Albertson Ward Profit Sharing Plan beyond his pro rata vested
interest as a participant in such Plan.
2. Includes 34,064 shares held in the Corporation's Profit Sharing Plan and
204,711 shares, which may be acquired pursuant to the exercise of stock
options.
3. Includes 11,544 shares held in the Corporation's Profit Sharing Plan and
217,453 shares which may be acquired pursuant to the exercise of stock
options.
4. Includes 81,344 shares held by Bowman Sales & Equipment, Inc.
5. Includes 5,048 shares held in the F&M Hat Company Profit Sharing Plan. Mr.
Fichthorn disclaims beneficial ownership of any of the shares held in the
F&M Hat Company Profit Sharing Plan beyond his pro rata vested interest as
a participant in such Plan.
6. Includes 608 shares held in a trust.
7. Includes 14,065 shares owned by his spouse and 5,600 shares which may be
acquired pursuant to the exercise of stock options.
8. Includes 2,251 shares held in a trust.
9. Includes 168 shares owned by his spouse. Also includes 33,912 shares held
by Strickler Insurance Agency, Inc. Mr. Freer disclaims beneficial
ownership of any of these shares beyond his pro rata interest in the
company.
10. Includes 31,470 shares held by his spouse as trustee under various trusts
for grandchildren. Also, includes 57,704 shares owned by his spouse.
11. Includes 2,291 shares held in the Industrial Piping Systems, Inc. 401(k)
Plan. Mr. Raub disclaims beneficial ownership of any shares held in the
Industrial Piping Systems 401(k) Plan beyond his pro-rata vested interest
as a participant in such Plan. Also includes 5,371 shares held by a
revocable trust of which his spouse is settlor.
12. Includes 78,242 shares held in a grantor retained annuity trust and 7,616
shares which may be acquired pursuant to the exercise of stock options.
Also includes 61,701 shares held in the Stewart Foundation. Mr. Stewart
disclaims beneficial ownership of any of these shares beyond his pro rata
interest in the Foundation.
9
13. Includes 820,024 shares issuable upon the exercise of stock options, which
shares have been treated as outstanding shares for purposes of calculating
the percentage of outstanding shares owned by directors and executive
officers as a group.
Executive Officers and Stock Ownership
The following persons are the executive officers of Fulton Financial
Corporation:
Name Age Office Held and Term of Office
Rufus A. Fulton, Jr. 62 Chairman of the Board and Chief Executive
Officer of Fulton Financial Corporation since
January, 1999; previously President and Chief
Executive Officer of Fulton Financial
Corporation. Member of Senior Management of
Fulton Financial Corporation.
R. Scott Smith, Jr. 56 President and Chief Operating Officer of
Fulton Financial Corporation since January,
2001; previously Executive Vice President of
Fulton Financial Corporation and Chairman,
President and Chief Executive Officer of
Fulton Bank. Member of Senior Management of
Fulton Financial Corporation.
Charles J. Nugent 54 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.
Member of Senior Management of Fulton
Financial Corporation.
Richard J. Ashby, Jr. 58 Executive Vice President of Fulton Financial
Corporation and since January, 2002, Chairman
and Chief Executive Officer of Fulton Bank;
previously Chairman, President and Chief
Executive Officer of Fulton Bank; President
and Chief Operating Officer of Fulton Bank;
and Chairman of the Board, President and
Chief Executive Officer of Lafayette
Ambassador Bank. Member of Senior Management
of Fulton Financial Corporation and Fulton
Bank.
Information concerning beneficial ownership of Fulton Financial Corporation
stock by Messrs. Fulton and Smith is included in the information above
concerning Directors. The following table shows the beneficial ownership of
Fulton Financial Corporation stock by the other named executive officers as of
February 19, 2003:
Name Shares Beneficially Owned Percent of Stock Outstanding
Charles J. Nugent 238,948/1/ .23
--------------
/1/ Includes 15,833 shares held in the Corporation's Profit Sharing Plan and
195,301 shares which may be acquired pursuant to the exercise of stock options.
10
Richard J. Ashby, Jr. 222,861/2/ .22
(This space intentionally left blank)
-----------------
/2/ Includes 5,605 shares held in the Corporation's Profit Sharing Plan and
163,834 shares which may be acquired pursuant to the exercise of stock options.
11
Executive Compensation
The following Summary Compensation Table shows all compensation paid by
Fulton Financial Corporation for services rendered during the past three fiscal
years by the Chief Executive Officer and each of the most highly compensated
named executive officers whose total annual salary and bonus exceeded $100,000
in 2002.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
------------------- ----------------------
Name and All Other
Principal Position Year Salary Bonus Options Compensation*
Rufus A. Fulton, Jr., 2002 $688,518.30 $26,481.48 34,500 $103,277.78
Chairman of the Board and Chief 2001 $638,444.30 $24,555.55 27,600 $ 95,766.65
Executive Officer 2000 $586,444.31 $22,555.55 21,100 $ 87,966.65
R. Scott Smith, Jr., President 2002 $404,444.44 $15,555.56 28,700 $ 60,666.67
and Chief Operating Officer 2001 $361,111.14 $13,888.89 23,000 $ 54,166.67
2000 $327,407.36 $12,592.59 16,100 $ 49,111.10
Charles J. Nugent, 2002 $337,037.04 $12,962.96 24,700 $ 50,555.56
Senior Executive Vice President and 2001 $293,703.80 $11,296.30 19,800 $ 44,055.57
Chief Financial Officer 2000 $269,629.62 $10,370.37 15,100 $ 40,444.44
Richard J. Ashby, Jr. 2002 $298,962.96 $11,037.04 20,550 $ 43,044.44
Executive Vice President 2001 $265,148.06** $ 9,851.85 16,500 $ 39,772.21
2000 $241,185.23** $ 8,814.82 12,600 $ 36,177.78
* Amounts accrued under the Fulton Financial Corporation Profit Sharing Plan
for the account of each named executive officer.
** Includes amounts, the receipt of which has been deferred pursuant to the
Fulton Financial Corporation Deferred Compensation Plan.
STOCK OPTION GRANTS IN FISCAL YEAR 2002
Potential Realized Value at
% of Total Assumed Annual Rates of
Options Exercise or Stock Price Appreciation for
Options Granted to Base Price Expiration Option Term
Name Granted Employees Per Share Date 5% 10%
Rufus A. Fulton, Jr. 34,500 7.96% $19.325 June 30, 2012 $419,291.91 $1,062,568.02
R. Scott Smith, Jr. 28,700 6.62 19.325 June 30, 2012 $348,802.25 $ 883,933.40
Charles J. Nugent 24,700 5.70 19.325 June 30, 2012 $300,188.70 $ 760,737.10
Richard J. Ashby, Jr. 20,550 4.74 19.325 June 30, 2012 $249,752.14 $ 632,920.95
12
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 2002
AND FISCAL YEAR END OPTION VALUES
Number of
Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
Name on Exercise* Realized Fiscal Year Fiscal Year End*
---- ----------- -------- ----------- ---------------
End**
---
Rufus A. Fulton, Jr. 63,000 $637,281.74 217,359 $628,383.16
R. Scott Smith, Jr. 16,475 $213,969.80 217,453 $941,275.73
Charles J. Nugent -- -- 195,301 $839,653.36
Richard J. Ashby, Jr. 15,088 $178,973.75 163,834 $712,149.31
* Restated to reflect a 5 for 4 stock split paid on May 20, 2002.
** All options are currently exercisable.
EQUITY COMPENSATION PLAN INFORMATION
Number of securities remaining
Number of securities to Weighted-average exercise available for future issuance
be issued upon exercise price of outstanding under equity compensation plans
of outstanding options, options, warrants and (excluding securities reflected
Plan category warrants and rights rights in first column)
------------- ----------------------- --------------------- -------------------------------
Equity compensation plans 2,854,036 $13.7923 660,000
approved by security
holders (1)(2)
Equity compensation plans
not approved by security
holders 0 0 0
Total 2,854,036 $13.7923 660,000
(1) This plan is Fulton Financial Corporation's 1996 Incentive Stock
Option Plan.
(2) As of December 31, 2002.
13
Executive Committee Report on Executive Compensation
Compensation for executive officers of Fulton Financial Corporation is
determined by the Board of Directors after receiving recommendations from the
Executive Committee based upon external salary comparisons and individual
performance. In making recommendations to the Board of Directors regarding the
appropriate levels of executive officer compensation for 2002, the Executive
Committee first considered the executive management tiers and corresponding base
salary ranges which had been developed in 2001 by Peter R. Johnson & Company, a
consultant on executive compensation. Fulton Financial Corporation's executive
compensation program is based, to a significant degree, on peer group
information, because the Board of Directors believes that the Corporation must
offer competitive salaries in order to attract and retain qualified executive
officers.
In making recommendations to the Board of Directors regarding the
appropriate levels of executive officer compensation for 2002, the Executive
Committee also considered the individual performance factors described in this
paragraph. With regard to the compensation paid to executive officers other than
the Chief Executive Officer, the Executive Committee considered information
provided by the Chief Executive Officer as to each executive officer's level of
individual performance, contribution to the organization, and salary history
during the past five years. With regard to the compensation paid to the Chief
Executive Officer, the Executive Committee considered his performance level, the
results of management decisions made by him, and the earnings of Fulton
Financial Corporation during the previous year. The Executive Committee did not
assign a particular weight to any of the foregoing individual performance
factors, nor did it establish specific target levels for individual performance
or corporate earnings. The compensation recommendations of the Executive
Committee were based on its overall subjective assessment of the value of the
services provided by each executive officer to Fulton Financial Corporation,
after giving careful consideration to the peer group compensation information
described above and the individual performance factors discussed in this
paragraph.
The peer group of bank holding companies used by the Executive Committee
for purposes of making a comparative analysis of executive compensation for 2002
included all of the same bank holding companies that are incorporated in the
peer group established to compare shareholder returns, as indicated in the
Performance Graph included in this Proxy Statement. The peer group includes bank
holding companies that are comparable to Fulton Financial Corporation in terms
of asset size, although they are not necessarily comparable in terms of
financial performance.
Pursuant to an Incentive Stock Option Plan approved by the Board of
Directors and the shareholders in 1996, Fulton Financial Corporation is
authorized to award incentive stock options and non-qualified stock options to
key employees of Fulton Financial Corporation and its subsidiaries. These stock
options enable the recipients to purchase Fulton Financial Corporation common
stock at the prices designated in the awarded options. The number of options
available for grant in any calendar year is determined based on the performance
of Fulton Financial Corporation measured in terms of total shareholder return
relative to a peer group, determined at the sole discretion of those members of
the Executive Committee who are not eligible to receive options under the
Incentive Stock Option Plan, for the immediately preceding five year period. The
awards of stock options made to the executive officers of Fulton Financial
Corporation during 2002 were determined by the Board of Directors based on the
recommendations of the Executive Committee. In making such recommendations, the
Executive Committee considered the number of shares to be optioned 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 executive officers.
The Executive Committee used the same criteria in determining the number of
options to be awarded to the Chief Executive Officer. The Executive Committee
did not establish specific target levels for individual performance or corporate
profitability. The Committee believes, however, that awards of stock
14
options and bonuses are an appropriate means of compensating executive officers
based on the performance of Fulton Financial Corporation.
EXECUTIVE COMMITTEE
Samuel H. Jones Jr., Chair Robert D. Garner
Donald M. Bowman, Jr. Carolyn R. Holleran
Rufus A. Fulton, Jr.* Donald W. Lesher, Jr.
Stuart H. Raub, Jr.
* During 2002, Mr. Fulton was Chairman of the Board and Chief Executive
Officer of Fulton Financial Corporation.
Severance Agreements and Survivors' Benefits
Fulton Financial Corporation has entered into severance agreements with
Messrs. Fulton, Smith, Ashby and Nugent (the "Executives"). Under the terms of
those agreements, certain limited severance benefits are payable in the event
that an Executive is discharged or resigns 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 be entitled to
receive from Fulton Financial Corporation an annual benefit 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 the Fulton Financial Corporation Employee Retirement
Plan. Such benefits would be payable, in the case of Mr. Fulton, for a period of
five years and, in the cases of Messrs. Smith, Ashby and Nugent, for a period of
three years, beginning on the date of the Executive's discharge or resignation
and continuing until (i) he elects to terminate benefits in order to accept
employment with another financial services institution; (ii) the end of the year
in which he attains the age of 65; or (iii) he dies, whichever first occurs.
Officers of Fulton Financial Corporation and certain of its bank
subsidiaries as of April 1, 1992, who had been employed by the Corporation for
at least five years as of that date, 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 25 percent of the employee's final annual salary. This
benefit is paid from the date of death until the employee's 65th birthday with a
minimum of ten annual payments. Messrs. Fulton, Smith and Ashby participate in
this program.
15
PERFORMANCE GRAPH
The following graph shows cumulative investment returns to shareholders
based on the assumptions that (A) an investment of $100 was made on December 31,
1997, in each of the following: (i) Fulton Financial Corporation common stock;
(ii) the stock of all United States companies traded on the NASDAQ Stock Market;
and (iii) common stock of the peer group of bank holding companies in a
nine-state (plus the District of Columbia) Eastern United States region with
total assets at September 30, 1996 of $2 to $8 billion; and (B) all dividends
were reinvested in such securities over the past five years.
Comparison of Five Year-Cumulative Total Returns
Fulton Financial Corporation
(Graph gets inserted)
Legend Description
FFC FULTON FINANCIAL CORPORATION
NASDAQ NASDAQ Stock Market (U.S. Companies)
Peer Group Self-Determined Peer Group consisting of bank holding companies
with assets of $2 - $8 billion at 9/30/96 with corporate
headquarters in PA, MD, NJ, DE, OH, NY, DC, VA, WV and NC and
not under acquisition agreement as of 12/31/02
Notes:
A. The lines represent yearly index levels derived from compounded
daily returns that include all dividends.
B. If the yearly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
C. The index level for all series was set to 100.0 on 12/31/97.
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
--------------------------------------------------------------------------------------------------------
FFC 100.00 88.71 80.47 111.77 114.59 119.65
NASDAQ 100.00 140.99 261.48 157.42 124.89 86.33
Peer Group 100.00 96.38 83.34 101.76 116.61 119.13
Meetings and Committees of the Board of Directors
The Board of Directors of Fulton Financial Corporation has a standing
Executive Committee, Audit Committee, and Trust Committee. There is also a
standing Human Resources Committee which, except with regard to the executive
officers of Fulton Financial Corporation, serves as the compensation committee.
The Board of Directors of Fulton Financial Corporation does not have a standing
Nominating Committee.
16
Compensation Committee Interlocks and Insider Participation
The functions of the Executive Committee of the Board of Directors of
Fulton Financial Corporation include, among other things, consideration of
compensation for executive officers of Fulton Financial Corporation and
presentation of salary recommendations to the Board of Directors for approval.
Members of the Executive Committee are Samuel H. Jones, Jr., Chair, Carolyn R.
Holleran, Vice Chair, and Messrs. Bowman, Fulton, Garner, Lesher and Raub. In
2002, Mr. Fulton was Chairman and Chief Executive Officer of Fulton Financial
Corporation. Mr. Fulton does not participate in discussions as to his own
compensation. There are no interlocking relationships, as defined in regulations
of the SEC, involving members of the Executive Committee. The Executive
Committee met three times during 2002.
Other Board Committees
Members of the Audit Committee are Patrick J. Freer, Chair, James K.
Sperry, Vice Chair, and Messrs. Chubb, Clark, Hodges, Raub and Shirk. Three
current directors that serve on the audit committee will be retiring as of the
2003 Annual Meeting in accordance with the Corporation's mandatory retirement
policy. They are Harold D. Chubb, William H. Clark, Jr., and James K. Sperry. At
the annual reorganization meeting of the Corporation at least one additional
qualifying director will be appointed to the Committee. All members of the Audit
Committee are deemed to be independent under the current applicable rules of the
National Association of Security Dealers' ("NASD") listing standards. The Audit
Committee met eight times during the year. The Audit Committee is governed by a
formal charter, which was adopted in 2000, and is attached as Exhibit B. The
functions of the Audit Committee include the following: performing all duties
assigned by the Board of Directors; reviewing with management and independent
public accountants the basis for the reports issued by Fulton Financial
Corporation pursuant to federal and state regulatory requirements; meeting with
the independent public accountants to review the scope of audit services,
significant accounting changes, audit conclusions regarding significant
accounting estimates, assessments as to the adequacy of internal controls and
the resolution of any reportable conditions or weakness, and compliance with
laws and regulations; overseeing the internal audit function; reviewing
regulatory examination reports and management's responses thereto; and reviewing
periodic reports from the loan review function.
The Corporation is closely monitoring the regulations that have been
proposed by the Securities and Exchange Commission to implement the provisions
of the Sarbanes-Oxley Act of 2002 (the "Act"), as well as the proposed NASDAQ
rules relating to corporate governance. The Corporation is in compliance with
those regulations of the Act that are currently in effect, and intends to take
the necessary actions to comply with the other regulations of the Act by the
applicable effective dates, including amending the Audit Committee charter that
is attached as Exhibit B.
Members of the Trust Committee are Clyde W. Horst, Chair, Joseph J. Mowad,
M.D.,Vice Chair, Mrs. Holleran and Messrs. Dally, Fichthorn, Gardner, Hess,
Jones and Stewart. 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.
Members of the Human Resources Committee are Mary Ann Russell, Chair,
Donald W. Lesher, Jr., Vice Chair, and Messrs. Albertson, Bowman, Garner, Henry
and Stoudt. Mr. Fulton serves as an ex-officio member of this Committee. The
Committee met eight times during the year to review benefit and salary
administration programs (except for executive officers of Fulton Financial
Corporation) and other human resources matters affecting Fulton Financial
Corporation and its subsidiaries.
17
There were eight meetings plus one special meeting of the Board of
Directors of Fulton Financial Corporation and twenty-seven meetings of
committees of the Board of Directors of Fulton Financial Corporation during
2002. 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.
Compensation of Directors
Each member of the Board of Directors of Fulton Financial Corporation is
paid an annual fee of $10,000 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. In addition, directors are
paid a fee of $400 for each Board of Directors meeting attended. 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.
Transactions with Directors and Executive Officers
Some of the directors and executive officers of Fulton Financial
Corporation and the companies with which they are associated were customers of,
and had banking transactions with Fulton Financial Corporation bank subsidiaries
during 2002. All loans and commitments to 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 (including interest rates,
collateral and repayment terms) as those prevailing at the time for comparable
transactions with other persons, 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.
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 2002 and prior years. The law firm of Albertson Ward, Woodbury,
New Jersey, has provided legal services to The Bank, a subsidiary of Fulton
Financial Corporation, for many years. In 2002, Albertson Ward was paid
$152,588.00 in fees for such services, which constituted more than five percent
(5%) of its gross revenues. Director Jeffrey G. Albertson is a partner in this
firm. The law firm of Barley, Snyder, Senft & Cohen, LLC, Lancaster,
Pennsylvania, provided legal services to Fulton Financial Corporation and its
subsidiaries in 2002. Director John O. Shirk is a partner in this law firm. The
law firm of Henry & Beaver, LLP, Lebanon, Pennsylvania, provided legal services
to Lebanon Valley Farmers Bank in 2002. Director Charles V. Henry, III is a
partner in this law firm. The law firm of Pierce & Dally, LLP, Nazareth,
Pennsylvania, provided legal services to Lafayette Ambassador Bank in 2002. In
2002, Pierce & Dally was paid $63,099.00 in fees for such services, which
constituted more than five percent (5%) of its gross revenues. Director Craig A.
Dally is a partner in this law firm. In each case, the law firm is expected to
continue to provide legal services to Fulton Financial Corporation or its
subsidiaries in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and executive 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
Financial Corporation. To the knowledge of Fulton Financial Corporation, all
Section 16(a) filing requirements applicable to its directors and executive
officers have been complied with, except in the following cases: with respect to
Robert D. Garner, the
18
report of 2,734 shares of Fulton Financial Corporation stock received by his
spouse effective July 1, 2001, in exchange for 1,458 shares of Drovers
Bancshares Corporation ("Drovers"), following Drovers' merger with Fulton
Financial Corporation on July 1, 2001, was filed on September 25, 2002; in the
case of Donald W. Lesher, Jr., the report of a purchase of 51 shares of Fulton
Financial Corporation stock on October 7, 2002 was filed on October 10, 2002;
and in the case of Donald M. Bowman, the report of a purchase of 34 shares of
Fulton Financial Corporation stock on September 16, 2002 was filed on October 2,
2002.
In Mr. Garner's case, the failure to file a timely report was inadvertent
and occurred as a result of the stock transfer agent not properly identifying
the shares for Section 16 reporting. For Messrs. Lesher and Bowman, the failure
to file a timely report was inadvertent and occurred as a result of the recently
changed two business day reporting requirement included in the Sarbanes-Oxley
Act of 2002. In each case, the error was promptly corrected after discovery of
the reporting obligation.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 2002, Fulton Financial Corporation engaged
KPMG LLP, independent certified public accountants, to audit the Corporation's
financial statements.
On June 18, 2002 Fulton Financial Corporation dismissed its independent
accountants, Arthur Andersen LLP ("Andersen") and appointed KPMG, LLP ("KPMG")
as its new independent accountants, each effective that day. On April 16, 2002,
Fulton Financial Corporation had announced that it had decided not to renew the
engagement of Andersen and would be seeking proposals from independent
accountants to audit Fulton Financial Corporation's financial statements for the
fiscal year ending December 31, 2002. Andersen continued to provide services to
Fulton Financial Corporation following the announcement that its engagement
would not be renewed. The decision to engage KPMG was approved by the Board of
Directors upon the recommendation of the Corporation's Audit Committee.
Andersen's report on Fulton Financial Corporation's 2001 financial statements
was dated January, 2002, in conjunction with the filing of its Annual Report on
Form 10-K for the year ended December 31, 2001.
During Fulton Financial Corporation's two fiscal years ended December 31,
2001 and 2000, and the subsequent interim period through June 18, 2002, there
were no disagreements between the Corporation and Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Andersen's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports.
None of the reportable events described under Item 304(a)(1)(v) of
Regulation S-K occurred during the Corporation's two fiscal years ended December
31, 2001 and 2000 and the subsequent interim period through June 18, 2002.
The audit reports of Andersen on the consolidated financial statements of
Fulton Financial Corporation and subsidiaries as of and for the fiscal years
ended December 31, 2001 and 2000 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.
On June 24, 2002, Fulton Financial Corporation filed a Form 8-K with the
Securities and Exchange Commission reporting these events. Attached as an
exhibit to that Form 8-K was a letter from Andersen indicating that Fulton
Financial Corporation had provided Andersen with a copy of the foregoing
disclosures, and stating that it had found no basis for disagreement with such
statements.
19
During the years ended December 31, 2001 and 2000 and the subsequent
interim period through the date of the Form 8-K, neither Fulton Financial
Corporation nor anyone on its behalf consulted KPMG regarding any of the matters
or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.
The appointment of KPMG for the current year will be reviewed in the second
quarter of 2003. Representatives of KPMG are expected to be present at the 2003
Annual Meeting with the opportunity to make a statement and to be available to
respond to appropriate questions.
Audit Fees
KPMG billed Fulton Financial Corporation $235,000 in 2002 for professional
services rendered for the audit of the Corporation's annual financial statements
and reviews of the financial statements included in the Corporation's Forms 10-Q
filed with the Securities and Exchange Commission.
Financial Information Systems Design and Implementation Fees
KPMG did not provide any professional services in 2002 for Fulton Financial
Corporation related to design or implementation of financial information
systems.
All Other Fees
KPMG billed Fulton Financial Corporation a total of $69,870 in 2002 for all
other fees. These fees were primarily for the preparation and review of federal
and state income tax returns for Fulton Financial Corporation and its
subsidiaries.
The Audit Committee of the Board of Directors of Fulton Financial
Corporation has carefully considered whether the provision of the non-audit
services described above which were performed by KPMG in 2002 would be
incompatible with maintaining the independence of KPMG in performing its audit
services and has determined that, in its judgment, the independence of the
auditor has not been compromised.
The Audit Committee has stated that, based on its review and discussion of
the audited 2002 financial statements of Fulton Financial Corporation with
management and the Corporation's auditor, KPMG, it 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 A.
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 and financial statement schedules, is available without charge to
shareholders upon written request addressed to Corporate Secretary, Fulton
Financial Corporation, P.O. Box 4887, Lancaster, Pennsylvania 17604.
20
Only one proxy statement is being delivered to multiple security holders
sharing an address unless the Corporation has received contrary instructions
from one or more of the security holders. The 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.
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 2003 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.
BY ORDER OF THE BOARD OF DIRECTORS
RUFUS A. FULTON, JR.
Chairman of the Board and
Chief Executive Officer
Lancaster, Pennsylvania
March 13, 2003
21
EXHIBIT A
Report of Audit Committee
February 24, 2003
To the Board of Directors of Fulton Financial Corporation:
We have reviewed and discussed with management the Company's audited financial
statements as of, and for the year ended, December 31, 2002.
We have discussed with representatives of KPMG LLP, the Company's independent
auditors, the matters required to be discussed by the Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants.
We have received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2002.
Patrick J. Freer, Chair
James K. Sperry, Vice Chair
Harold D. Chubb
William H. Clark, Jr.
George W. Hodges
Stuart H. Raub, Jr.
John O. Shirk
22
EXHIBIT B
Fulton Financial Corporation's Audit Committee Charter
PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
("Board") in fulfilling its oversight role in regard to the internal control
structure, accounting policies, and the overall financial reporting processes of
Fulton Financial Corporation (FFC) and its affiliates.
MEMBERSHIP
The Audit Committee shall consist of a minimum of five outside directors of FFC
who are considered independent. Independence would be considered impaired under
the following scenarios:
. The director is or has been an employee of FFC or its subsidiaries
during the prior three years.
. The director accepts any compensation from FFC or any of its
subsidiaries in excess of $60,000 during the previous fiscal year,
other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation.
. The director is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which
FFC or any of its subsidiaries made, or from which FFC or any of its
subsidiaries received, payments (other than those arising solely from
investments in FFC's securities) that exceed 5% of FFC's or the
business organization's consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three years.
. The director is an immediate family member of an individual who has
been an executive officer of FFC or its subsidiaries during the past
three years. (Family member is defined as a person's spouse, parent,
child, sibling, mother-in-law, father-in-law, sister-in-law,
brother-in-law or anyone who resides in such person's house.)
. The director is employed as an executive of another company where any
of the executives of FFC or its subsidiaries serve on that company's
compensation committee.
A director satisfying any of the above impairment conditions may, however, serve
if the FFC Board determines membership on the Audit Committee is required by the
best interests of FFC and its stockholders and the relationship does not
interfere with the director's exercise of independent judgment, considering the
materiality of the relationship with FFC and its subsidiaries or to the
director. Only one director whose independence is considered impaired may be
appointed to the Audit Committee. This director may not be a current employee or
an immediate family member of a current employee.
All members of the Audit Committee must be able to read and understand
fundamental financial statements (including a company's balance sheet, income
statement and cash flow statement) or become able to do so within a reasonable
period of time. At least one member shall have accounting or related financial
management experience that results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer, or other senior officer with financial oversight responsibilities.
23
The Chief Financial Officer and the Chief Auditor of FFC shall be permanent
invitees for all meetings. Other officers of FFC and its subsidiaries shall
attend meetings by invitation for specific presentations only.
MEETINGS
Regular meetings of the Audit Committee shall be scheduled for the months of
January, March, April, June, July, September, October and December. Meetings may
be rescheduled or cancelled at the discretion of the Audit Committee Chair.
Under no circumstances shall meetings be held less than four times annually.
DUTIES
The scope of the Audit Committee's oversight duties includes, but is not limited
to, the areas of internal auditing, financial reporting, loan administration,
external auditing, regulatory matters, and any other areas so delegated by the
Board.
Within each of the defined areas, it shall be the duty of the Audit Committee
to:
Internal Audit
.. Review the organizational structure of FFC to ensure the propriety of
independence with regard to the Chief Auditor and Internal Audit Services;
.. Review, on a periodic basis, staffing levels and staff qualifications of
Internal Audit Services to ensure objective and competent internal audit
coverage;
.. Review and approve the annual audit plan to ensure sufficient audit
coverage of the system of internal controls, compliance with laws and
regulations, and detection of management override regarding the internal
control system or management's compromise of the internal control
environment;
.. Review internal audit results to ensure the adequacy and timeliness of
management's corrective actions relative to reported deficiencies;
.. Meet with the Chief Auditor in executive session on an annual basis, or
more frequently as deemed necessary by the Committee; and
.. Review and concur with any performance evaluation regarding the Chief
Auditor.
Financial Reporting
.. Review all significant changes in accounting policies;
.. Review accounting treatments for all material transactions; and
.. Review material fluctuations/trends in financial statement balances.
Loan Administration
.. Review the rationale used by management in determining the adequacy of the
allowance for loan and lease losses (ALLL);
24
.. Review management's assertion regarding the adequacy of the ALLL
"reviewable record;"
.. Review key performance ratios related to the ALLL; and
.. Review and approve management's annual loan review plan.
Independent Public Accountants
.. Take appropriate action to oversee the independence of the independent
public accountant (IPA), ensuring the IPA's ultimate accountability to the
FFC Board through its Audit Committee;
.. Recommend to the FFC Board the selection, retention or termination of the
IPA;
.. Ensure receipt from the IPA of a formal written statement delineating all
relationships between the IPA and FFC and its subsidiaries and take
appropriate action for any disclosed relationships to ensure the IPA's
objectivity and independence;
.. Review the IPA's management letter of FFC and management's response
thereto;
.. Review the IPA's report on FFC's annual financial statements, including the
IPA's judgments regarding the quality of FFC's accounting principles
applied in its financial reporting;
.. Review and approve requests exceeding $100,000 for any management
consulting engagement to be performed by the IPA and be advised of any
other study undertaken at the request of management that is beyond the
scope of the audit engagement letter;
.. Review any adjustments to FFC's financial statements recommended by the
IPA;
.. Meet with the IPA in executive session on an annual basis, or more
frequently as deemed necessary by the Committee; and
FDIC Improvement Act (FDICIA) Requirements
.. Review management's assertion regarding the effectiveness of internal
controls over financial reporting;
.. Review management's assertion regarding compliance with designated laws and
regulations; and
.. Review the IPA's attestation on management's assertions regarding internal
controls over financial reporting.
Regulatory Matters
.. Review regulatory examination reports of FFC, including examination reports
of FFC affiliates, as appropriate, and approve management's responses
thereto; and
.. Review the Chief Auditor's opinion letter regarding the adequacy of
management's response to any regulatory report of an affiliate of FFC.
25
Other Matters
.. Review and approve all revisions to Internal Audit Services' Audit Charter,
the document delineating the authority and responsibilities of Internal
Audit Services;
.. Review and reassess the adequacy of the Audit Committee Charter on an
annual basis;
.. Review all changes to the FFC Code of Conduct; and
.. Maintain minutes and other relevant records of Audit Committee meetings and
activities.
DISCLOSURES
In order to ensure that FFC shareholders are informed about the functioning of
the Audit Committee, it shall be the responsibility of management to
.. Disclose in the proxy statement for the FFC annual meeting a report from
the Audit Committee stating:
. The Audit Committee has reviewed and discussed the audited financial
statements with management;
. The Audit Committee has discussed with the IPA the matters required to
be discussed by SAS 61;
. The Audit Committee has received the written disclosures and the
letter from the IPA required by ISB Standard No. 1 and has discussed
with the auditors the auditors' independence; and
. The Audit Committee recommended to the FFC Board that the financial
statements be included in the Annual Report on Form 10-K for the last
fiscal year filed.
.. Disclose in the proxy statement any Audit Committee member who was
determined to lack independence and the reasons for such determination;
.. Disclose in the proxy statement that the Audit Committee is governed by a
written charter; and
.. Include the Audit Committee Charter in the proxy statement once every three
years.
26
FULTON FINANCIAL CORPORATION
ATTN: SHAREHOLDER SERVICES
ONE PENN SQUARE
LANCASTER, PA 17604
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Fulton Financial Corporation, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS Fult1 KEEP THIS
PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
FULTON FINANCIAL CORPORATION
This proxy is solicited by the Board of Directors and will be voted as
directed. If no directions are given, this proxy will be voted FOR the election
of the nominees listed.
To withhold authority to vote,
mark "For All Except" and write
the nominee's number on the line
below.
Vote On Directors For Withhold For All
1. DIRECTORS RECOMMEND A "FOR" VOTE FOR THE FOLLOWING All All Except
MATTER: [_] [_] [_]
FOR THE THREE YEAR TERM:
01) Jeffrey G. Albertson 04) Eugene H. Gardner
02) Craig A. Dally 05) Clyde W. Horst
03) Rufus A. Fulton, Jr. 06) R. Scott Smith, Jr.
This proxy also confers authority to vote on any other business that may be
properly brought before the meeting or any adjournment thereof. If any other
business is presented at the meeting, the shares represented by this proxy will
be voted in accordance with the recommendation of the Board of Directors of
Fulton Financial Corporation.
For address changes and/or comments, please check this box and write them on the
back where indicated. [_]
YES NO
Please indicate if you plan to attend this meeting [_] [_]
Number of people attending _______________
_____________________________________ _____ ___________________________ _______
_____________________________________ _____ ___________________________ _______
Signature [PLEASE SIGN WITHIN BOX] Date Signature [Joint Owners] Date
This proxy hereby appoints David S. Etter and Arthur M. Peters, Jr., or any
one of them, as proxies, with full power of substitution, to represent and vote,
as designated on the reverse side, all of the Fulton Financial Corporation
Common Stock: (i) held of record by the signer on February 25, 2003, and (ii)
which the signer is otherwise entitled to vote at the Annual Meeting of
Shareholders to be held on Tuesday, April 15, 2003, at 12:00 noon, at the
Hershey Lodge and Convention Center, West Chocolate Avenue and University Drive,
Hershey, Pennsylvania, or any adjournment thereof.
Address Changes/Comments: ______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(If you noted any address changes/comments above, please mark corresponding
box on reverse side.)