þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
PENNSYLVANIA | 23-2195389 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
One Penn Square, P. O. Box 4887, Lancaster, Pennsylvania | 17604 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of exchange on which registered | |
Common Stock, $2.50 par value | The NASDAQ Stock Market, LLC |
2
3
(1) | See additional information in Item 2. Properties. | |
(2) | Dearden, Maguire, Weaver and Barrett LLC, an investment management and advisory company, is a wholly owned subsidiary of Fulton Financial Advisors, N.A. |
4
No. of Financial | Deposit Market | |||||||||||||||||||||||||
Institutions | Share (6/30/06) | |||||||||||||||||||||||||
Population | Banking | Banks/ | Credit | |||||||||||||||||||||||
County | State | (2006 Est.) | Subsidiary | Thrifts | Unions | Rank | % | |||||||||||||||||||
Lancaster
|
PA | 493,000 | Fulton Bank | 21 | 12 | 1 | 19.2 | % | ||||||||||||||||||
Centre
|
PA | 142,000 | Fulton Bank | 15 | 4 | 19 | 0.06 | % | ||||||||||||||||||
Dauphin
|
PA | 254,000 | Fulton Bank | 17 | 10 | 7 | 4.6 | % | ||||||||||||||||||
Cumberland
|
PA | 224,000 | Fulton Bank | 19 | 6 | 14 | 0.7 | % | ||||||||||||||||||
York
|
PA | 410,000 | Fulton Bank | 17 | 23 | 4 | 9.8 | % | ||||||||||||||||||
Chester
|
PA | 477,000 | Fulton Bank | 41 | 5 | 16 | 1.2 | % | ||||||||||||||||||
Delaware
|
PA | 556,000 | Fulton Bank | 39 | 15 | 41 | 0.1 | % |
5
No. of Financial | Deposit Market | |||||||||||||||||||||||||
Institutions | Share (6/30/06) | |||||||||||||||||||||||||
Population | Banking | Banks/ | Credit | |||||||||||||||||||||||
County | State | (2006 Est.) | Subsidiary | Thrifts | Unions | Rank | % | |||||||||||||||||||
Montgomery
|
PA | 781,000 | Fulton Bank | 44 | 28 | 37 | 0.2 | % | ||||||||||||||||||
Berks
|
PA | 398,000 | Fulton Bank | 21 | 13 | 9 | 3.1 | % | ||||||||||||||||||
Bucks
|
PA | 624,000 | Fulton Bank | 33 | 11 | 14 | 2.3 | % | ||||||||||||||||||
|
Lebanon Valley Farmers Bank | 22 | 0.4 | % | ||||||||||||||||||||||
Lebanon
|
PA | 126,000 | Lebanon Valley Farmers Bank | 9 | 2 | 1 | 29.0 | % | ||||||||||||||||||
Schuylkill
|
PA | 147,000 | Lebanon Valley Farmers Bank | 18 | 6 | 9 | 3.5 | % | ||||||||||||||||||
Snyder
|
PA | 38,000 | Swineford National Bank | 8 | | 1 | 30.0 | % | ||||||||||||||||||
|
||||||||||||||||||||||||||
Union
|
PA | 43,000 | Swineford National Bank | 7 | 1 | 5 | 5.0 | % | ||||||||||||||||||
Northumberland
|
PA | 92,000 | Swineford National Bank | 17 | 3 | 14 | 1.8 | % | ||||||||||||||||||
|
FNB Bank, N.A. | 9 | 4.7 | % | ||||||||||||||||||||||
Montour
|
PA | 18,000 | FNB Bank, N.A. | 5 | 3 | 1 | 27.8 | % | ||||||||||||||||||
Columbia
|
PA | 65,000 | FNB Bank, N.A. | 7 | | 6 | 4.6 | % | ||||||||||||||||||
Lycoming
|
PA | 118,000 | FNB Bank, N.A. | 11 | 10 | 16 | 0.6 | % | ||||||||||||||||||
Northampton
|
PA | 289,000 | Lafayette Ambassador Bank | 18 | 12 | 2 | 16.6 | % | ||||||||||||||||||
Lehigh
|
PA | 332,000 | Lafayette Ambassador Bank | 20 | 14 | 8 | 0.6 | % | ||||||||||||||||||
Washington
|
MD | 143,000 | Hagerstown Trust | 10 | 3 | 2 | 20.4 | % | ||||||||||||||||||
Frederick
|
MD | 225,000 | The Columbia Bank | 15 | 3 | 17 | 0.1 | % | ||||||||||||||||||
Montgomery
|
MD | 935,000 | The Columbia Bank | 34 | 20 | 30 | 0.3 | % | ||||||||||||||||||
Howard
|
MD | 272,000 | The Columbia Bank | 21 | 23 | 2 | 13.9 | % | ||||||||||||||||||
Prince Georges
|
MD | 855,000 | The Columbia Bank | 21 | 22 | 13 | 1.6 | % | ||||||||||||||||||
Baltimore
|
MD | 790,000 | The Columbia Bank | 44 | 16 | 25 | 0.9 | % | ||||||||||||||||||
Baltimore City
|
MD | 632,000 | The Columbia Bank | 39 | 21 | 24 | 0.3 | % | ||||||||||||||||||
Cecil
|
MD | 99,000 | Peoples Bank of Elkton | 7 | 3 | 5 | 10.0 | % | ||||||||||||||||||
Sussex
|
DE | 178,000 | Delaware National Bank | 17 | 4 | 7 | 1.1 | % | ||||||||||||||||||
New Castle
|
DE | 526,000 | Delaware National Bank | 30 | 24 | 29 | 0.1 | % | ||||||||||||||||||
Camden
|
NJ | 520,000 | The Bank | 22 | 9 | 15 | 1.1 | % | ||||||||||||||||||
Gloucester
|
NJ | 278,000 | The Bank | 22 | 4 | 2 | 13.1 | % | ||||||||||||||||||
Salem
|
NJ | 66,000 | The Bank | 8 | 4 | 1 | 31.8 | % | ||||||||||||||||||
Atlantic
|
NJ | 275,000 | The Bank | 17 | 6 | 17 | 0.7 | % | ||||||||||||||||||
Warren
|
NJ | 112,000 | Skylands Community Bank | 12 | 3 | 3 | 10.1 | % | ||||||||||||||||||
Sussex
|
NJ | 155,000 | Skylands Community Bank | 13 | 1 | 11 | 0.7 | % | ||||||||||||||||||
Morris
|
NJ | 495,000 | Skylands Community Bank | 40 | 14 | 16 | 1.3 | % | ||||||||||||||||||
Hunterdon
|
NJ | 132,000 | Skylands Community Bank | 17 | 3 | 15 | 0.7 | % | ||||||||||||||||||
|
Somerset Valley Bank | 20 | 0.4 | % | ||||||||||||||||||||||
Middlesex
|
NJ | 797,000 | Somerset Valley Bank | 46 | 24 | 47 | 0.1 | % | ||||||||||||||||||
Somerset
|
NJ | 323,000 | Somerset Valley Bank | 26 | 10 | 8 | 3.9 | % | ||||||||||||||||||
Mercer
|
NJ | 371,000 | First Washington State Bank | 27 | 29 | 12 | 1.7 | % |
6
No. of Financial | Deposit Market | |||||||||||||||||||||||||
Institutions | Share (6/30/06) | |||||||||||||||||||||||||
Population | Banking | Banks/ | Credit | |||||||||||||||||||||||
County | State | (2006 Est.) | Subsidiary | Thrifts | Unions | Rank | % | |||||||||||||||||||
Monmouth
|
NJ | 643,000 | First Washington State Bank | 28 | 9 | 23 | 0.9 | % | ||||||||||||||||||
Ocean
|
NJ | 566,000 | First Washington State Bank | 23 | 5 | 16 | 1.0 | % | ||||||||||||||||||
Chesapeake
|
VA | 217,000 | Resource Bank | 15 | 6 | 11 | 1.7 | % | ||||||||||||||||||
Fairfax
|
VA | 1,018,000 | Resource Bank | 35 | 13 | 21 | 0.4 | % | ||||||||||||||||||
Newport News
|
VA | 183,000 | Resource Bank | 12 | 7 | 14 | 0.8 | % | ||||||||||||||||||
Richmond City
|
VA | 191,000 | Resource Bank | 15 | 18 | 15 | 0.2 | % | ||||||||||||||||||
Virginia Beach
|
VA | 441,000 | Resource Bank | 17 | 8 | 4 | 8.8 | % |
Primary | ||||
Entity | Charter | Regulator(s) | ||
Fulton Bank
|
PA | PA/FDIC | ||
Lebanon Valley Farmers Bank
|
PA | PA/FRB | ||
Swineford National Bank
|
National | OCC (1) | ||
Lafayette Ambassador Bank
|
PA | PA/FRB | ||
FNB Bank, N.A
|
National | OCC | ||
Hagerstown Trust
|
MD | MD/FDIC | ||
Delaware National Bank
|
National | OCC | ||
The Bank
|
NJ | NJ/FDIC | ||
Peoples Bank of Elkton
|
MD | MD/FDIC | ||
Skylands Community Bank
|
NJ | NJ/FDIC | ||
Resource Bank
|
VA | VA/FRB | ||
First Washington State Bank
|
NJ | NJ/FDIC | ||
Somerset Valley Bank
|
NJ | NJ/FDIC | ||
The Columbia Bank
|
MD | MD/FDIC | ||
Fulton Financial Advisors, N.A
|
National (2) | OCC | ||
Fulton Financial (Parent Company)
|
N/A | FRB |
(1) | Office of the Comptroller of the Currency. | |
(2) | Fulton Financial Advisors, N.A. is chartered as an uninsured national trust bank. |
7
8
9
| customers may not want or need the Corporations products or services; | ||
| borrowers may not be able to repay their loans; | ||
| the value of the collateral securing the Corporations loans to borrowers may decline; and | ||
| the quality of the Corporations loan portfolio may decline. |
10
11
12
13
Total
Bank
Owned
Leased
Branches
56
27
83
11
1
12
5
2
7
14
10
24
6
2
8
9
3
12
11
1
12
25
6
31
2
2
5
7
12
2
5
7
13
13
7
9
16
4
21
25
157
107
264
Table of Contents
Owned/
Bank
Property
Location
Leased
Operations Center
East Petersburg, PA
Owned
Admin. Headquarters
Lancaster, PA
(1
)
Operations Center
Mantua, NJ
Owned
Admin. Headquarters
York, PA
Leased (2)
Admin. Headquarters
Reading, PA
Leased (5)
Admin. Headquarters
Doylestown, PA
Owned
Admin. Headquarters
Lebanon, PA
Owned
Admin. Headquarters
Hummels Wharf, PA
Owned
Admin. Headquarters
Easton, PA
Owned
Operations Center
Bethlehem, PA
Owned
Corp Service Center
Bethlehem, PA
Leased (6)
Admin. Headquarters
Danville, PA
Owned
Admin. Headquarters
Hagerstown, MD
Owned
Admin. Headquarters
Georgetown, DE
Leased (3)
Admin. Headquarters
Woodbury, NJ
Owned
Admin. Headquarters
Elkton, MD
Owned
Admin. Headquarters
Hackettstown, NJ
Leased (4)
Admin. Headquarters
Herndon, VA
Owned
Admin. Headquarters
Somerville, PA
Owned
Admin. Headquarters
Windsor, NJ
Owned
Admin. Headquarters
Columbia, MD
Leased (7)
(1)
Includes approximately 100,000 square feet which is owned by an independent third
party who financed the construction through a loan from Fulton Bank. The Corporation
is leasing this space from the third party in an arrangement accounted for as a
capital lease. The lease term expires in 2027. The remainder of the Administrative
Headquarters location is owned by the Corporation.
(2)
Lease expires in 2013.
(3)
Lease expires in 2011.
(4)
Lease expires in 2009.
(5)
Lease expires in 2016.
(6)
Lease expires in 2017.
(7)
Lease expires in 2013.
Table of Contents
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
e
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range
Per-Share
High
Low
Dividend
$
17.35
$
16.07
$
0.138
16.47
15.36
0.1475
16.99
15.55
0.1475
16.88
15.65
0.1475
$
17.92
$
16.00
$
0.126
17.14
15.68
0.138
18.00
15.43
0.138
16.90
14.87
0.138
Number of securities
remaining available for
future issuance under
Number of securities to
Weighted-average
equity compensation
be issued upon exercise
exercise price of
plans (excluding
of outstanding options,
outstanding options,
securities reflected in
Plan Category
warrants and rights
warrants and rights
first column)
7,996,776
$
12.65
14,864,642
7,996,776
$
12.65
14,864,642
Table of Contents
Table of Contents
Period
Ending December 31
Index
2001
2002
2003
2004
2005
2006
$
100.00
$
104.42
$
140.24
$
161.58
$
157.56
$
162.67
$
100.00
$
68.76
$
103.67
$
113.16
$
115.57
$
127.58
$
100.00
$
100.53
$
130.70
$
151.98
$
151.50
$
165.31
Total number of
shares purchased
Maximum number of
Total
as part of a
shares that may yet
number of
Average price
publicly
be
shares
paid per
announced plan
purchased under the
Period
purchased
share
or program
plan or program
1,043,490
1,043,490
5,000
$
15.99
5,000
1,038,490
Table of Contents
(dollars in thousands, except per-share data and ratios)
(1)
Adjusted for stock dividends and stock splits.
(2)
Net income, as adjusted for intangible amortization (net of tax), divided by average
shareholders equity, net of goodwill and intangible assets.
Table of Contents
Table of Contents
2006
2005
3.88
%
3.96
%
3.90
3.92
3.85
3.91
3.68
3.92
3.82
3.93
Table of Contents
Table of Contents
(1)
Includes non-performing loans.
(2)
Balances include amortized historical cost for available for sale securities. The related
unrealized holding gains (losses) are included in other assets.
Table of Contents
2006 vs. 2005
2005 vs. 2004
Increase (decrease) due
Increase (decrease) due
to change in
to change in
Volume
Rate
Net
Volume
Rate
Net
(in thousands)
$
135,262
$
75,230
$
210,492
$
69,877
$
52,457
$
122,334
10,929
11,802
22,731
(6,194
)
4,638
(1,556
)
3,805
(6
)
3,799
5,192
(1,700
)
3,492
942
837
1,779
(51
)
326
275
(1,762
)
2,386
624
6,532
1
6,533
173
771
944
1,305
178
1,483
$
149,349
$
91,020
$
240,369
$
76,661
$
55,900
$
132,561
$
1,335
$
8,407
$
9,742
$
1,076
$
7,093
$
8,169
4,229
20,049
24,278
1,488
13,700
15,188
34,536
37,611
72,147
13,676
13,962
27,638
16,848
26,781
43,629
(645
)
19,877
19,232
11,254
4,675
15,929
9,152
(2,154
)
6,998
$
68,202
$
97,523
$
165,725
$
24,747
$
52,478
$
77,225
Table of Contents
Increase
2006
2005
$
%
(dollars in thousands)
$
2,478,893
$
2,022,615
$
456,278
22.6
%
335,596
324,637
10,959
3.4
3,073,830
2,621,730
452,100
17.2
2,058,034
1,710,736
347,298
20.3
1,345,191
732,847
612,344
83.6
522,761
501,926
20,835
4.2
77,777
67,113
10,664
15.9
$
9,892,082
$
7,981,604
$
1,910,478
23.9
%
2006
2005
Increase
(in thousands)
$
337,062
$
32,576
$
304,486
261,493
73,743
187,750
263,370
28,509
234,861
435,092
17,700
417,392
4,992
864
4,128
3,725
119
3,606
$
1,305,734
$
153,511
$
1,152,223
Increase
2006
2005
$
%
(dollars in thousands)
$
2,141,831
$
1,990,039
$
151,792
7.6
%
335,596
324,637
10,959
3.4
2,812,337
2,547,987
264,350
10.4
1,794,664
1,682,227
112,437
6.7
910,099
715,147
194,952
27.3
517,769
501,062
16,707
3.3
74,052
66,994
7,058
10.5
$
8,586,348
$
7,828,093
$
758,255
9.7
%
Table of Contents
Increase
2006
2005
$
%
(dollars in thousands)
$
1,807,248
$
1,589,265
$
217,983
13.7
%
1,673,407
1,547,766
125,641
8.1
2,340,402
2,055,503
284,899
13.9
4,134,190
3,171,901
962,289
30.3
$
9,955,247
$
8,364,435
$
1,590,812
19.0
%
2006
2005
Increase
(in thousands)
$
289,332
$
33,042
$
256,290
160,938
53,461
107,477
277,736
76,251
201,485
628,881
74,907
553,974
$
1,356,887
$
237,661
$
1,119,226
Table of Contents
Increase (decrease)
2006
2005
$
%
(dollars in thousands)
$
1,517,916
$
1,556,223
$
(38,307
)
(2.5
)%
1,512,469
1,494,305
18,164
1.2
2,062,666
1,979,252
83,414
4.2
3,505,309
3,096,994
408,315
13.2
$
8,598,360
$
8,126,774
$
471,586
5.8
%
Table of Contents
Table of Contents
Year Ended December 31
2006
2005
2004
2003
2002
(dollars in thousands)
$
10,374,323
$
8,424,728
$
7,533,915
$
6,140,200
$
5,295,459
$
9,892,082
$
7,981,604
$
6,857,386
$
5,564,806
$
5,381,950
$
92,847
$
89,627
$
77,700
$
71,920
$
71,872
3,013
4,095
3,482
6,604
7,203
429
467
1,466
1,476
2,204
3,138
3,436
3,476
4,497
5,587
389
206
453
651
676
6,969
8,204
8,877
13,228
15,670
2,863
2,705
2,042
1,210
842
268
1,245
906
711
669
1,289
1,169
1,496
1,811
2,251
97
77
76
97
56
4,517
5,196
4,520
3,829
3,818
2,452
3,008
4,357
9,399
11,852
3,498
3,120
4,717
9,705
11,900
12,991
3,108
11,567
5,474
$
106,884
$
92,847
$
89,627
$
77,700
$
71,920
0.02
%
0.04
%
0.06
%
0.17
%
0.22
%
1.03
%
1.10
%
1.19
%
1.27
%
1.36
%
0.39
%
0.38
%
0.30
%
0.33
%
0.47
%
0.32
%
0.43
%
0.30
%
0.37
%
0.45
%
(1)
Includes accruing loans past due 90 days or more.
Table of Contents
December 31
2006
2005
2004
2003
2002
(in thousands)
$
33,113
$
36,560
$
22,574
$
22,422
$
24,090
20,632
9,012
8,318
9,609
14,095
4,103
2,072
2,209
585
938
$
57,848
$
47,644
$
33,101
$
32,616
$
39,123
(1)
In 2006, the total interest income that would have been recorded if
non-accrual loans had been current in accordance with their original terms
was approximately $2.6 million. The amount of interest income on non-accrual
loans that was included in 2006 income was approximately $800,000.
(2)
Accrual of interest is generally discontinued when a loan becomes 90
days past due as to principal and interest. When interest accruals are
discontinued, interest credited to income is reversed. Non-accrual loans are
restored to accrual status when all delinquent principal and interest becomes
current or the loan is considered secured and in the process of collection.
Certain loans, primarily adequately collateralized mortgage loans, that are
determined to be sufficiently collateralized may continue to accrue interest
after reaching 90 days past due.
(3)
Excluded from the amounts presented at December 31, 2006 were $212.4
million in loans where possible credit problems of borrowers have caused
management to have doubts as to the ability of such borrowers to comply with
the present loan repayment terms. These loans were reviewed for impairment
under Statement 114, but continue to pay according to their contractual terms
and are therefore not included in non-performing loans. Non-accrual loans
include $18.5 million of impaired loans.
December 31
2006
2005
2004
2003
2002
(dollars in thousands)
% of
% of
% of
% of
% of
Loans
Loans in
Loans in
Loans in
Loans in
Allow-
In Each
Allow-
Each
Allow-
Each
Allow-
Each
Allow-
Each
ance
Category
ance
Category
ance
Category
ance
Category
ance
Category
$
52,942
28.6
%
$
52,379
28.2
%
$
43,207
30.1
%
$
34,247
31.7
%
$
33,130
31.6
%
37,197
65.5
17,602
64.7
19,784
62.5
14,471
59.0
13,099
56.8
6,475
5.9
7,935
7.1
16,289
7.4
16,279
9.3
14,178
11.6
10,270
14,931
10,347
12,703
11,513
$
106,884
100.0
%
$
92,847
100.0
%
$
89,627
100.0
%
$
77,700
100.0
%
$
71,920
100.0
%
Table of Contents
The following table presents the components of other income for the past two years:
Increase (decrease)
2006
2005
$
%
(dollars in thousands)
$
37,441
$
35,669
$
1,772
5.0
%
43,773
40,198
3,575
8.9
26,792
24,229
2,563
10.6
21,086
25,032
(3,946
)
(15.8
)
2,200
(2,200
)
N/A
13,344
10,345
2,999
29.0
142,436
137,673
4,763
3.5
7,439
6,625
814
12.3
$
149,875
$
144,298
$
5,577
3.9
%
2006
2005
Increase
(in thousands)
$
805
$
114
$
691
2,508
217
2,291
958
171
787
1,089
33
1,056
1,161
217
944
6,521
752
5,769
57
57
$
6,578
$
752
$
5,826
Table of Contents
Increase (decrease)
2006
2005
$
%
(dollars in thousands)
$
36,636
$
35,555
$
1,081
3.0
%
41,265
39,981
1,284
3.2
25,834
24,058
1,776
7.4
19,997
24,999
(5,002
)
(20.0
)
2,200
(2,200
)
N/A
12,183
10,128
2,055
20.3
$
135,915
$
136,921
$
(1,006
)
(0.7
)%
7,382
6,625
757
11.4
$
143,297
$
143,546
$
(249
)
(0.2
)%
Table of Contents
The following table presents the components of other expenses for each of the past two years:
Increase (decrease)
2006
2005
$
%
(dollars in thousands)
$
213,913
$
181,889
$
32,024
17.6
%
36,493
29,275
7,218
24.7
14,251
11,938
2,313
19.4
12,228
12,395
(167
)
(1.3
)
10,638
8,823
1,815
20.6
7,966
7,035
931
13.2
7,907
5,311
2,596
48.9
6,245
5,736
509
8.9
5,154
4,716
438
9.3
5,057
5,393
(336
)
(6.2
)
46,139
43,780
2,359
5.4
$
365,991
$
316,291
$
49,700
15.7
%
2006
2005
Increase
(in thousands)
$
27,643
$
3,483
$
24,160
6,162
1,029
5,133
2,121
328
1,793
1,560
377
1,183
1,475
173
1,302
1,007
109
898
3,483
711
2,772
572
132
440
485
48
437
403
82
321
4,818
562
4,256
$
49,729
$
7,034
$
42,695
Table of Contents
Increase (decrease)
2006
2005
$
%
(dollars in thousands)
$
186,270
$
178,406
$
7,864
4.4
%
30,331
28,246
2,085
7.4
12,130
11,610
520
4.5
10,668
12,018
(1,350
)
(11.2
)
9,163
8,650
513
5.9
6,959
6,926
33
0.5
4,424
4,600
(176
)
(3.8
)
5,673
5,604
69
1.2
4,669
4,668
1
4,654
5,311
(657
)
(12.4
)
41,321
43,218
(1,897
)
(4.4
)
$
316,262
$
309,257
$
7,005
2.3
%
Table of Contents
Table of Contents
Table of Contents
(1)
Balances recorded for the February 1, 2006 acquisition of Columbia Bancorp.
(2)
Excluding balances recorded for Columbia Bancorp.
(3)
Fulton Financial Corporation, excluding balances recorded for Columbia Bancorp, as compared to 2005.
Table of Contents
December 31
2006
2005
2004
2003
2002
(in thousands)
$
2,603,224
$
2,044,010
$
1,946,962
$
1,594,451
$
1,489,990
361,962
331,659
326,176
354,517
189,110
3,213,809
2,831,405
2,461,016
1,992,650
1,527,143
2,152,275
1,773,256
1,650,139
1,322,977
1,239,603
1,428,809
851,451
595,567
307,108
248,565
523,066
520,098
488,059
498,428
526,611
100,711
79,738
72,795
77,646
84,063
10,383,856
8,431,617
7,540,714
6,147,777
5,305,085
(9,533
)
(6,889
)
(6,799
)
(7,577
)
(9,626
)
$
10,374,323
$
8,424,728
$
7,533,915
$
6,140,200
$
5,295,459
December 31
2006
2005
2004
HTM
AFS
Total
HTM
AFS
Total
HTM
AFS
Total
(in thousands)
$
$
165,636
$
165,636
$
$
135,532
$
135,532
$
$
170,065
$
170,065
17,066
17,066
35,118
35,118
68,449
68,449
7,648
288,465
296,113
7,512
212,650
220,162
6,903
66,468
73,371
1,262
488,279
489,541
5,877
438,987
444,864
10,658
332,455
343,113
75
70,637
70,712
65,834
65,834
650
71,127
71,777
492,524
492,524
262,503
262,503
1,374
1,374
3,539
1,343,107
1,346,646
4,869
1,393,263
1,398,132
6,790
1,714,920
1,721,710
$
12,524
$
2,865,714
$
2,878,238
$
18,258
$
2,543,887
$
2,562,145
$
25,001
$
2,424,858
$
2,449,859
Table of Contents
Table of Contents
Table of Contents
Payments Due In
One Year
One to
Three to
Over Five
or Less
Three Years
Five Years
Years
Total
(in thousands)
$
5,802,422
$
$
$
$
5,802,422
3,414,830
603,802
191,573
219,842
4,430,047
1,680,840
1,680,840
190,305
243,732
89,711
780,400
1,304,148
11,813
17,741
13,325
44,000
86,879
15,511
23,239
6,676
45,426
(1)
Includes demand deposits and savings accounts, which can be withdrawn by customers
at any time.
(2)
See additional information regarding time deposits in Note H, Deposits, in
the Notes to Consolidated Financial Statements.
(3)
See additional information regarding borrowings in Note I, Short-Term
Borrowings and Long-Term Debt, in the Notes to Consolidated Financial Statements.
(4)
See additional information regarding operating leases in Note N, Leases, in
the Notes to Consolidated Financial Statements.
(5)
Includes significant information technology, telecommunication and data
processing outsourcing contracts. Variable obligations, such as those based on
transaction volumes, are not included.
$
571,499
674,089
367,406
2,702,516
$
4,315,510
$
739,056
34,193
$
773,249
Table of Contents
-
Identifying loans for individual review under Statement 114. In general, these consist
of large balance commercial loans and commercial mortgages that are rated less than
satisfactory based upon the Corporations internal credit-rating process.
-
Assessing whether the loans identified for review under Statement 114 are impaired.
That is, whether it is probable that all amounts will not be collected according to the
contractual terms of the loan agreement, generally representing loans that management has
placed on non-accrual status.
-
For loans reviewed under Statement 114, calculating the estimated fair value, using
observable market prices, discounted cash flows or the value of the underlying
collateral.
-
Classifying all non-impaired large balance loans based on credit risk ratings and
allocating an allowance for loan losses based on appropriate factors, including recent
loss history for similar loans.
-
Identifying all smaller balance homogeneous loans for evaluation collectively under the
provisions of Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies (Statement 5). In general, these loans include residential mortgages,
consumer loans, installment loans, smaller balance commercial loans and mortgages and
lease receivables.
-
Statement 5 loans are segmented into groups with similar characteristics and an
allowance for loan losses is allocated to each segment based on recent loss history and
other relevant information.
-
Reviewing the results to determine the appropriate balance of the allowance for loan
losses. This review gives additional consideration to factors such as the mix of loans in
the portfolio, the balance of the allowance relative to total loans and non-performing
assets, trends in the overall risk profile of the portfolio, trends in delinquencies and
non-accrual loans and local and national economic conditions.
-
An unallocated allowance is maintained to recognize the inherent imprecision in estimating and measuring loss exposure.
-
Documenting the results of its review in accordance with SAB 102.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
MATURING
After One But
After Five But
Within One Year
Within Five Years
Within Ten Years
After Ten Years
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
(dollars in thousands)
$
$
7,648
4.03
%
$
$
142
3.56
941
5.93
179
5.59
50
25
2.00
$
192
2.63
%
$
8,614
4.23
%
$
179
5.59
%
$
$
3,539
6.44
%
MATURING
After One But
After Five But
Within One Year
Within Five Years
Within Ten Years
After Ten Years
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
(dollars in thousands)
$
17,066
5.16
%
$
$
$
38,600
4.36
243,777
5.08
4,771
5.13
1,317
7.04
24,320
5.14
274,567
4.70
84,737
5.65
104,655
6.84
50
5.30
4,191
6.22
66,396
7.17
$
80,036
4.77
%
$
522,535
4.89
%
$
89,508
5.63
%
$
172,368
6.97
%
$
492,524
5.24
%
$
1,343,107
4.02
%
(1)
Weighted average yields on tax-exempt securities have been computed on a fully
tax-equivalent basis assuming a tax rate of 35 percent.
(2)
Maturities for mortgage-backed securities and collateralized mortgage obligations are
dependent upon the interest rate environment and prepayments on the underlying loans. For the
purpose of this table, the entire balance and weighted average rate is shown in one period.
(3)
Includes Small Business Administration securities, whose maturities are dependent upon
prepayments on the underlying loans. For the purpose of this table, amounts are based upon
contractual maturities.
Table of Contents
One
One Year
Through
More Than
or Less
Five Years
Five Years
Total
(in thousands)
$
1,456,715
$
475,713
$
225,704
$
2,158,132
309,313
407,876
89,865
807,054
$
1,766,028
$
883,589
$
315,569
$
2,965,186
$
620,216
$
1,594,790
$
1,377,582
$
3,592,588
370,450
976,975
426,071
1,773,496
$
990,666
$
2,571,765
$
1,803,653
$
5,366,084
$
1,029,168
$
152,214
$
47,538
$
1,228,920
85,380
39,078
75,431
199,889
$
1,114,548
$
191,292
$
122,969
$
1,428,809
$
369,560
291,073
394,241
161,242
$
1,216,116
Table of Contents
Expected Maturity Period
Estimated
2007
2008
2009
2010
2011
Beyond
Total
Fair Value
$
924,799
$
605,999
$
511,552
$
358,602
$
248,512
$
596,918
$
3,246,382
$
3,135,763
6.64
%
6.35
%
6.47
%
6.60
%
6.65
%
6.33
%
6.50
%
3,136,621
780,789
616,523
502,517
416,318
1,655,019
7,107,787
7,045,241
8.27
%
7.74
%
7.74
%
7.77
%
7.27
%
6.72
%
7.71
%
485,813
465,730
414,713
618,332
263,061
419,856
2,667,505
2,626,069
4.27
%
3.97
%
4.17
%
4.02
%
4.52
%
5.10
%
4.30
%
70
1,592
101
500
91,727
93,990
94,320
5.12
%
4.99
%
5.72
%
6.25
%
5.57
%
5.56
%
267,230
267,230
267,230
6.92
%
6.92
%
$
4,814,533
$
1,854,110
$
1,542,889
$
1,479,951
$
927,891
$
2,763,520
$
13,382,894
$
13,168,623
7.48
%
6.34
%
6.36
%
5.92
%
6.32
%
6.35
%
6.70
%
$
3,422,714
$
457,792
$
137,390
$
99,857
$
82,354
$
194,524
$
4,394,631
$
4,377,688
4.50
%
4.22
%
4.14
%
4.45
%
4.75
%
4.53
%
4.46
%
1,737,694
273,033
273,033
260,297
253,787
3,039,959
5,837,803
5,837,803
3.01
%
1.02
%
1.02
%
0.90
%
0.84
%
0.69
%
1.43
%
284,564
196,989
59,565
89,565
536
261,435
892,654
909,647
5.10
%
5.17
%
4.95
%
5.92
%
4.75
%
5.87
%
5.41
%
1,861,951
228,000
1,565
2,091,516
2,091,516
5.03
%
4.73
%
8.44
%
5.00
%
$
7,306,923
$
1,155,814
$
469,988
$
449,719
$
336,677
$
3,497,483
$
13,216,604
$
13,216,654
4.30
%
3.73
%
2.43
%
2.69
%
1.80
%
1.30
%
3.27
%
(1)
Amounts are based on contractual payments and maturities, adjusted for estimated
prepayments.
(2)
Amounts are based on contractual maturities; adjusted for estimated prepayments on
mortgage-backed securities, collateralized mortgage obligations and expected call on agency
and municipal securities.
(3)
Amounts are based on contractual maturities of time deposits.
(4)
Estimated based on history of deposit flows.
(5)
Amounts are based on contractual maturities of debt instruments, adjusted for possible
calls.
(6)
Amounts include Federal funds purchased, short-term promissory notes, floating FHLB
advances and securities sold under agreements to repurchase, which mature in less than 90
days, in addition to junior subordinated deferrable interest debentures.
(7)
Floating rate loans include adjustable rate mortgages.
(8)
Line of credit amounts are based on historical cash flows, with an average life of
approximately 5 years.
Table of Contents
Annual change
in net interest income
% Change
+ $7.5 million
+1.6%
+ $5.1 million
+1.1%
+ $2.7 million
+0.6%
- $4.4 million
-0.9%
- $11.8 million
-2.4%
- $21.2 million
-4.4%
Table of Contents
December 31
2006
2005
$
355,018
$
368,043
27,529
31,404
659
528
239,042
243,378
12,524
18,258
2,865,714
2,543,887
10,374,323
8,424,728
(106,884
)
(92,847
)
10,267,439
8,331,881
191,401
170,254
71,825
53,261
626,042
418,735
37,733
29,687
224,038
192,239
$
14,918,964
$
12,401,555
$
1,831,419
$
1,672,637
8,401,050
7,132,202
10,232,469
8,804,839
1,022,351
939,096
658,489
359,866
1,680,840
1,298,962
61,392
38,604
123,805
115,834
1,304,148
860,345
13,402,654
11,118,584
476,987
430,827
1,246,823
996,708
92,592
138,529
(39,091
)
(42,285
)
(261,001
)
(240,808
)
1,516,310
1,282,971
$
14,918,964
$
12,401,555
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share data)
Year Ended December 31
2006
2005
2004
$
727,297
$
517,413
$
394,765
97,652
74,921
76,792
14,896
12,114
9,553
6,568
4,793
4,023
15,564
14,940
8,407
2,530
1,586
103
864,507
625,767
493,643
246,941
140,774
89,779
78,043
34,414
15,182
53,960
38,031
31,033
378,944
213,219
135,994
485,563
412,548
357,649
3,498
3,120
4,717
482,065
409,428
352,932
37,441
35,669
34,817
43,773
40,198
39,451
26,792
24,229
20,494
21,086
25,032
19,262
7,439
6,625
17,712
13,344
12,545
7,128
149,875
144,298
138,864
213,913
181,889
166,026
36,493
29,275
23,813
14,251
11,938
10,769
12,228
12,395
11,430
10,638
8,823
6,943
7,907
5,311
4,726
70,561
66,660
53,808
365,991
316,291
277,515
265,949
237,435
214,281
80,422
71,361
64,673
$
185,527
$
166,074
$
149,608
$
1.07
$
1.01
$
0.95
1.06
1.00
0.94
0.581
0.540
0.493
Table of Contents
Accumulated
Number of
Additional
Other
Shares
Common
Paid-in
Retained
Comprehensive
Treasury
Outstanding
Stock
Capital
Earnings
Income (Loss)
Stock
Total
(dollars in thousands)
149,189,000
$
284,480
$
648,155
$
104,187
$
12,267
$
(100,772
)
$
948,317
149,608
149,608
(10,329
)
(10,329
)
(11,513
)
(11,513
)
(558
)
(558
)
127,208
15,278
100,247
(115,615
)
(90
)
1,376,000
(9,141
)
19,027
9,886
3,900
3,900
11,851,000
21,498
164,365
185,863
7,533,000
14,348
110,877
125,225
(4,941,000
)
(78,966
)
(78,966
)
(77,256
)
(77,256
)
165,008,000
$
335,604
$
1,018,403
$
60,924
$
(10,133
)
$
(160,711
)
$
1,244,087
166,074
166,074
(26,219
)
(26,219
)
(2,185
)
(2,185
)
(4,306
)
(4,306
)
558
558
133,922
84,046
(84,114
)
(68
)
1,176,000
1,809
4,179
5,071
11,059
1,041
1,041
3,934,000
9,368
57,199
66,567
(5,250,000
)
(85,168
)
(85,168
)
(88,469
)
(88,469
)
164,868,000
$
430,827
$
996,708
$
138,529
$
(42,285
)
$
(240,808
)
$
1,282,971
185,527
185,527
18,132
18,132
(1,304
)
(1,304
)
(4,835
)
(4,835
)
197,520
(8,799
)
(8,799
)
22,648
107,952
(130,600
)
1,222,000
2,989
6,868
9,857
1,687
1,687
8,619,000
20,523
133,608
154,131
(1,061,000
)
(16,770
)
(16,770
)
(3,423
)
(3,423
)
(100,864
)
(100,864
)
173,648,000
$
476,987
$
1,246,823
$
92,592
$
(39,091
)
$
(261,001
)
$
1,516,310
Table of Contents
(in thousands)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
2006
2005
2004
(in thousands)
172,830
164,234
156,759
2,042
2,026
1,694
174,872
166,260
158,453
2,179
1,197
Table of Contents
Table of Contents
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(in thousands)
$
7,648
$
$
(68
)
$
7,580
1,262
11
1,273
75
75
3,539
68
(1
)
3,606
$
12,524
$
79
$
(69
)
$
12,534
$
165,931
$
2,960
$
(3,255
)
$
165,636
17,062
5
(1
)
17,066
289,816
129
(1,480
)
288,465
493,525
1,599
(6,845
)
488,279
69,575
1,449
(387
)
70,637
494,484
1,609
(3,569
)
492,524
1,376,651
2,265
(35,809
)
1,343,107
$
2,907,044
$
10,016
$
(51,346
)
$
2,865,714
$
7,512
$
$
(103
)
$
7,409
5,877
19
5,896
4,869
143
5,012
$
18,258
$
162
$
(103
)
$
18,317
$
137,462
$
2,029
$
(3,959
)
$
135,532
35,124
(6
)
35,118
213,748
163
(1,261
)
212,650
444,034
1,044
(6,091
)
438,987
64,478
1,860
(504
)
65,834
265,033
301
(2,831
)
262,503
1,445,796
556
(53,089
)
1,393,263
$
2,605,675
$
5,953
$
(67,741
)
$
2,543,887
Table of Contents
Held to Maturity
Available for Sale
Amortized
Estimated
Amortized
Estimated
Cost
Fair Value
Cost
Fair Value
(in thousands)
$
192
$
192
$
80,242
$
80,036
8,614
8,556
529,333
522,535
179
179
90,153
89,508
170,250
172,368
8,985
8,927
869,978
864,447
494,484
492,524
3,539
3,607
1,376,651
1,343,107
$
12,524
$
12,534
$
2,741,113
$
2,700,078
Less Than 12 months
12 Months or Longer
Total
Estimated
Unrealized
Estimated
Unrealized
Estimated
Unrealized
Fair Value
Losses
FairValue
Losses
Fair Value
Losses
(in thousands)
$
5,948
$
(1
)
$
$
$
5,948
$
(1
)
121,546
(361
)
130,767
(1,187
)
252,313
(1,548
)
60,640
(500
)
294,956
(6,345
)
355,596
(6,845
)
8,112
(145
)
13,180
(242
)
21,292
(387
)
175,527
(1,045
)
120,192
(2,524
)
295,719
(3,569
)
99,432
(2,075
)
1,034,860
(33,735
)
1,134,292
(35,810
)
471,205
(4,127
)
1,593,955
(44,033
)
2,065,160
(48,160
)
22,325
(1,638
)
16,623
(1,617
)
38,948
(3,255
)
$
493,530
$
(5,765
)
$
1,610,578
$
(45,650
)
$
2,104,108
$
(51,415
)
Table of Contents
2006
2005
(in thousands)
$
2,603,224
$
2,044,010
361,962
331,659
3,213,809
2,831,405
696,836
567,733
1,455,439
1,205,523
1,428,809
851,451
523,066
520,098
100,711
79,738
10,383,856
8,431,617
(9,533
)
(6,889
)
$
10,374,323
$
8,424,728
2006
2005
2004
(in thousands)
$
92,847
$
89,627
$
77,700
(6,969
)
(8,204
)
(8,877
)
4,517
5,196
4,520
(2,452
)
(3,008
)
(4,357
)
3,498
3,120
4,717
12,991
3,108
11,567
$
106,884
$
92,847
$
89,627
2006
2005
(in thousands)
$
33,113
$
36,560
20,632
9,012
4,103
2,072
$
57,848
$
47,644
Table of Contents
2006
2005
(in thousands)
$
30,610
$
26,693
203,551
180,153
136,576
119,179
8,034
5,483
378,771
331,508
(187,370
)
(161,254
)
$
191,401
$
170,254
2006
2005
2004
(in thousands)
$
418,735
$
364,019
$
127,202
207,307
54,716
236,817
$
626,042
$
418,735
$
364,019
Table of Contents
2006
2005
Accumulated
Accumulated
Gross
Amortization
Net
Gross
Amortization
Net
(in thousands)
$
50,279
$
(17,927
)
$
32,352
$
35,590
$
(11,214
)
$
24,376
475
(230
)
245
475
(135
)
340
8,897
(6,305
)
2,592
8,897
(5,206
)
3,691
59,651
(24,462
)
35,189
44,962
(16,555
)
28,407
2,544
2,544
1,280
1,280
$
62,195
$
(24,462
)
$
37,733
$
46,242
$
(16,555
)
$
29,687
Year
$
7,463
6,222
5,489
4,692
3,514
2006
2005
2004
(in thousands)
$
7,515
$
8,157
$
8,396
724
1,548
2,138
(1,640
)
(2,190
)
(2,377
)
$
6,599
$
7,515
$
8,157
Table of Contents
Year
$
1,649
1,477
1,280
1,055
800
2006
2005
(in thousands)
$
1,831,419
$
1,672,637
1,683,857
1,637,007
2,287,146
2,125,475
4,430,047
3,369,720
$
10,232,469
$
8,804,839
Year
$
3,414,830
461,853
141,949
104,901
86,672
219,842
$
4,430,047
December 31
Maximum Outstanding
2006
2005
2004
2006
2005
2004
(in thousands)
$
1,022,351
$
939,096
$
676,922
$
1,236,941
$
939,096
$
849,200
339,207
352,937
500,206
498,541
573,991
708,830
279,076
282,035
2,000
2,000
2,000
36,318
11,930
55,600
33,180
26,000
3,888
4,929
5,466
5,435
13,219
5,807
$
1,680,840
$
1,298,962
$
1,194,524
Table of Contents
December 31
2006
2005
2004
(dollars in thousands)
$
339,207
$
352,937
$
500,206
3.57
%
2.61
%
1.03
%
$
356,561
$
436,244
$
531,196
3.40
%
2.12
%
0.97
%
2006
2005
(in thousands)
$
998,521
$
717,037
206,705
40,724
100,000
100,000
1,999
3,880
(3,077
)
(1,296
)
$
1,304,148
$
860,345
Table of Contents
Rate at
Fixed/
December 31,
Callable
Debentures Issued to
Variable
2006
Amount
Maturity
Callable
Rate
Fixed
8.57
%
$
10,310
8/15/2028
8/15/2008
104.3
%
Variable
8.86
%
15,464
11/7/2032
11/7/2007
100.0
Variable
8.86
%
3,093
11/7/2032
11/7/2007
100.0
Variable
8.81
%
4,124
7/31/2031
7/31/2006
107.5
Variable
8.92
%
2,578
6/26/2032
6/26/2007
100.0
Variable
8.01
%
6,186
6/30/2039
6/30/2009
100.0
Variable
7.25
%
4,124
3/15/2035
3/15/2010
100.0
Variable
7.13
%
6,186
6/15/2035
6/15/2010
100.0
Fixed
6.29
%
154,640
12/31/2036
NA
NA
$
206,705
Year
$
190,305
184,594
59,138
89,116
595
780,400
$
1,304,148
Table of Contents
For Capital
Actual
Adequacy Purposes
Well-Capitalized
As of December 31, 2006
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
$
1,287,443
11.7
%
$
880,074
8.0
%
$
1,100,093
10.0
%
496,555
11.2
356,238
8.0
445,297
10.0
147,565
11.9
99,272
8.0
124,090
10.0
119,237
11.4
83,679
8.0
104,599
10.0
107,102
10.7
80,069
8.0
100,086
10.0
107,459
11.2
76,921
8.0
96,151
10.0
$
1,083,953
9.9
%
$
440,037
4.0
%
$
660,056
6.0
%
401,584
9.0
178,119
4.0
267,178
6.0
134,167
10.8
49,636
4.0
74,454
6.0
96,821
9.3
41,840
4.0
62,759
6.0
90,332
9.0
40,035
4.0
60,052
6.0
89,215
9.3
38,460
4.0
57,691
6.0
$
1,083,953
7.7
%
$
425,125
3.0
%
$
708,541
5.0
%
401,584
7.1
168,974
3.0
281,624
5.0
134,167
9.2
43,573
3.0
72,622
5.0
96,821
7.5
38,821
3.0
64,701
5.0
90,332
7.0
38,942
3.0
64,904
5.0
89,215
7.0
38,209
3.0
63,681
5.0
Table of Contents
For Capital
Actual
Adequacy Purposes
Well-Capitalized
As of December 31, 2005
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
$
1,102,891
12.1
%
$
730,115
8.0
%
$
912,644
10.0
%
409,653
11.1
295,353
8.0
369,191
10.0
102,007
11.6
70,539
8.0
88,173
10.0
101,532
11.0
73,965
8.0
92,456
10.0
105,343
11.9
70,786
8.0
88,482
10.0
$
910,044
10.0
%
$
365,057
4.0
%
$
547,586
6.0
%
323,466
8.8
147,676
4.0
221,515
6.0
85,331
9.7
35,269
4.0
52,904
6.0
80,820
8.7
36,983
4.0
55,474
6.0
86,825
9.8
35,393
4.0
53,089
6.0
$
910,044
7.7
%
$
355,090
3.0
%
$
591,817
5.0
%
323,466
7.1
137,077
3.0
228,462
5.0
85,331
7.0
36,492
3.0
60,821
5.0
80,820
7.0
34,606
3.0
57,676
5.0
86,825
7.9
33,116
3.0
55,194
5.0
Year ended December 31
2006
2005
2004
(in thousands)
$
85,010
$
69,611
$
63,440
1,191
760
417
86,201
70,371
63,857
(5,779
)
990
816
$
80,422
$
71,361
$
64,673
Year ended December 31
2006
2005
2004
35.0
%
35.0
%
35.0
%
(3.1
)
(2.8
)
(2.9
)
(1.5
)
(2.1
)
(2.1
)
0.3
0.2
0.1
(0.4
)
(0.3
)
(0.3
)
(0.1
)
(0.1
)
0.4
30.2
%
30.1
%
30.2
%
Table of Contents
2006
2005
(in thousands)
$
37,409
$
32,496
14,432
21,592
11,111
9,217
8,954
7,234
5,370
621
3,644
3,318
2,594
2,412
1,930
1,867
1,868
1,177
1,059
568
1,400
175
129
89,114
81,463
10,368
6,847
5,007
9,357
2,315
2,653
983
1,832
747
2,700
2,997
21,373
24,433
67,741
57,030
(11,087
)
(9,193
)
$
56,654
$
47,837
Table of Contents
2006
2005
2004
(in thousands)
$
8,427
$
7,801
$
8,251
2,467
3,468
3,072
1,892
1,376
967
$
12,786
$
12,645
$
12,290
Statement 158 Adjustments
Increase/(Decrease)
After
Before
Post-
Application of
Application of
Pension
retirement
Statement 158
Statement 158
Plan
Benefits
(As Reported)
(in thousands)
$
226,337
$
(2,040
)
$
(259
)
$
224,038
14,921,263
(2,040
)
(259
)
14,918,964
117,306
7,239
(738
)
123,805
13,396,155
7,239
(738
)
13,402,654
(30,292
)
(9,279
)
480
(39,091
)
1,525,109
(9,279
)
480
1,516,310
Table of Contents
2006
2005
2004
(in thousands)
$
2,431
$
2,486
$
2,307
3,457
3,370
3,102
(4,227
)
(3,273
)
(3,001
)
806
885
664
$
2,467
$
3,468
$
3,072
Plan Year Ended
September 30
2006
2005
(in thousands)
$
63,640
$
59,265
2,431
2,486
3,457
3,370
(2,935
)
(1,673
)
(1,039
)
959
(360
)
(767
)
$
65,194
$
63,640
$
53,457
$
41,468
4,051
10,652
3,033
3,010
(2,935
)
(1,673
)
$
57,606
$
53,457
2006
2005
(in thousands)
$
(65,194
)
$
(63,640
)
57,606
53,457
(7,588
)
(10,183
)
(26
)
(38
)
61
72
14,242
15,254
$
6,689
$
5,105
$
(7,588
)
$
5,105
$
50,827
$
50,434
(1)
As required by Statement 158, these amounts were recognized though a charge to other
comprehensive loss, net of tax, as of December 31, 2006.
Table of Contents
2006
2005
2004
5.75
%
5.50
%
5.75
%
4.50
4.00
4.50
8.00
8.00
8.00
2006
2005
9.0
%
17.0
%
51.0
44.0
40.0
39.0
100.0
%
100.0
%
Year
$
1,555
1,639
1,779
1,984
2,148
16,126
$
25,231
2006
2005
2004
(in thousands)
$
367
$
406
$
364
498
524
474
(4
)
(5
)
(2
)
(226
)
(226
)
(230
)
$
635
$
699
$
606
Table of Contents
2006
2005
(in thousands)
$
10,849
$
8,929
367
406
498
524
(350
)
(359
)
(1,557
)
419
(264
)
930
$
9,543
$
10,849
$
146
$
150
340
350
7
5
(350
)
(359
)
$
143
$
146
2006
2005
(in thousands)
$
(9,543
)
$
(10,849
)
143
146
(9,400
)
(10,703
)
(226
)
(453
)
(512
)
1,311
$
(10,138
)
$
(9,845
)
$
(9,400
)
$
(9,845
)
(1)
As required by Statement 158, these amounts were recognized though a charge to other
comprehensive loss, net of tax, as of December 31, 2006.
Table of Contents
2006
2005
2004
(in thousands)
$
1,687
$
1,041
$
3,900
(274
)
(321
)
(591
)
$
1,413
$
720
$
3,309
Weighted
Average
Aggregate
Weighted
Remaining
Intrinsic
Stock
Average
Contractual
Value
Options
Exercise Price
Term
(in millions)
7,111,591
$
11.86
837,250
15.89
(1,146,683
)
7.15
1,263,197
10.16
(68,579
)
15.79
7,996,776
$
12.65
6.0 years
$
32.4
5,887,243
$
11.22
4.9 years
$
32.3
Table of Contents
Stock Options
Restricted Stock
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Options
Fair Value
Shares
Fair Value
1,147,175
$
2.40
15,750
$
17.12
837,250
2.39
195,278
2.65
(8,653
)
2.41
(15,750
)
17.12
(61,517
)
2.44
2,109,533
$
2.41
$
2006
2005
2004
(dollars in thousands)
1,146,683
1,104,305
1,458,212
$
10,726
$
10,675
$
13,577
$
6,813
$
6,774
$
6,341
$
8,247
$
7,049
$
6,936
2006
2005
2004
5.12
%
3.76
%
4.22
%
14.82
16.17
18.12
3.71
3.23
3.22
7 Years
6 Years
7 Years
Table of Contents
2006
2005
2004
163,583
137,493
110,662
$
13.81
$
14.11
$
13.86
$
399
$
341
$
271
Year
$
11,813
9,774
7,967
7,056
6,269
44,000
$
86,879
Table of Contents
2006
2005
(in thousands)
$
571,499
$
829,769
674,089
494,872
367,406
382,415
2,702,516
2,028,997
$
4,315,510
$
3,736,053
$
739,056
$
599,191
34,193
23,037
$
773,249
$
622,228
Table of Contents
2006
2005
Book
Estimated
Estimated
Value
Fair Value
Book Value
Fair Value
(in thousands)
$
355,018
$
355,018
$
368,043
$
368,043
27,529
27,529
31,404
31,404
659
659
528
528
239,042
242,411
243,378
245,946
12,524
12,534
18,258
18,317
2,865,714
2,865,714
2,543,887
2,543,887
10,374,323
10,201,158
8,424,728
8,322,514
71,825
71,825
53,261
53,261
$
5,802,422
$
5,802,422
$
5,435,119
$
5,435,119
4,430,047
4,413,104
3,369,720
3,346,911
1,680,840
1,680,840
1,298,962
1,298,962
61,392
61,392
38,604
38,604
57,375
57,375
45,676
45,676
1,304,148
1,321,141
860,345
871,429
(1)
See Note C, Investment Securities, for detail by security type.
Assets
Liabilities
Demand and savings deposits
Short-term borrowings
Accrued interest payable
Other financial liabilities
Table of Contents
Table of Contents
$
46,407
16,854
186,034
1,052,684
7,775
14,689
964
202,407
20,586
1,548,400
968,936
184,083
80,136
9,495
1,242,650
$
305,750
(1)
Amount includes $72.3 million of investment securities which were sold prior to the
date of acquisition, but settled after the date of acquisition.
2006
2005
$
491,061
$
479,398
149,142
150,962
186,319
183,744
$
1.07
$
1.05
1.06
1.04
Table of Contents
December 31
2006
2005
$
3,931
$
8,852
1,159
10
1,645,889
1,203,927
374,359
355,343
$
2,025,338
$
1,568,132
$
75,000
$
61,388
36,318
304,242
140,121
47,942
43,674
45,526
39,978
509,028
285,161
1,516,310
1,282,971
$
2,025,338
$
1,568,132
Year ended December 31
2006
2005
2004
(in thousands)
$
178,407
$
223,900
$
62,131
56,725
45,336
40,227
235,132
269,236
102,358
89,414
66,824
58,563
145,718
202,412
43,795
(13,810
)
(8,445
)
(6,420
)
159,528
210,857
50,215
17,105
(53,640
)
84,525
8,894
8,857
14,868
$
185,527
$
166,074
$
149,608
Table of Contents
Year Ended December 31
2006
2005
2004
(in thousands)
$
185,527
$
166,074
$
149,608
1,687
1,041
3,900
4,408
(1,381
)
(13,004
)
(25,999
)
44,783
(99,393
)
(2,278
)
(2,653
)
36,859
(22,182
)
41,790
(71,638
)
163,345
207,864
77,970
(96,222
)
(3,700
)
(6,000
)
(4,640
)
(100,000
)
(151,549
)
(21,724
)
(5,283
)
(252,411
)
(125,424
)
(11,283
)
49,930
(21,042
)
79,552
(98,022
)
(85,495
)
(74,802
)
9,857
10,991
7,537
(5,121
)
(264
)
152,563
98,606
(20,193
)
(85,168
)
(78,966
)
89,014
(82,372
)
(66,679
)
(52
)
68
8
76
8
$
24
$
76
$
8
$
3,023
$
2,758
$
2,889
77,327
60,539
54,457
Table of Contents
Table of Contents
Fulton Financial Corporation:
March 1, 2007
Table of Contents
Fulton Financial Corporation:
March 1, 2007
Table of Contents
Three Months Ended
March 31
June 30
Sept. 30
Dec. 31
$
192,652
$
213,206
$
229,101
$
229,548
77,609
90,354
103,177
107,804
115,043
122,852
125,924
121,744
1,000
875
555
1,068
36,607
36,001
36,912
40,355
88,016
90,793
92,425
94,757
62,634
67,185
69,856
66,274
18,755
20,484
21,514
19,669
$
43,879
$
46,701
$
48,342
$
46,605
$
0.26
$
0.27
$
0.28
$
0.27
0.25
0.27
0.28
0.27
0.138
0.1475
0.1475
0.1475
$
140,810
$
148,609
$
164,070
$
172,279
42,562
48,686
57,585
64,387
98,248
99,923
106,485
107,892
800
725
815
780
35,853
38,317
36,163
33,965
73,828
78,189
81,537
82,737
59,473
59,326
60,296
58,340
18,037
17,722
18,168
17,434
$
41,436
$
41,604
$
42,128
$
40,906
$
0.25
$
0.26
$
0.26
$
0.25
0.25
0.25
0.25
0.25
0.126
0.138
0.138
0.138
Table of Contents
Table of Contents
88
89
90
91
(a)
The following documents are filed as part of this report:
1.
Financial Statements The following consolidated financial statements of
Fulton Financial Corporation and subsidiaries are incorporated herein by reference
in response to Item 8 above:
(i)
Consolidated Balance Sheets December 31, 2006 and 2005.
(ii)
Consolidated Statements of Income Years ended December 31, 2006, 2005
and 2004.
(iii)
Consolidated Statements of Shareholders Equity and Comprehensive Income
Years ended December 31, 2006, 2005 and 2004.
(iv)
Consolidated Statements of Cash Flows Years ended December 31, 2006,
2005 and 2004.
(v)
Notes to Consolidated Financial Statements
(vi)
Report of Independent Registered Public Accounting Firm
2.
Financial Statement Schedules All financial statement schedules for which
provision is made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions or are
inapplicable and have therefore been omitted.
3.
Exhibits The following is a list of the Exhibits required by Item 601 of
Regulation S-K and filed as part of this report:
3.1
Articles of Incorporation, as amended and restated, of Fulton Financial
Corporation as amended Incorporated by reference to Exhibit 3.1 of the Fulton
Financial Corporation Form S-4 Registration Statement filed on October 7, 2005.
3.2
Bylaws of Fulton Financial Corporation as amended Incorporated by
reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on
Form 8-K dated September 22, 2006.
4.1
Rights Amendment dated June 20, 1989, as amended and restated on April 27,
1999, between Fulton Financial Corporation and Fulton Bank Incorporated by
reference to Exhibit 1 of the Fulton Financial Corporation Current Report on Form
8-K dated April 27, 1999.
4.2
An Indenture entered into on March 28, 2005 between Fulton Financial
Corporation and Wilmington Trust Company as trustee, relating to the issuance by
Fulton of $100 million aggregate principal amount of 5.35% subordinated notes due
April 1, 2015 Incorporated by reference to Item 1 of the Fulton Financial
Corporation Current Report on Form 8-K dated March 31, 2005.
10.1
Employment Agreement entered into between Fulton Financial Corporation and
R. Scott Smith, Jr. dated June 1, 2006 Filed herewith.
10.2
Employment Agreement entered into between Fulton Financial Corporation and
Richard J. Ashby, Jr. dated June 1, 2006 Filed herewith.
10.3
Deferred Compensation Agreement between Fulton Financial Corporation and
Richard J. Ashby, Jr., as of April 7, 1992 Filed herewith.
10.4
Employment Agreement entered into between Fulton Financial Corporation and
Craig H. Hill dated June 1, 2006 Filed herewith.
10.5
Employment Agreement entered into between Fulton Financial Corporation and
Charles J. Nugent dated June 1, 2006 Filed herewith.
Table of Contents
10.6
Employment Agreement entered into between Fulton Financial Corporation and
James E. Shreiner dated June 1, 2006 Filed herewith.
10.7
Employment Agreement entered into between Fulton Financial Corporation and
E. Philip Wenger dated June 1, 2006 Filed herewith.
10.8
Form of Employment Agreement to Senior Management Incorporated by
reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006.
10.9
Form of Death Benefit Only Agreement to Senior Management Filed
herewith.
10.10
2004 Stock Option and Compensation Plan adopted October 21, 2003
Incorporated by reference to Exhibit C of Fulton Financial Corporations 2004
Proxy Statement filed on March 18, 2004.
10.11
Fulton Financial Corporation Profit Sharing Plan Incorporated by reference to
Exhibit 4.2 of the Fulton
Financial Corporation Form S-8 Registration Statement filed on January 11,
2002.
10.12
Form of stock option agreement and form of Restricted Stock Agreement
between Fulton Financial Corporation and Officers of the Corporation as of July
1, 2005 Incorporated by reference to Exhibits 10.1 and 10.2 of the Fulton
Financial Corporation Current Report on Form 8-K dated June 27, 2005.
10.13
Form of Amendment to Stock Option Agreement for John M. Bond
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation
Current Report on Form 8-K dated December 22, 2006.
10.14
Agreement between Fulton Financial Corporation and Fiserv Solutions, Inc.
dated as of January 1, 2005. Portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934. See also Fulton Financial Corporation Current Report on Form 8-K dated June
24, 2005.
10.15
Revolving Credit Agreement, dated July 12, 2004, by and between Fulton
Financial Corporation, as Borrower, and SunTrust Bank, as Lender Incorporated
by reference to Exhibit 4.1 of the Fulton Financial Corporation Quarterly Report
on Form 10-Q for the quarter ended June 30, 2006.
10.16
First Amendment to Revolving Credit Agreement, dated August 31, 2005, by
and between Fulton Financial Corporation, as Borrower, and SunTrust Bank, as
Lender Incorporated by reference to Exhibit 4.2 of the Fulton Financial
Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
10.17
Second Amendment to Revolving Credit Agreement, dated June 30, 2006, by
and between Fulton Financial Corporation, as Borrower, and SunTrust Bank, as
Lender Incorporated by reference to Exhibit 4.3 of the Fulton Financial
Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
21
Subsidiaries of the Registrant.
23
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Table of Contents
(b)
Exhibits The exhibits required to be filed as part of this report are submitted
as a separate section of this report.
(c)
Financial Statement Schedules None required.
Table of Contents
92
93
FULTON FINANCIAL CORPORATION
(Registrant)
Dated:
March 1, 2007
By:
/s/ R. Scott Smith, Jr.
R. Scott Smith, Jr.,
Chairman, Chief Executive Officer and President
Signature
Capacity
Date
Director
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Executive Vice President
and Controller
(Principal Accounting Officer)
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Table of Contents
Signature
Capacity
Date
Director
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
March 1, 2007
Director
March 1, 2007
Director
March 1, 2007
Chairman, President and Chief
March 1, 2007
Executive Officer
Director
March 1, 2007
Table of Contents
94
95
Table of Contents
10.13
Form of Amendment to Stock Option Agreement for John M. Bond
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation
Current Report on Form 8-K dated December 22, 2006.
10.14
Agreement between Fulton Financial Corporation and Fiserv Solutions, Inc.
dated as of January 1, 2005. Portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934. See also Fulton Financial Corporation Current Report on Form 8-K dated June
24, 2005.
10.15
Revolving Credit Agreement, dated July 12, 2004, by and between Fulton
Financial Corporation, as Borrower, and SunTrust Bank, as Lender Incorporated
by reference to Exhibit 4.1 of the Fulton Financial Corporation Quarterly Report
on Form 10-Q for the quarter ended June 30, 2006.
10.16
First Amendment to Revolving Credit Agreement, dated August 31, 2005, by
and between Fulton Financial Corporation, as Borrower, and SunTrust Bank, as
Lender Incorporated by reference to Exhibit 4.2 of the Fulton Financial
Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
10.17
Second Amendment to Revolving Credit Agreement, dated June 30, 2006, by
and between Fulton Financial Corporation, as Borrower, and SunTrust Bank, as
Lender Incorporated by reference to Exhibit 4.3 of the Fulton Financial
Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
21
Subsidiaries of the Registrant.
23
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and R Scott Smith, Jr., an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Chairman, Chief Executive Officer, and President of Fulton. Fulton and Executive have previously entered into a Severance Agreement, dated May 17, 1988 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Chairman, Chief Executive Officer, and President of Fulton, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Executive Compensation Committee of the Board acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to Fulton's Board of Directors and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall review the Agreement on
a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $763,213, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by the Executive Compensation Committee such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided
for in the following sentence for twenty-four (24) months following such
termination. For purposes of the foregoing, the consideration payable under this
Section 4.2 shall include the Base Salary (as in effect immediately prior to the
termination) and may include an additional cash bonus amount determined in the
sole and absolute discretion of Fulton, which discretion shall be exercised by
the Executive Compensation Committee of the Board (or its successor) and
approved by the Board (all exclusive of any election to defer receipt of
compensation the Executive may have made). During such twenty-four (24) month
period, the Executive shall also continue to be eligible to
participate in the employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of two (2) years thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to three (3) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of three (3) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to three (3) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of three (3)
additional years of benefit accruals under each tax qualified or
nonqualified defined benefit type of retirement plan in which the Executive
was a participant immediately prior to Executive's termination or
resignation, calculated in each case as if the Executive had continued as a
plan participant for the number of additional years indicated above,
Executive's annual compensation for plan purposes in the most recently
completed plan year of each plan continued unchanged through these
additional years, and the retirement plans continued to operate unchanged
through the additional years. The actuarial equivalence factors and
assumptions generally in use under any defined benefit plan shall be
applied in determining lump sum present values of any defined benefit plan
additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
R Scott Smith, Jr.
1346 Silver Spring
Holtwood, PA 17532
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto. The Original
Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up
Payment, as determined pursuant to this Section 7.8, shall be paid by
Fulton to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Fulton. Any determination by the Accounting Firm shall be
binding upon Fulton and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Fulton that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Fulton exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Fulton shall
determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ Charles J. Nugent /s/ R. Scott Smith, Jr. --------------------------------- ---------------------------------------- Name: Charles J. Nugent EXECUTIVE Title: Senior Executive Vice President and Chief Financial Officer |
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and Richard J. Ashby, Jr., an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice President/Community Banking of Fulton. Fulton and Executive have previously entered into a Severance Agreement, dated May 17, 1988 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Executive Vice President/Community Banking of Fulton, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to the Chief Executive Officer of Fulton and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall
review the Agreement on a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $405,000, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by the Chief Executive Officer of Fulton such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided
for in the following sentence for twenty-four (24) months following such
termination. For purposes of the foregoing, the consideration payable under this
Section 4.2 shall include the Base Salary (as in effect immediately prior to the
termination) and may include an additional cash bonus amount determined in the
sole and absolute discretion of Fulton, which discretion shall be exercised by
the Executive Compensation Committee of the Board (or its successor) and
approved by the Board (all exclusive of any election to defer receipt of
compensation the Executive may have made). During such twenty-four (24) month
period, the Executive shall also continue to be eligible to
participate in the employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of two (2) years thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to three (3) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of three (3) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to three (3) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of three (3)
additional years of benefit accruals under each tax qualified or
nonqualified defined benefit type of retirement plan in which the Executive
was a participant immediately prior to Executive's termination or
resignation, calculated in each case as if the Executive had continued as a
plan participant for the number of additional years indicated above,
Executive's annual compensation for plan purposes in the most recently
completed plan year of each plan continued unchanged through these
additional years, and the retirement plans continued to operate unchanged
through the additional years. The actuarial equivalence factors and
assumptions generally in use under any defined benefit plan shall be
applied in determining lump sum present values of any defined benefit plan
additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
Richard J. Ashby, Jr.
9 Apple Hill Road
Lititz, PA 17543
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto, except for the Deferred
Compensation Agreement dated April 7, 1992 and amendments thereto. The Original Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that
there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up Payment, as determined pursuant to this Section 7.8, shall be paid by Fulton to the Executive within five days of the receipt of the Accounting Firm's determination. All fees and expenses of the Accounting Firm shall be borne solely by Fulton. Any determination by the Accounting Firm shall be binding upon Fulton and the Executive. As a result of the possible uncertainty in application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments will not have been made by Fulton that should have been made ("UNDERPAYMENT"), consistent with the calculations required to be made hereunder. In the event that Fulton exhausts its remedies pursuant to Section 7.8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as Fulton shall determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ R. Scott Smith, Jr. /s/ Richard J. Ashby, Jr. --------------------------------- ---------------------------------------- Name: R. Scott Smith, Jr. EXECUTIVE Title: Chairman, President and Chief Executive Officer |
EXHIBIT 10.3
DEFERRED COMPENSATION AGREEMENT
MADE this 7th day of April, 1992,
BETWEEN FULTON FINANCIAL CORPORATION, a Pennsylvania corporation with offices at One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania 17604 (Fulton),
AND RICHARD J. ASHBY, JR., an adult individual, whose current residence address is 1137 West Lafayette Street, Easton, Pennsylvania 18042 (Executive).
Background:
Executive is presently employed by Lafayette Bank (Lafayette) and serves as its President. Executive was previously employed by Fulton Bank. Both Lafayette and Fulton Bank are wholly-owned subsidiaries of Fulton. In connection with Executive's change of employment from Fulton Bank to Lafayette, on January 1, 1992, he ceased to be an active participant in a qualified retirement plan maintained by Fulton Bank and participated in qualified retirement plans maintained by Lafayette. The purpose of this Agreement is to assure Executive that his retirement benefits will not be materially adversely affected by his transfer of employment from Fulton Bank to Lafayette.
WITNESSETH:
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and covenants hereinafter contained, and
intending to be legally bound, Fulton and the Executive agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
(a) "Fulton Profit-Sharing Plan" means the Fulton Financial Corporation Employees Retirement Plan and Trust Agreement, as amended from time to time, or any plan which supersedes or replaces the foregoing Plan.
(b) "Fulton Pension Plan" means the Fulton Financial Affiliates Defined Benefit Pension Plan, as amended from time to time, or any plan which supersedes or replaces the foregoing Plan.
(c) "Fulton Savings Plan" means the Fulton Financial Affiliates 401(k) Savings Plan and Trust Agreement, as amended from time to time, or any plan which supersedes or replaces the foregoing Plan.
(d) "Determination Date" means the date on which Executive ceases to be an active participant in the Fulton Pension Plan, whether because of an employment transfer, termination of his employment, or otherwise.
(e) "Actual Fulton Profit-Sharing Plan Account" means Executive's account or accounts under the Fulton Profit-Sharing Plan.
(f) "Assumed Fulton Profit-Sharing Plan Account" means the amount of money that would have accumulated in an account for
the Executive under the Fulton Profit-Sharing Plan during the period beginning January 1, 1992, and ending on the Determination Date, had the Executive been employed by Fulton Bank for such period. Annual contributions shall be credited to such Account at the actual rate of contributions and forfeitures (as a percentage of compensation) made to the Fulton Profit-Sharing Plan for each year prior to the Determination Date, and annual contributions shall be based on Executive's compensation (as defined in the Fulton Profit-Sharing Plan) from Lafayette for each such year. Net income shall be credited to such Account based on the rate of return on the Executive's Actual Fulton Profit-Sharing Account during such period of time.
(g) "Fulton Pension Plan Benefit" shall mean Executive's accrued benefit as of the Determination Date under the Fulton Pension Plan, expressed as a lump sum benefit and calculated in accordance with the actuarial equivalency factors used to calculate lump sums under such Plan as of the Determination Date. The amount of such accrued benefit shall be determined as if the Executive terminated his employment on the Determination Date, even if Executive died on such Date.
(h) "Fulton Savings Plan Account" shall mean the balance in Executive's account or accounts under the Fulton Savings Plan as of the Determination Date, but excluding all amounts credited to Executive's 401(k) salary deferral account
(presently called the "Salary Reduction Account") under such Plan.
(i) "Deferred Compensation Amount" means an amount (if any) determined as of the Determination Date equal to the difference between (i) the Assumed Fulton Profit-Sharing Plan Account, and (ii) the sum of (A) the Fulton Pension Plan Benefit and (B) the Fulton Savings Plan Account.
(j) "Termination of employment" means that the Executive is no longer employed by Fulton or any of its affiliates and is no longer accruing benefits or earning contributions under the Fulton Profit-Sharing Plan, the Fulton Pension Plan, or the Fulton Savings Plan.
2. Payment of the Deferred Compensation Amount. Upon the termination of employment of Executive for any reason, Fulton will pay to Executive, in the form hereinafter provided, the Deferred Compensation Amount. The Deferred Compensation Amount may, at Fulton's option, be paid in a lump sum or in annual or more frequent installments (the periodic payments of which shall be credited with the then assumed interest rate for calculating lump sum values under the Fulton Pension Plan). In the event of the Executive's death prior to the receipt of the entire Deferred Compensation Amount (whether or not the payments of the Deferred Compensation Amount have commenced), the balance shall be paid in a lump sum to the Executive's estate. If the Determination Date precedes the date of termination of employment of Executive, the
Deferred Compensation Amount shall be recalculated as of the date of termination of employment of the Executive by (a) crediting the rate of return to the Assumed Fulton Profit-Sharing Plan Account between the Determination Date and the date of termination of employment of Executive, and (b) recalculating the Fulton Pension Plan Benefit and the Fulton Savings Plan Account as of the date of termination of employment of Executive.
3. Calculation of Deferred Compensation Amount. The determination of the Deferred Compensation Amount, if made in good faith by an independent actuary selected by Fulton, shall be binding on both Fulton and the Executive.
4. No Contract of Employment. This Agreement shall not constitute or be construed as a contract of employment between the Executive and Fulton, Lafayette, or any of their affiliates.
5. Relationship of Parties. The payments which are to be made by Fulton to Executive or his estate under the terms of this Agreement shall not constitute a lien or preferred claim on any of the assets of Fulton, and the relationship of Fulton, on the one hand, and Executive or his estate, on the other, as a result of this Agreement, shall be solely that of debtor and unsecured creditor.
6. Offsets and Non-alienation. At anytime after the termination of employment of Executive, Fulton may, at its option, offset any amounts owed by Executive to Fulton or any of its affiliates against the Deferred Compensation Amount.
Otherwise, the payments to be made under this Agreement are personal to the Executive and the right to receive such payments shall not be subject to assignment or alienation by Executive.
7. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to its subject matter, and supersedes any prior agreement, whether written or oral. It may be terminated or amended only by written agreement executed by both the parties hereto.
8. Choice of Law. This Agreement is executed in the Commonwealth of Pennsylvania and shall be interpreted in accordance with its laws.
9. Binding Effect. This Agreement shall be binding upon the parties hereto and their respective successors in interest.
IN WITNESS WHEREOF, this Agreement has been executed the day and year first above written.
FULTON FINANCIAL CORPORATION
By: /s/ Beverly Wise Shaeffer ------------------------------------ Beverly Wise Shaeffer Senior Vice President Attest: /s/ William R. Colmery -------------------------------- William R. Colmery Assistant Secretary Witness: EXECUTIVE /s/ Craig Hill /s/ Richard J. Ashby, Jr. ------------------------------------- ---------------------------------------- (Richard J. Ashby, Jr.) |
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and Craig H. Hill, an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice President/Human Resources of Fulton. Fulton and Executive have previously entered into a Severance Agreement, dated October 17, 2000 and amended July 22, 2002 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Executive Vice President/Human Resources of Fulton Bank, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to Chief Executive Officer of Fulton and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall
review the Agreement on a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $198,700, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by the Chief Executive Officer of Fulton such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided for in the following sentence for twelve (12) months following such termination. For purposes of the foregoing, the consideration payable under this Section 4.2 shall include the Base Salary (as in effect immediately prior to the termination) and may include an additional cash bonus amount determined in the sole and absolute discretion of Fulton, which discretion shall be exercised by the Executive Compensation Committee of the Board (or its successor) and approved by the Board (all exclusive of any election to defer receipt of compensation the Executive may have made). During such twelve (12) month period, the Executive shall also continue to be eligible to participate in the
employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of one (1) year thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to two (2) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of two (2) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to two (2) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of two (2) additional
years of benefit accruals under each tax qualified or nonqualified defined
benefit type of retirement plan in which the Executive was a participant
immediately prior to Executive's termination or resignation, calculated in
each case as if the Executive had continued as a plan participant for the
number of additional years indicated above, Executive's annual compensation
for plan purposes in the most recently completed plan year of each plan
continued unchanged through these additional years, and the retirement
plans continued to operate unchanged through the additional years. The
actuarial equivalence factors and assumptions generally in use under any
defined benefit plan shall be applied in determining lump sum present
values of any defined benefit plan additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
Craig H. Hill
1145 Oakmont Drive
Lancaster, PA 17601
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto. The Original
Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up
Payment, as determined pursuant to this Section 7.8, shall be paid by
Fulton to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Fulton. Any determination by the Accounting Firm shall be
binding upon Fulton and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Fulton that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Fulton exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Fulton shall
determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ R. Scott Smith, Jr. /s/ Craig H. Hill --------------------------------- ---------------------------------------- Name: R. Scott Smith Jr. EXECUTIVE Title: Chairman, President and Chief Executive Officer |
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and Charles J. Nugent an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice President and Chief Financial Officer of Fulton. Fulton and Executive have previously entered into a Severance Agreement, dated November 19, 1992 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Executive Vice President and Chief Financial Officer of Fulton, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to the Chief Executive Officer of Fulton and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall review the Agreement on
a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $478,400, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by the Chief Executive Officer of Fulton such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided
for in the following sentence for twenty-four (24) months following such
termination. For purposes of the foregoing, the consideration payable under this
Section 4.2 shall include the Base Salary (as in effect immediately prior to the
termination) and may include an additional cash bonus amount determined in the
sole and absolute discretion of Fulton, which discretion shall be exercised by
the Executive Compensation Committee of the Board (or its successor) and
approved by the Board (all exclusive of any election to defer receipt of
compensation the Executive may have made). During such twenty-four (24) month
period, the Executive shall also continue to be eligible to
participate in the employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of two (2) years thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to three (3) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of three (3) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to three (3) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of three (3)
additional years of benefit accruals under each tax qualified or
nonqualified defined benefit type of retirement plan in which the Executive
was a participant immediately prior to Executive's termination or
resignation, calculated in each case as if the Executive had continued as a
plan participant for the number of additional years indicated above,
Executive's annual compensation for plan purposes in the most recently
completed plan year of each plan continued unchanged through these
additional years, and the retirement plans continued to operate unchanged
through the additional years. The actuarial equivalence factors and
assumptions generally in use under any defined benefit plan shall be
applied in determining lump sum present values of any defined benefit plan
additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
Charlie J. Nugent
944 Shaeffer Road
Lancaster, PA 17602
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto. The Original
Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up
Payment, as determined pursuant to this Section 7.8, shall be paid by
Fulton to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Fulton. Any determination by the Accounting Firm shall be
binding upon Fulton and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Fulton that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Fulton exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Fulton shall
determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ R. Scott Smith, Jr. /s/ Charles J. Nugent -------------------------------- ---------------------------------------- Name: R. Scott Smith, Jr. EXECUTIVE Title: Chairman, President and Chief Executive Officer |
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and James E. Shreiner, an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice President/Administrative Services of Fulton. Fulton and Executive have previously entered into a Severance Agreement, dated October 17, 2000 and amended July 22, 2002 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Executive Vice President/Administrative Services of Fulton, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to the Chief Executive Officer of Fulton and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall
review the Agreement on a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $291,576, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during
the Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by Chief Executive Officer of Fulton such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided for in the following sentence for twelve (12) months following such termination. For purposes of the foregoing, the consideration payable under this Section 4.2 shall include the Base Salary (as in effect immediately prior to the termination) and may include an additional cash bonus amount determined in the sole and absolute discretion of Fulton, which discretion shall be exercised by the Executive Compensation Committee of the Board (or its successor) and approved by the Board (all exclusive of any election to defer receipt of compensation the Executive may have made). During such twelve (12) month period, the Executive shall also continue to be eligible to participate in the
employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of one (1) year thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to two (2) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of two (2) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to two (2) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of two (2) additional
years of benefit accruals under each tax qualified or nonqualified defined
benefit type of retirement plan in which the Executive was a participant
immediately prior to Executive's termination or resignation, calculated in
each case as if the Executive had continued as a plan participant for the
number of additional years indicated above, Executive's annual compensation
for plan purposes in the most recently completed plan year of each plan
continued unchanged through these additional years, and the retirement
plans continued to operate unchanged through the additional years. The
actuarial equivalence factors and assumptions generally in use under any
defined benefit plan shall be applied in determining lump sum present
values of any defined benefit plan additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
James E. Shreiner
1228 Hunsicker Road
Lancaster, PA 17601
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto. The Original
Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up
Payment, as determined pursuant to this Section 7.8, shall be paid by
Fulton to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Fulton. Any determination by the Accounting Firm shall be
binding upon Fulton and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Fulton that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Fulton exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Fulton shall
determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ R. Scott Smith, Jr. By: /s/ James E. Shreiner ----------------------------- ---------------------------------------- Name: R. Scott Smith, Jr. EXECUTIVE Title: Chairman, President and Chief Executive Officer |
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Fulton Financial Corporation, a Pennsylvania corporation ("FULTON"), and E. Philip Wenger, an adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice President/Chairman and CEO of Fulton Bank. Fulton and Executive have previously entered into a Severance Agreement, dated October 17, 2000 and amended July 23, 2002 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive upon the occurrence of an employment termination in connection with a change in control of Fulton. Fulton now desires to enter into a comprehensive Employment Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and addressing more broadly the terms and conditions of Executive's employment, including but not limited to the consequences of an employment termination in connection with a change in control. The Executive desires to continue in the employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the employment of the Executive, and Executive hereby agrees to continue Executive's employment by Fulton, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Vice President/Chairman and CEO of Fulton Bank, and thereafter during the term of this Agreement in such other or additional positions as may be assigned by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall perform such duties and shall have such authority consistent with Executive's position as may from time to time reasonably be specified by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board. Executive shall report directly to Chief Executive Officer of Fulton and shall perform Executive's duties for Fulton principally at Fulton's headquarters in Lancaster, Pennsylvania, or at such other locations determined by the Board or by the Chief Executive Officer of Fulton acting on behalf of the Board, except for periodic travel that may be necessary or appropriate in connection with the performance of Executive's duties hereunder. The terms and conditions of this Agreement have been reviewed and approved by the Board's Executive Compensation Committee, and such Committee shall review the Agreement on
a three year cycle, or more frequently, to assess its continuing appropriateness in light of Fulton's then-current needs.
(b) Executive shall devote Executive's full working time, energy, skill and best efforts to the performance of Executive's duties hereunder, in a manner that will faithfully and diligently further the business and interests of Fulton, and shall not be employed by or participate or engage in or be a part of in any manner the management or operation of any business enterprise other than Fulton without the prior written consent of the Board or the Chief Executive Officer of Fulton acting on behalf of the Board, which consent may be granted or withheld in Fulton's sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder, Fulton shall pay to Executive a salary at an initial annual rate equal to $320,943, payable in periodic installments in accordance with Fulton's regular payroll practices in effect from time to time. Executive's annual salary, as determined in accordance with this Section 3.1, is hereinafter referred to as Executive's "BASE SALARY." For years subsequent to the initial year of this Agreement, Executive's Base Salary shall be set by Fulton at an amount no less than the initial annual rate set herein. For each year in the Employment Period, Executive shall be a participant in any bonus or incentive compensation program for executives, including in particular any annual cash bonus plan and equity-based long term incentive plan, that Fulton may implement and administer from time to time during the Employment Period, and the amount and form of such bonus and incentive compensation shall be determined annually by Fulton consistent with its Board's executive compensation practices. References herein to the amount of the Executive's Base Salary or annual cash bonus or cash incentive compensation shall be to the gross amount of such compensation element, exclusive of any elective compensation deferral agreements entered into by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Fulton's broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
Employment Period to participate in any Fulton executive-only retirement plan, deferred compensation plan, welfare benefit plan, or other benefit programs, as and to the extent any such benefit programs, plans or arrangements are or may from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid vacation, leave of absence and leave for illness or temporary disability in conformity with Fulton's regular policies and practices, and any leave on account of illness or temporary disability shall not constitute a breach by the Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other general executives perquisites as approved from time to time by the Chief Executive Officer of Fulton such as company paid club memberships and employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment, Fulton shall reimburse Executive for all reasonable expenses incurred by Executive in connection with the performance of Executive's duties hereunder in accordance with its regular reimbursement policies as in effect from time to time and upon receipt of itemized vouchers therefor and such other supporting information as Fulton may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's employment is voluntarily terminated by the Executive other than for Good Reason (as defined in Section 4.2) or terminates due to Executive's retirement upon attaining age 65, Fulton shall be obligated to pay Executive's Base Salary through the effective date of Executive's termination, together with applicable expense reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Upon making the payments described in this Section 4.1, Fulton shall have no further compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided for in the following sentence for twelve (12) months following such termination. For purposes of the foregoing, the consideration payable under this Section 4.2 shall include the Base Salary (as in effect immediately prior to the termination) and may include an additional cash bonus amount determined in the sole and absolute discretion of Fulton, which discretion shall be exercised by the Executive Compensation Committee of the Board (or its successor) and approved by the Board (all exclusive of any election to defer receipt of compensation the Executive may have made). During such twelve (12) month period, the Executive shall also continue to be eligible to participate in the
employee benefit plans referred to in Section 3.2 to the extent Executive remains eligible under the applicable employee benefit plans and to the extent Executive's eligibility is not contrary to, or does not negate, the tax favored status of the plans or of the benefits payable under the plan. If Executive is unable to continue to participate in any employee benefit plan or program provided for under this Agreement, Executive shall be compensated in respect of such inability to participate through payment by Fulton to Executive, on an annual basis in advance, of an amount equal to the annual cost that would have been incurred by Fulton if the Executive were able to participate in such plan or program plus an amount which, when added to the Fulton annual cost, would be sufficient after Federal, state and local income and payroll taxes (based on the tax returns filed by the Executive most recently prior to the date of termination) to enable the Executive to net an amount equal to the Fulton annual cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Fulton's material obligations under this Agreement, and Fulton has not remedied such breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes or attempts to change in any significant respect the authority, duties, compensation, benefits or other terms or conditions of Executive's employment in a manner that is adverse to the Executive; or
(iii) Fulton requires Executive to be based at a location outside a thirty-five (35) mile radius of the location where Executive previously was based, except for reasonably required travel on Fulton's business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate immediately upon notice of termination for "Cause" (as defined herein), in which event Fulton shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles. As used herein, "CAUSE" shall mean the following:
(a) Executive shall have committed an act of dishonesty constituting a felony and resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or otherwise failed (for reasons other than incapacity due to accident or physical or mental illness) to perform Executive's duties to Fulton, with such refusal or failure continuing for a period of at least 30 consecutive days following the receipt by Executive of written notice from Fulton setting forth in detail the facts upon which Fulton relies in concluding that Executive has deliberately and intentionally refused or failed to perform such duties; or
(d) Executive's conduct that brings public discredit on or injures the reputation of Fulton, in Fulton's reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined below) or death during the term of this Agreement, the employment of the Executive will terminate automatically, in which event the Bank shall not thereafter be obligated to make any further payments hereunder other than amounts (including salary, expense reimbursement, etc.) accrued under this Agreement as of the date of such termination in accordance with generally accepted accounting principles or as otherwise specifically provided herein. For purposes hereof, Disability shall mean shall mean that the Executive, by reason of a medically determinable physical or medical impairment that can be expected to result in death or expected to last for a continuous period of at least twelve months, (i) is unable to engage in any substantial gainful activity or (ii) has received income replacement benefits for a period of at least three months under an accident or health plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result of the Executive's death, the Executive's dependents, beneficiaries and estate, as the case may be, will receive such survivor's income and other benefits as they may be entitled under the terms of the benefit programs, plans, and arrangements described in Section 3.2 which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result of the Executive's Disability, (A) Fulton shall pay the Executive an amount equal to at least six months' Base Salary at the rate and as required by Section 3.1 and in effect immediately prior to the date of Disability, (B) thereafter for as long as Executive continues to be disabled Fulton shall continue to pay an amount equal to at least 60% of Base Salary in effect immediately prior to the date of Disability until the earlier of Executive's death or December 31 of the calendar year in which Executive attains age 65; and (C), to the extent not duplicative of the foregoing, Executive shall receive those benefits customarily provided by Fulton 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.
(iii) For the purposes of (i) and (ii) above, the Executive or Executive's dependents shall pay the same percentage of the total cost of coverage under the applicable employee benefit plans as Executive was paying when Executive's employment terminated. The total cost of the Executive's continued coverage shall be determined using the same rates for health, life and/or disability coverage that apply from time to time to similarly situated active employees.
4.5 Death or Disability Following Termination of Employment. Executive's disability or death following Executive's termination pursuant to Section 4.2 shall not affect Executive's right, or if applicable, the right of Executive's beneficiaries, to receive the payments for the balance of the period described in Section 4.2, nor will it affect the right of Executive or Executive's beneficiaries to receive the balance of payments due under Sections 6 and 7 herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice to Fulton, name one or more beneficiaries of any benefits which may become payable by Fulton pursuant to this Agreement. If Executive fails to designate a beneficiary any benefits to be paid pursuant to this Agreement shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed to Fulton and shall not, at any time during or after Executive's employment by Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone, without the express authorization of the Board or senior management of Fulton, any trade secret, private or confidential information or knowledge of Fulton or any of their affiliates obtained or acquired by Executive while so employed. All computer software, business cards, customer lists, price lists, contract forms, catalogs, books, records, files and know-how acquired while an employee of Fulton are acknowledged to be the property of Fulton (or the applicable affiliate) and shall not be duplicated, removed from Fulton's possession or made use of other than in pursuit of Fulton's business and, upon termination of employment for any reason, Executive shall deliver to Fulton, without further demand, all copies thereof which are then in Executive's possession or under Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the Employment Period and for a period of one (1) year thereafter, directly or indirectly:
(a) be or become an officer, director or employee or agent of, or a consultant to or give financial or other assistance to, any person or entity considering engaging in commercial banking, or so engaged, anywhere within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure orders from or do business with any customer of Fulton;
(c) solicit or contact any person who is an employee of the Fulton with a view to the engagement or employment of such person by a third party;
(d) seek to contract with or engage (in such a way as to adversely affect or interfere with the business of Fulton) any person or entity who has been contracted with or engaged to provide goods or services to Fulton; or
(e) engage in or participate in any effort or act to induce any of the customers, associates, consultants, or employees of Fulton to take any action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and Executive's affiliates
from owning, as passive investors, in the aggregate not more than 5% of the outstanding publicly traded stock of any corporation so engaged and (ii) in the event the Executive's employment is terminated by the Executive for Good Reason or by Fulton other than for Cause, the covenants in this Section 5.2 shall not apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained herein are fair and reasonable in light of the consideration paid hereunder, and that damages alone shall not be an adequate remedy for any breach by Executive of Executive's covenants which then apply and accordingly expressly agrees that, in addition to any other remedies which Fulton may have, Fulton shall be entitled to injunctive relief in any court of competent jurisdiction for any breach or threatened breach of any such covenants by Executive. Nothing contained herein shall prevent or delay Fulton from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton shall mean a change in control of the kind that would be required to be reported in response to Item 1 of Securities and Exchange Commission Form 8-K promulgated under the Securities Exchange Act of 1934 and as in effect on the date hereof. Without limitation of the foregoing, a "Change in Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have acquired, directly or indirectly, beneficial ownership of 20 percent or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed such that during any period of two consecutive years during the term of this Agreement, the persons who at the beginning of such period were members of the Board cease for any reason to constitute a majority of the Board, unless the nomination or election of each director who was not a director at the beginning of such period was
approved in advance by directors representing not less than two-thirds of the directors then in office who were directors at the beginning of the period; or
(iii) Fulton shall be merged or consolidated with or its assets purchased by another corporation and as a result of such merger, consolidation or sale of assets, less than a majority of the outstanding voting stock of the surviving, resulting or purchasing corporation is owned, immediately after the transaction, by the holders of the voting stock of the Company outstanding immediately before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed to be the beneficial owner of any shares which the person or any of the person's affiliates or associates (i) owns, directly or indirectly, (ii) has the right to acquire, or (iii) has the right to vote or direct the voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90 days before a Change in Control and ending two (2) years after such Change in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of amounts payable under Section 4, Fulton will pay the Executive the amounts specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is terminated by Fulton in the circumstances described Section 4.2(a)(ii), or the Executive resigns for Good Reason as described in Section 4.2(a)(i), Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to two (2) times the sum of (A) the Base Salary immediately before the Change in Control and (B) the highest annual cash bonus or other incentive compensation awarded to the Executive over the past three years in which cash bonus or other incentive compensation was awarded (all exclusive of any election to defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Fulton'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 Executive's employment (the "DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an amount which, when added to the Unvested Company Contribution, would be sufficient after Federal, state and local income taxes (based on the tax returns filed by the Executive most recently prior to the Date of Termination) to enable the Executive to net an amount equal to the Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive outplacement services utilized by the Executive upon the receipt by Fulton of written receipts or other appropriate documentation; and
(iv) Except for the payment provided in (iii) above, such payments shall be made in one lump sum within 15 business days after the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of two (2) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to two (2) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of two (2) additional
years of benefit accruals under each tax qualified or nonqualified defined
benefit type of retirement plan in which the Executive was a participant
immediately prior to Executive's termination or resignation, calculated in
each case as if the Executive had continued as a plan participant for the
number of additional years indicated above, Executive's annual compensation
for plan purposes in the most recently completed plan year of each plan
continued unchanged through these additional years, and the retirement
plans continued to operate unchanged through the additional years. The
actuarial equivalence factors and assumptions generally in use under any
defined benefit plan shall be applied in determining lump sum present
values of any defined benefit plan additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and exercise rights of all stock options, shares of restricted stock, and other equity-based compensation units held by the Executive pursuant to any stock option plan, stock option agreement, restricted stock agreement, or other long term incentive plan shall be governed by the terms of such plan or agreement, but in the event the plan or agreement is silent on the subject of change in control, all such options, shares, and units shall immediately become vested and exercisable as to all or any part of the shares and rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and no benefits under 6.2(b) if the Executive is terminated by Fulton during a Change in Control Period upon the death or Disability of the Executive or for Cause. In an instance of death or Disability of the Executive, however, the Executive and Executive's dependents, beneficiaries and estate shall receive any benefits payable to them under Section 4.4.
(e) References in this Section 6.2 and in Section 7 to "Fulton" shall include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or unenforceable by a court of competent jurisdiction, Executive shall negotiate in good faith to provide Fulton with protection as nearly equivalent to that found to be invalid or unenforceable and if any such provision shall be so determined to be invalid or unenforceable by reason of the duration or geographical scope of the covenants contained therein, such duration or geographical scope, or both, shall be considered to be reduced to a duration or geographical scope to the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by Executive, and shall be assignable by Fulton only to any affiliate or to any person or entity which may become a successor in interest (by purchase of assets or stock, or by merger, or otherwise) to Fulton in the business or a portion of the business presently operated by it. Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective permitted successors, assigns, heirs, executors and administrators, including the restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand-delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any party to serve process in any other manner permitted by law.
(a) If to Fulton:
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
Attention: General Counsel
(b) If to Executive:
E. Philip Wenger
6 Whitetail Way
Pequea, PA 17565
7.4 Entire Agreement and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contemplated herein and supersedes all prior agreements and understandings with respect thereto. The Original
Agreement, if any, shall be terminated, with no further rights or obligations thereunder due to or from either party, as of the effective date hereof. Any amendment, modification, or waiver of this Agreement shall not be effective unless in writing and agreed and executed by Fulton and the Executive. Neither the failure nor any delay on the part of any party to exercise any right, remedy, power or privilege shall preclude any other or further exercise of the same or of any other right, remedy, power, or privilege with respect to any occurrence and such failure or delay to exercise any right shall be construed as a waiver of any right, remedy, power, or privilege with respect to any other occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), without giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in this Agreement are for convenience only and shall not affect its interpretation. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such further instruments and take such other actions as any other party shall reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Fulton (or its successor) to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after the payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all determinations required to be made under this Section 7.8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by Fulton (the "ACCOUNTING FIRM"), which shall provide detailed supporting calculations to both Fulton and the Executive within 15 business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by Fulton. Any Gross-Up
Payment, as determined pursuant to this Section 7.8, shall be paid by
Fulton to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Fulton. Any determination by the Accounting Firm shall be
binding upon Fulton and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Fulton that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Fulton exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Fulton to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Fulton in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Fulton of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Fulton of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to Fulton (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Fulton notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Fulton any information reasonably requested by Fulton relating to such claim,
(ii) take such action in connection with contesting such claim as Fulton shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Fulton and reasonable acceptable to the Executive,
(iii) cooperate with Fulton in good faith in order effectively to contest such claim, and
(iv) permit Fulton to participate in any proceedings relating to such claim; provided, however, that Fulton shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section, Fulton shall control all proceedings taken in connection with such contest and, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Fulton shall
determine; provided, however, that if Fulton directs the Executive to pay such claim and sue for a refund, Fulton shall, to the extent permitted by applicable law, advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Fulton's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled in Executive's sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Fulton's complying with the requirements of such Section) promptly pay to Fulton the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after receipt by the Executive of an amount advanced by Fulton pursuant to Section 7.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Fulton does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related expenses incurred by Executive in connection with or relating to enforcement by Executive of Executive's rights under this Agreement shall be paid in full by the Bank, provided Executive prevails in connection with enforcing Executive's rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in Sections 4 or 6 hereto by seeking employment or otherwise and the Bank shall not be entitled to setoff against the amount of any payments made pursuant to Sections 4 or 6 hereto with respect to any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Fulton's certificate of incorporation or bylaws, Fulton will indemnify the Executive and hold Executive harmless to the fullest extent permitted by law with respect to Executive's service as an officer and employee of Fulton and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to Executive's service as an officer or employee of Fulton and its subsidiaries. The Executive will be covered by a directors' and officers' insurance policy with respect to Executive's acts as an officer to the same extent as all other Bank officers under such policies.
7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the contrary, in no event shall Fulton be obligated to commence payment or distribution to the Executive of any amount that constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code section 409A ("CODE SECTION 409A") earlier than the earliest permissible date under Code section 409A that such amount could be paid without additional taxes or interest being imposed under Code section 409A. The Companies and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the distribution provisions of Code section 409A and to cause any and all amounts due under this Agreement, the payment or distribution of which is delayed pursuant to Code section 409A, to be paid or distributed in a single sum payment at the earliest permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Fulton shall establish and maintain with an unaffiliated trustee an irrevocable grantor trust (the "TRUST"), the assets of which shall at all times be subject to the claims of Fulton's creditors in the event of Fulton's insolvency. Upon the occurrence of a Change in Control, Fulton shall deposit with the trustee of the Trust, to be credited to an account established under the Trust in the name of and for the benefit of the Executive, assets sufficient in value to satisfy fully the obligations of Fulton to the Executive under this Agreement that would arise in the event that subsequent to the Change in Control, and during the period the Executive continues to be covered by the severance benefit protections of this Agreement, the Executive is terminated by Fulton without Cause or the Executive terminates his own employment for Good Reason. The contingent obligations to be funded under the Trust shall include in particular those specified in Section 6 and Section 7.8 hereof. In the event the Executive's entitlement to benefits under the Agreement expires or the amounts funded are in excess of the amount needed to fully satisfy the claims under the Agreement of the Executive, any excess amounts in the Executive's account under the Trust shall revert to Fulton.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
FULTON FINANCIAL CORPORATION
By: /s/ R. Scott Smith, Jr. /s/ E. Philip Wenger --------------------------------- ---------------------------------------- Name: R. Scott Smith Jr. EXECUTIVE Title: Chairman, President and Chief Executive Officer |
EXHIBIT 10.9
DEATH BENEFIT ONLY AGREEMENT
THIS DEATH BENEFIT ONLY AGREEMENT (the "Agreement"), made and entered into as of the ____________ day of ________________, by and among Fulton Financial Corporation and its wholly owned subsidiary FFC Management, Inc. (hereafter jointly or severally the "Company") and ____________________ (the "Executive").
WHEREAS, the Executive is a key employee of the Company and/or its subsidiaries or affiliates, and the Company wishes to retain the Executive in its employ and the employ of its subsidiaries and affiliates;
WHEREAS, as an inducement to continued employment, the Company wishes to assist the Executive with additional financial protection in the event of the Executive's death;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
BENEFITS
Should the Executive die while this Agreement is in effect, the Company shall pay the Executive's beneficiary a death benefit in an amount, if any, determined in accordance with the following provisions:
(A) If the Executive is actively employed at the time of his death, the benefit payable upon the Executive's death shall be an amount such that after the assessment of individual income taxes at all taxation levels to which this benefit is subject (assuming the highest marginal tax rate at each level of taxation in effect at the time of the Executive's death) the amount remaining shall be equal to the product of the Benefit Factor and the Executive's base salary. Executive's base salary shall be at the annual rate in effect on his date of death.
(B) On or after the effective date of the Executive's termination of employment by reason of Retirement, the benefit payable upon the Executive's death shall be equal to $_________.
(C) On or after the effective date of the Executive's termination of employment by reason of Disability, the benefit payable upon the Executive's death shall be equal the amount as calculated in section A of Article I. until the Executive reaches age 65, at which time the Executive will be considered retired for purposes of this Agreement. Executive's base salary shall be at the annual rate in effect at the time of the Executive's termination for reason of Disability.
(D) Except as otherwise provided in this Article 1(B) or (C), no benefit shall be payable under this Agreement on or after the effective date of the Executive's termination of employment unless such termination has occurred within 12 months of a Change in Control for reasons other then Cause. If termination occurs within 12 months of Change in Control for reason other then Cause, this Agreement and the benefits due hereunder will remain in full force.
A benefit payable under this Article I shall be paid in a single lump sum to the Executive's beneficiary as soon as practicable after the Company receives written notice, in a form and manner acceptable to the Company, of the Executive's death. In the event the Executive has not designated a beneficiary, or if the Executive's designated beneficiary shall have predeceased the Executive, the benefit under this Agreement shall be paid to the Executive's estate. The beneficiary shall be designated on a form designated by the Company for such purpose. The Executive may at any time and from time to time while this Agreement is in effect change his beneficiary by executing and delivering to the Company a new beneficiary designation form.
ARTICLE II
FUNDING RESTRICTIONS
The Executive, his beneficiary, and any successor in interest to them, shall be and remain, with respect to the obligations under this Agreement, a general creditor of the Company in the same manner as any other general creditor of the Company. The Company, on behalf of itself and each subsidiary and affiliate, reserves the absolute right, in its sole discretion, through the purchase of life insurance on the life of the Executive or otherwise, to secure to the Company a source for the payment of the Company's obligations hereunder and to determine the extent, nature, and method thereof from time to time, including the right to discontinue the same at any time. Should the Company elect to do so, in whole or in part, through the purchase of life insurance or any other funding medium, only the Company shall have any right or interest in any such life insurance or other funding medium, and neither the Executive nor his or her beneficiary shall have any right or interest therein or recourse thereto.
ARTICLE III
TERM OF AGREEMENT
This Agreement is effective as of the date first written above, and shall remain in effect for so long as the Executive remains in the employ of the Company or one of its owned subsidiaries or affiliates. This Agreement shall continue in effect after the Executive's termination of employment with the Company only if such termination occurs by reason of the Executive's Disability, Retirement, or within twelve (12) months of a Change in Control. Unless the termination following a Change in Control is for Cause.
ARTICLE IV
ERISA PROVISIONS
To the extent this Agreement is deemed to constitute or comprise a part of an "employee welfare benefit plan" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the provisions of this Article IV shall apply.
A. Named Fiduciary and Administrator.
The named fiduciary and administrator of this Agreement shall be the Company. As named fiduciary and administrator, the Company shall be responsible for the management. control and administration of the plan in accordance with the provisions of this Agreement. The Company may delegate to others certain responsibilities hereunder, including the employment of advisors and the delegation of ministerial duties to qualified individuals.
B. Claims Procedure.
If benefits under this Agreement are not paid to the Executive's beneficiary and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the administrator named above within sixty (60) days from the date payment is refused. The administrator shall review the written claim and if the claim is denied, in whole or in part, shall provide in writing within 90 days of receipt of such claim the specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the administrator fails to take any action within the aforesaid ninety (90) day period.
If the claimants desire a second review, they shall notify the named fiduciary in writing within sixty (60) days of receiving notice of the first claim denial. Claimants may review the Agreement or any documents relating thereto and submit any written issues and comments they may feel appropriate. In its sole discretion, the named fiduciary shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall include reference to specific provisions of the Agreement upon which the decision is based.
If the claimants continue to dispute the benefit denial based upon completed performance of the Agreement or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to a Board of Arbitration for final arbitration. Said Board shall consist of one member selected by the claimant, one member selected by the Company and the third member selected by the first two members. The Board shall operate under any generally recognized set of arbitration rules. The parties hereto agree that they and their heirs, personal representatives, successors and assigns shall be bound by the decision of such Board with respect to any controversy properly submitted to it for determination.
Where a dispute arises as to the Company's discharge of Executive "for cause", such dispute shall likewise be submitted to arbitration as above described and the parties hereto agree to be bound by the decision thereunder.
ARTICLE V
MISCELLANEOUS
A. Alienability and Assignment Prohibition. Neither the Executive, his spouse, nor any other beneficiary hereunder shall have any power or right to transfer assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder. nor shall any of said benefits be subject to seizure for the payment of any debts. judgments, alimony, or separate maintenance owed by the Executive or his beneficiary, nor be transferable by operation of law in the event of bankruptcy or insolvency or otherwise. In the event the Executive or any beneficiary attempts assignment, commutation, hypothecation, transfer, or disposal of the benefits hereunder, the Company's liabilities hereunder shall forthwith cease and terminate.
B. Gender and Headings. Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine, or neuter gender, whenever they should so apply. Headings and subheadings in this Agreement are inserted for reference and convenience only and shall not be deemed a part of the Agreement.
C. Effect on Other Company Benefit Agreements. Nothing contained in this Agreement shall affect the right of the Executive to participate in or be covered under any qualified or non-qualified pension, profit sharing, bonus, or other supplemental compensation or fringe benefit plan or arrangement constituting a part of the Company's existing or future compensation and benefits structure. The Executive acknowledges that this Agreement replaces and supercedes any prior agreement relating to the provision of death benefits to the Executive, but excluding any supplemental retirement or similar arrangement which provides the Executive with a death benefit.
D. Amendment and Termination. This Agreement may be amended or terminated at any time or times, in whole or in part, by the mutual written consent of the Executive and the Company. The Company may amend this Agreement unilaterally at any time or times, so long as no such unilateral amendment has the effect of revoking or decreasing the amount of the death benefit payable hereunder.
E. Applicable Law. The validity and interpretation of this Agreement shall be governed by the laws of the State of Delaware.
F. Definitions. The following definitions shall apply for purposes of this Agreement:
"Benefit Factor" shall mean 2 (two).
"Cause" shall mean termination of the Executive's employment because of the Executive's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or a willful violation of any law, rule or regulation (other than traffic violations or similar offenses).
"Change in Control" shall mean an event occurring:
(i) at such time as any "person" (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act") is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of voting securities of the Company representing 25% or more of the outstanding voting securities of Fulton Financial Corporation (the "Company") or the right to acquire such securities, except for any voting securities purchased by any employee benefit plan of the Company or its subsidiaries;
(ii) at such time as individuals who constitute the Board of Directors of the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors constituting the Incumbent Board (or members who were nominated by the Incumbent Board), or whose nomination for election by the Company's stockholders was approved by a nominating committee solely composed of members which are Incumbent Board members (or members nominated by the Incumbent Board), shall be, for purposes of this clause (b), considered as though he or she were a member of the Incumbent Board;
(iii) at such time as a reorganization, merger, consolidation, or similar transaction occurs or is effectuated as a result of which 60% of shares of the common stock of the resulting entity are owned by persons who were not stockholders of the Company immediately prior to the consummation of the transaction;
(iv) at such time as substantially all of the assets of the Company are sold or otherwise transferred to another Company or other entity that is not controlled by the Company.
"Disability" shall mean any mental or physical condition, with respect to which an individual qualifies for and receives benefits under a long-term disability plan of the Company, or in the absence of such a long-term disability plan or coverage under such a plan, "Disability" shall mean a physical or mental condition which, in the sole discretion of the Company, is reasonably expected to be of indefinite duration and to substantially prevent the individual from fulfilling his duties or responsibilities to the Company.
"Retirement" shall mean the Executive's termination of employment (other than for Cause) at or after attaining age 65 unless Executive has voluntarily chosen to retire prior to obtaining the age 65 under policies established and recognized by the Company pertaining to early retirement. If such election has been made "Retirement" shall mean the date upon which Executive takes early retirement
IN WITNESS WHEREOF, the Executive and the Company, by their signatures below, hereby acknowledge their agreement to the terms and provisions contained herein, all effective as of the date first written above.
FFC Management, Inc.
State of Incorporation | Name Under Which | |||
Subsidiary | or Organization | Business is Conducted | ||
Fulton Bank
|
Pennsylvania | Fulton Bank | ||
One Penn Square
|
||||
P.O. Box 4887
|
||||
Lancaster, Pennsylvania 17604
|
||||
|
||||
Lebanon Valley Farmers Bank
|
Pennsylvania | Lebanon Valley Farmers Bank | ||
555 Willow Street
|
||||
P. O. Box 1285
|
||||
Lebanon, Pennsylvania 17042
|
||||
|
||||
Swineford National Bank
|
United States of America | Swineford National Bank | ||
1255 North Susquehanna Trail
|
||||
P.O Box 241
|
||||
Hummels Wharf, Pennsylvania 17831
|
||||
|
||||
Lafayette Ambassador Bank
|
Pennsylvania | Lafayette Ambassador Bank | ||
P.O. Box 25091
|
||||
Lehigh Valley, Pennsylvania 18002
|
||||
|
||||
Fulton Financial Realty Company
|
Pennsylvania | Fulton Financial Realty Company | ||
One Penn Square
|
||||
P.O. Box 4887
|
||||
Lancaster, Pennsylvania 17604
|
||||
|
||||
Fulton Reinsurance Company, LTD
|
Turks & Caicos Islands | Fulton Reinsurance Company, LTD | ||
One Beatrice Butterfield Building
|
||||
Butterfield Square, Providenciales
|
||||
Turks & Caicos Islands, BWI
|
||||
|
||||
FNB Bank, N.A.
|
United States of America | FNB Bank, N.A. | ||
354 Mill Street
|
||||
P.O. Box 279
|
||||
Danville, Pennsylvania 17821
|
||||
|
||||
Hagerstown Trust Company
|
Maryland | Hagerstown Trust | ||
83 West Washington Street
|
||||
Hagerstown, Maryland 21740
|
||||
|
||||
Central Pennsylvania Financial Corp.
|
Pennsylvania | Central Pennsylvania Financial Corp. | ||
100 W. Independence Street
|
||||
Shamokin, PA 17872
|
||||
|
||||
Delaware National Bank
|
United States of America | Delaware National Bank | ||
9 South Dupont Highway
|
||||
P. O. Box 520
|
||||
Georgetown, DE 19947
|
||||
The Bank
|
New Jersey | The Bank | ||
100 Park Avenue
|
||||
P.O. Box 832
|
||||
Woodbury, NJ 08096
|
State of Incorporation
Name Under Which
Subsidiary
or Organization
Business is Conducted
Delaware
FFC Management, Inc.
Maryland
The Peoples Bank of Elkton
New Jersey
Skylands Community Bank
National Association
United States of America
Fulton Financial Advisors, N.A.
Pennsylvania
Fulton Insurance Services Group, Inc.
Delaware
FFC Penn Square, Inc.
Delaware
PBI Capital Trust
Delaware
Premier Capital Trust II
Virginia
Resource Bank
State of Incorporation
Name Under Which
Subsidiary
or Organization
Business is Conducted
Virginia
Resource Capital Trust III
Virginia
Virginia Financial Services, LLC
New Jersey
First Washington State Bank
New Jersey
Somerset Valley Bank
Connecticut
SVB Bald Eagle Statutory Trust I
Connecticut
SVB Bald Eagle Statutory Trust II
Maryland
Columbia Bank
Delaware
Columbia Capital Trust I
Delaware
Columbia Capital Trust II
Delaware
Columbia Capital Trust III
Pennsylvania
Fulton Capital Trust I
99
1. | I have reviewed this annual report on Form 10-K of Fulton Financial Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and; |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 1, 2007 | /s/ R. Scott Smith, Jr. | |||
R. Scott Smith, Jr. | ||||
Chairman, Chief Executive Officer and President |
100
1. | I have reviewed this annual report on Form 10-K of Fulton Financial Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and; |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 1, 2007 | /s/ Charles J. Nugent | |||
Charles J. Nugent | ||||
Senior Executive Vice President and Chief Financial Officer |
101
Dated:
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March 1, 2007 | |||
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/s/ R. Scott Smith, Jr.
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R. Scott Smith, Jr. | |||
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Chairman, Chief Executive Officer and President |
102
Dated:
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March 1, 2007 | |||
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/s/ Charles J. Nugent
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Senior Executive Vice President and | |||
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Chief Financial Officer |