<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JEFFBANKS, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
LOGO
JEFFBANKS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of JEFFBANKS,
INC. (the "Company") will be held at the Company's principal executive office
located at 1845 Walnut Street, Philadelphia, Pennsylvania, on Friday, May 29,
1998, at 10:00 a.m. (the "Meeting") for the following purposes:
1. To elect four Class B directors to serve until the expiration of their
three-year terms and until their successors shall have been duly elected
and qualified.
2. To ratify the selection of Grant Thornton LLP as independent public
auditors for the Company for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
Only those shareholders who hold Common Stock of record at the close of
business on March 18, 1998 are entitled to notice of and to vote at the Meeting
or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding matters proposed to be acted upon at
the Meeting.
By Order of the Board of Directors,
/s/ William H. Lamb
------------------------------------
WILLIAM H. LAMB, Secretary
April 15, 1998
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE
PROVIDED.
<PAGE>
LOGO
JEFF BANKS, INC.
1845 Walnut Street
Philadelphia, Pennsylvania 19103
------------------
PROXY STATEMENT
------------------
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors") of
JeffBanks, Inc. (the "Company") to be voted at the Annual Meeting of
Shareholders (the "Meeting") to be held at 1845 Walnut Street, Philadelphia,
Pennsylvania 19103 on Friday, May 29, 1998 at 10:00 a.m., or any adjournment
thereof, pursuant to the foregoing Notice of Annual Meeting. This Proxy
Statement and the accompanying Notice were mailed to shareholders of the
Company on or about April 15, 1998.
GENERAL INFORMATION ABOUT THE MEETING
Quorum and Voting
The presence in person or by proxy of shareholders holding a majority of
the outstanding shares of the Company's common stock, par value $1.00 per share
(the "Common Stock"), will constitute a quorum for the transaction of all
business at the Meeting. A shareholder voting for the election of directors may
withhold authority to vote for all nominees for directors or may withhold
authority to vote for certain nominees for directors. A shareholder may also
abstain from voting on the proposal to ratify the selection of independent
auditors for the 1998 fiscal year. Votes withheld from the election of any
nominee for director and abstentions from any other proposal will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will not be counted in the number of votes cast on
any matter. If a broker does not receive voting instructions from the
beneficial owner of shares on a particular matter and indicates on the proxy
that it does not have discretionary authority to vote on that matter, those
shares will be considered as present and entitled to vote with respect to that
matter, but will not be counted in the number of votes cast "for" or "against"
the matter.
Only shareholders of record at the close of business on March 18, 1998 are
entitled to vote at the Meeting. As of March 18, 1998, there were 5,052,489
shares of the Common Stock outstanding and entitled to vote. Each share of
Common Stock entitles the holder to one vote on all matters presented at the
Meeting.
Shares represented by duly executed proxies in the accompanying form
received prior to the Meeting and not revoked will be voted at the Meeting or
at any adjournments in accordance with choices specified on the proxy. If no
choices are specified, it is the intention of the persons named as proxies in
the accompanying form of proxy to vote FOR the nominees for election as
directors and FOR the ratification of independent auditors for the 1998 fiscal
year. Such proxy may be revoked by the person executing it at any time before
the authority thereby granted is exercised by giving written notice to the
Secretary of the Company, by delivery of a duly executed proxy bearing a later
date or by voting in person at the Meeting. Attendance at the Meeting will not
have the effect of revoking
1
<PAGE>
a proxy unless the shareholder so attending so notifies the inspectors of
election in writing prior to voting of the proxy. Beneficial owners who intend
to vote shares at the Meeting should obtain a legal proxy or power of attorney
from their broker and present it at the Meeting to establish their right to
vote such shares.
Solicitation Expenses
The expenses of soliciting proxies for the Meeting, including the cost of
preparing, assembling and mailing this Proxy Statement and the accompanying
form of proxy, will be borne by the Company. In addition to the solicitation of
proxies by mail, certain directors, officers and employees of the Company,
without additional compensation, may use their personal efforts, by telephone
or otherwise, to obtain proxies. The Company will also request persons, firms
and corporations holding shares in their names, or in the names of their
nominees, which shares are beneficially owned by others, to send this proxy
material to and obtain proxies from such beneficial owners, and will reimburse
such holders for their reasonable expenses in so doing.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 18, 1998, information with
respect to the beneficial ownership of Common Stock of (i) each director,
nominee for director and executive officer of the Company, (ii) the directors
and executive officers as a group and (iii) each person known by the Company to
own beneficially more than five percent of the outstanding Common Stock. Unless
otherwise indicated in footnotes to the table, each person listed has sole
voting and dispositive power with respect to the securities owned by such
person. The business address of the persons listed below is 1845 Walnut Street,
Philadelphia, Pennsylvania 19103.
<TABLE>
<CAPTION>
Number of Shares
and Nature of Percent of
Name Beneficial Ownership Class(1)
---- -------------------- ----------
<S> <C> <C>
Betsy Z. Cohen ............................................. 675,449(2) 12.83%
Edward E. Cohen ............................................ 675,449(2) 12.83%
Robert J. Coleman .......................................... 140,331(3) 2.74%
John G. Hoopes ............................................. 69,798(4) 1.38%
Hersh Kozlov ............................................... 34,561(5) *
William H. Lamb ............................................ 317,742(6) 6.28%
Arthur Makadon ............................................. 6,605(7) *
P. Sherrill Neff ........................................... 8,510(8) *
James R. Sibel ............................................. 32,173(9) *
Harmon S. Spolan ........................................... 229,811(10) 4.46%
William D. White ........................................... 6,848(11) *
Paul Frenkiel .............................................. 41,039(12) *
All directors and executive officers as a group (12 persons) 1,520,456 27.42%
</TABLE>
- ------------
* Less than 1%.
(1) Shares of Common Stock issuable pursuant to options or warrants are deemed
outstanding for purposes of computing the percentage of the person or
group holding such options but are not deemed outstanding for purposes of
computing the percentage of any other person (except that the aggregate of
the options held by Betsy Z. and Edward E. Cohen are included in the
shares set forth as held by each individually).
(2) Consists of: 273,387 shares owned jointly by Mrs. and Mr. Cohen; 4,203
shares held in the Company's Cash and Deferred Savings Plan (the "401(k)
Plan") for the benefit of Mrs. Cohen; 2,662 shares held in the 401(k) Plan
for the benefit of Mr. Cohen; 261 shares held in an individual retirement
account ("IRA") for the benefit of Mrs. Cohen; 17,151 shares held in an
IRA for the benefit of Mr. Cohen; 2,474 shares held by the Jefferson Bank
Employee Stock Ownership Plan (the
2
<PAGE>
"ESOP") for the benefit of Mrs. Cohen; 1,025 shares held by the ESOP for
the benefit of Mr. Cohen; 9,086 shares held by Mrs. Cohen as custodian for
the benefit of their children; 78,304 shares held by trustees for the
benefit of Mr. and Mrs. Cohen's children; 9,886 shares held by Mr. Cohen as
trustee for Mr. Spolan and his wife (Mr. Cohen disclaims beneficial
ownership of such shares); 58,080 shares held by Mr. and Mrs. Cohen as
trustees of a charitable foundation (Mr. and Mrs. Cohen disclaim beneficial
ownership of such shares); and 6,890 shares owned by Resource America,
Inc., of which Mr. Cohen is Chairman, Chief Executive Officer, President
and shareholder ("RAI") (Mr. Cohen disclaims beneficial ownership of such
shares). The share amount also includes 151,402 shares issuable to Mrs.
Cohen upon the exercise of stock options and 60,638 shares issuable to Mr.
Cohen upon the exercise of stock options.
(3) Consists of 67,141 shares held by Mr. Coleman directly, 71,190 issuable to
him pursuant to a warrant and 2,000 shares issuable to him upon the
exercise of stock options.
(4) Consists of 50,000 shares held by Mr. Hoopes directly, 17,798 shares
issuable to him pursuant to a warrant and 2,000 shares issuable to him
upon exercise of stock options.
(5) Consists of 15,026 shares held directly by Mr. Kozlov; 12,101 shares held
in an IRA for his benefit; 902 shares held in an IRA for the benefit of
his wife; 227 shares held by Mr. Kozlov as custodian for the benefit of
his minor child; and 6,305 shares issuable to Mr. Kozlov upon the exercise
of stock options.
(6) Consists of 160,828 shares held by Mr. Lamb directly; 65,456 shares held
jointly with his wife; 55,658 shares held by his wife; 6,419 shares held
by Mr. Lamb as trustee for his children; 18,576 shares held by the Lamb,
Windle & McErlane Money Purchase Pension Trust (of which Mr. Lamb is sole
trustee); 4,500 shares held by Mrs. Lamb as trustee for her child; and
6,305 shares issuable to Mr. Lamb upon the exercise of stock options.
(7) Consists of 300 shares owned directly by Mr. Makadon and 6,305 shares
issuable to him upon the exercise of stock options.
(8) Consists of 2,205 shares held by Mr. Neff directly and 6,305 shares
issuable to him upon the exercise of stock options.
(9) Consists of 335 shares held by Mr. Sibel directly; 42 shares held in the
401(k) Plan for the benefit of Mr. Sibel; 2,173 shares held in the ESOP
for his account; and 29,623 shares issuable to him upon the exercise of
stock options.
(10) Consists of 960 shares owned by Mr. Spolan directly; 74,797 shares owned
jointly with his wife; 1,722 shares held in the 401(k) Plan for the
benefit of Mr. Spolan; 9,886 shares held in a trust for Mr. and Mrs.
Spolan of which Mr. Cohen is trustee; 3,718 shares held by the ESOP for
the account of Mr. Spolan; 32,525 shares held by Mr. Spolan as trustee for
the children of Mr. and Mrs. Cohen; 6,205 shares held by Mr. Spolan as
trustee for himself and his wife; 483 shares held in a benefit plan for
the benefit of Mr. Spolan; and 99,515 shares issuable to him upon the
exercise of stock options.
(11) Consists of 543 shares held in a pension plan for the benefit of Mr. White
and 6,305 shares issuable to him upon the exercise of stock options.
(12) Consists of 5,946 shares held directly by Mr. Frenkiel; 3,589 shares held
in the 401(k) Plan for his benefit; 2,419 shares held in an IRA for his
benefit; 808 shares held by the ESOP for his account; 2,297 shares held by
Mr. Frenkiel as custodian for his child; and 25,980 shares issuable to Mr.
Frenkiel upon the exercise of stock options.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Directors
The Board of Directors is divided into three classes with directors in
each class serving three-year terms. The terms of the Class B directors expire
at the Meeting. The Nominating Committee of the Board of Directors (the
"Nominating Committee") has nominated Harmon S. Spolan, Hersh Kozlov, Arthur
Makadon and John G. Hoopes as directors in Class B. Should any nominee become
unable or refuse to accept nomination for election as a director in Class B, it
is intended that the persons acting as proxies will vote for the election of
such other person as the Nominating Committee may recommend. The Board of
Directors knows of no reason why any of the nominees might be unable or refuse
to accept election. The nominees for Class B directors receiving a plurality of
the votes cast at the Meeting will be elected.
During 1997, the Board of Directors held seven meetings. In 1997, all of
the directors attended at least 75% of the aggregate of meetings of the Board
of Directors and the standing committees (described below) on which they served
during the period they were directors and members of such committees. Set forth
below are the names, ages and principal occupations during the past five years
of the nominees for election as directors, the continuing members of the Board
of Directors and the executive officers of the Company.
<TABLE>
<CAPTION>
Served as Principal Occupation for Past Five
a Director Years and Position Held with the
Name Age Since Company or Its Subsidiary Banks
---- --- ---------- ----------------------------------
<S> <C> <C> <C>
NOMINEES FOR ELECTION AS
CLASS B DIRECTORS
Harmon S. Spolan(1)(5) ......... 62 1981 Harmon S. Spolan has been President,
Chief Operating Officer and a director of
the Company since 1981 and has been
President, Chief Operating Officer and a
director of the Company's subsidiary bank,
Jefferson Bank ("Jefferson Bank") since
1978. Mr. Spolan has been Vice Chairman
and a director of the Company's other sub-
sidiary bank, Jefferson Bank of New Jer-
sey ("Jefferson NJ"), since 1988. Mr. Spo-
lan is admitted to practice law as a
member of the Pennsylvania bar.
Hersh Kozlov(3)(4)(5) .......... 50 1994 In addition to serving as a director of the
Company, Hersh Kozlov has been a direc-
tor of Jefferson NJ since 1988. Mr. Kozlov
has been a senior member of the Cherry
Hill, New Jersey law firm of Kozlov,
Seaton, Romanini, Brooks & Greenberg,
since 1980.
Arthur Makadon(4)(5) ........... 55 1995 Arthur Makadon is a senior partner at the
Philadelphia law firm of Ballard Spahr
Andrews & Ingersoll, with which he has
been affiliated since 1975.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Served as Principal Occupation for Past Five
a Director Years and Position Held with the
Name Age Since Company or Its Subsidiary Banks
---- --- ----------- ----------------------------------
<S> <C> <C> <C>
John G. Hoopes(2)(5) .............. 52 1997 From 1988 until their acquisition by the
Company in January 1997, John Hoopes
was Chairman of the board of directors
and a director of United Valley Bancorp,
Inc. ("United Valley Bancorp") and its
wholly-owned banking subsidiary, United
Valley Bank ("United Valley Bank"). Mr.
Hoopes is the Chairman of DVF Financial,
Inc., an investment firm located in Wayne,
Pennsylvania.
CLASS A DIRECTORS
Edward E. Cohen(1)(3)(5) .......... 59 1981 Edward E. Cohen has been a director of
the Company, Jefferson Bank and Jeffer-
son NJ since 1981, 1976 and 1988, respec-
tively, and presently serves as Chairman of
the Executive Committee. Mr. Cohen is
Chairman, Chief Executive Officer and
President of RAI, a publicly-held specialty
finance company. Until April 1996, Mr.
Cohen was of counsel to Ledgewood Law
Firm, P.C., a Philadelphia law firm which
provides legal services to the Company,
Jefferson Bank and Jefferson NJ. Mr.
Cohen is married to Betsy Z. Cohen.
James R. Sibel(1)(5) .............. 54 1989 James R. Sibel has served as Executive
Vice President, Chief Credit Officer and a
director of the Company since 1989. Mr.
Sibel has been the Executive Vice Presi-
dent, Chief Credit Officer and a director of
Jefferson Bank since 1987.
P. Sherrill Neff(2)(4)(5) ......... 46 1994 P. Sherrill Neff is President, Chief Finan-
cial Officer and a director of Neose Tech-
nologies, Inc., a biotechnology firm based
in Horsham, Pennsylvania. From Febru-
ary 1993 to December 1994, Mr. Neff was
Senior Vice President, Corporate Develop-
ment, of U.S. Healthcare, Inc., a national
managed health care company headquar-
tered in Blue Bell, Pennsylvania. Before
that, Mr. Neff was a Managing Director in
the Investment Banking Division of Alex.
Brown & Sons Incorporated, Baltimore,
Maryland.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Served as Principal Occupation for Past Five
a Director Years and Position Held with the
Name Age Since Company or Its Subsidiary Banks
---- --- ----------- ----------------------------------
<S> <C> <C> <C>
CLASS C DIRECTORS
Betsy Z. Cohen(1)(5) .............. 56 1981 Betsy Z. Cohen has served as Chairman of
the Board of Directors, Chief Executive
Officer and a director of the Company
since 1981, as Chairman of the board of
directors, Chief Executive Officer and a
director of Jefferson Bank since 1974 and
as Chairman of the board of directors and
a director of Jefferson NJ since 1988. Mrs.
Cohen is also Chairman, Chief Executive
Officer and a trustee of Resource Asset
Investment Trust, a publicly-traded real
estate investment trust ("RAIT"), and a
director of Life Technologies, Inc. and
Aetna Inc. Mrs. Cohen is married to
Edward E. Cohen.
William H. Lamb(1)(4)(5) .......... 58 1981 William H. Lamb has served as Secretary
and a director of the Company and Jeffer-
son Bank since 1981 and 1974, respectively.
Mr. Lamb has been a senior member of the
Chester County, Pennsylvania law firm of
Lamb, Windle & McErlane, P.C. since
1970.
William D. White(2)(3)(5) ......... 64 1994 From 1989 to 1994, William D. White, who
is now retired, was the President of the
National League of Professional Baseball
Clubs. Mr. White is a director and/or
trustee of investment companies for which
Mitchell Hutchins Asset Management Inc.
serves as investment advisor.
Robert J. Coleman(3)(5) ........... 59 1997 From 1988 to January 1997, Robert J.
Coleman was a director of United Valley
Bancorp and United Valley Bank. Mr.
Coleman is the Chairman of the Executive
Committee of the regional law firm of
Marshall, Dennehey, Warner, Coleman &
Goggin. Mr. Coleman is also a director
of the Hero Scholarship Fund of Delaware
County and the Insurance Society of
Philadelphia.
</TABLE>
- ------------
(1) Member of the 1997 Executive Committee. The Executive Committee, which
serves at the pleasure of the Board of Directors, has the authority to
take action between meetings of the Board of Directors. During 1997, the
Executive Committee held five meetings.
6
<PAGE>
(2) Member of the 1997 Audit Committee. The Audit Committee, which serves at
the pleasure of the Board of Directors, selects the independent auditors,
reviews the scope and results of the audit and reviews the adequacy of the
Company's accounting, financial and operating controls. During 1997, the
Audit Committee held four meetings.
(3) Member of the 1997 Nominating Committee. The Nominating Committee, which
serves at the pleasure of the Board of Directors, recommends nominees for
election to the Board of Directors. The Nominating Committee will consider
recommendations of security holders in proposing nominees for election to
the Board of Directors at the 1998 Annual Meeting of Shareholders,
provided that such recommendations are received by the Company at its
executive offices not later than December 17, 1998. During 1997, the
Nominating Committee held one meeting.
(4) Member of the 1997 Compensation Committee. The Compensation Committee
serves at the pleasure of the Board of Directors. The Compensation
Committee establishes compensation for senior executive officers of the
Company (Mrs. Cohen and Messrs. Cohen, Sibel and Spolan) and recommends
appropriate compensation levels to the Boards of Directors of the
Company's subsidiary banks for their senior executive officers. During
1997, the Compensation Committee held three meetings.
(5) For 1998, committee assignments are as follows: Executive Committee -- Mrs.
Cohen and Messrs. Cohen, Spolan, Sibel and Lamb; Audit Committee --
Messrs. Neff, Hoopes and White; Nominating Committee -- Messrs. Cohen,
Kozlov, Coleman and White; Compensation Committee -- Messrs. Lamb, Kozlov,
Makadon and Neff.
Executive Officer
Paul Frenkiel, CPA, 45, became Chief Financial Officer of the Company in
September 1987. His professional experience prior to that time included an
accounting practice specializing in financial institutions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of all such reports.
Based solely on its review of the reports received by it, or written
representations from certain reporting persons that no filings were required
for those persons, the Company believes that, during the fiscal year ended
December 31, 1997, its officers, directors and greater than ten percent
shareholders complied with all applicable filing requirements except that, due
to delay by the Company in delivering certain option grants reported herein,
Form 4s were filed late by each of Mrs. Cohen (two reports), Mr. Frenkiel (two
reports), Mr. Kozlov, Mr. Lamb, Mr. Makadon, Mr. Neff, Mr. Sibel (two reports),
Mr. Spolan and Mr. White. In addition, Mr. Hoopes filed a Form 4 late with
respect to six sales aggregating 8,108 shares and Mr. Makadon filed a Form 4
late with respect to two purchases aggregating 300 shares.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Directors' Fees
Each director of the Company who is not an employee of the Company or its
subsidiary banks is paid a fee of $6,000 per year plus $500 for each meeting of
the Board of Directors attended. Directors are also eligible to participate in
the Company's Key Employee Stock Option Plan and the 1996 Stock Option Plan
subject to the conditions thereof.
Summary Compensation of Named Executives
The following table sets forth the cash compensation and certain other
components of compensation paid during 1995, 1996 and 1997 for the Company's
Chief Executive Officer and the three other executive officers of the Company
whose salary plus bonus exceeded $100,000 for the fiscal year ended December
31, 1997. The table includes compensation paid by the Company, Jefferson Bank
and Jefferson NJ to the individuals listed. Compensation to the Company's
executive officers and directors is allocated among the Company and its
subsidiary banks based upon the relative amount of time spent by such persons
on the affairs of the Company and the subsidiary banks. The subsidiary banks
further allocate between themselves the compensation of persons employed by
both based upon their relative amount of total assets and the amount of time
spent on the affairs of each subsidiary bank.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Annual Compensation Awards
----------------------------------------------- ------------------------------
Options,
Restricted Stock
Name and Principal Stock Appreciation All Other
Position Year Salary Bonus Awards(1)(2) Rights(#)(3) Compensation(4)
- --------------------------- ------ ------------------ ------------------ -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Betsy Z. Cohen ............ 1997 $350,000 (5) $125,000(5) $ 3,673 30,500 $ 2,760
Director, Chairman and 1996 310,000 125,000 2,807 0 2,000
Chief Executive Officer 1995 285,000 75,000 1,765 0 2,000
Harmon S. Spolan .......... 1997 $300,000 $ 25,000 $ 3,673 6,175 $ 1,400
Director and Chief 1996 290,000 25,000 4,172 0 750
Operating Officer 1995 280,000 15,011 2,807 0 750
Edward E. Cohen ........... 1997 $175,000 $ 0 $ 3,673 0 $ 2,760
Director and Chairman 1996 175,000 0 3,776 0 0
of Executive Committee 1995 175,000 0 1,042 0 0
James R. Sibel ............ 1997 $185,000 $ 20,000 $ 3,673 8,675 $ 170
Director, Executive Vice 1996 175,000 15,000 4,172 0 360
President and Chief Credit 1995 165,000 26,725 2,802 0 360
Officer
</TABLE>
- ------------
(1) Represents the dollar value of shares estimated to be allocated to the
accounts of Mrs. Cohen and Messrs. Spolan, Cohen and Sibel under the ESOP
for 1997.
(2) The total number of shares held in the ESOP, including estimated share
allocation for 1997, and their aggregate market value as of December 31,
1997 are as follows: Mrs. Cohen - 2,474 shares, $113,804; Mr. Spolan -
3,718 shares, $171,028; Mr. Cohen - 1,025 shares, $47,150; and Mr. Sibel -
2,173 shares, $99,958. The Company pays dividends on the shares of Common
Stock held in the ESOP as and when declared by the Board of Directors. The
market value used for purposes of this table is the closing price per
share of the Common Stock as of December 31, 1997 ($46.00 per share).
8
<PAGE>
(3) Adjusted for 5% stock dividend declared in May 1997.
(4) Represents the dollar value of shares contributed by the Company to the
401(k) Plan. The value used for purposes of this table is the closing
price per share of the Common Stock as of December 31, 1997 ($46.00 per
share).
(5) Pursuant to an understanding between Mrs. Cohen and the Compensation
Committee, the base compensation of $475,000 required by her employment
agreement with the Company was allocated $350,000 to base compensation and
$125,000 to agreed upon bonus compensation. See "Compensation or Executive
Officers and Directors - Employment Agreement."
Option Grants and Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth the number of options granted to the
executive officers and directors listed in the Summary Compensation Table, the
exercise price of those options and certain related information as of December
31, 1997.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
------------------------------------------------------- ----------------
Number of
Securities
Underlying % of Total Options/SARs Base or
Options/SARs Granted to Employees Exercise Expiration Grant Date
Name Granted in Fiscal Year Price ($/sh) Date(1) Present Value(2)
- ---- ------------ ------------------------ ------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Betsy Z. Cohen ........... 10,500 6.34 $ 27.50 1/15/07 $ 93,450.00
10,000 6.34 30.25 7/8/07 95,500.00
10,000 6.34 38.375 12/3/07 114,600.00
Harmon S. Spolan ......... 3,675 2.22 $ 27.50 1/15/07 $ 32,708.00
2,500 1.58 38.375 12/3/07 28,650.00
Edward E. Cohen .......... 0 -- -- -- --
James R. Sibel ........... 3,675 2.22 $ 27.50 1/15/07 $ 32,708.00
2,500 1.58 30.25 7/8/07 23,875.00
2,500 1.58 38.375 12/3/07 28,650.00
</TABLE>
- ------------
(1) All listed options were exercisable on the date of grant and terminate upon
the earlier to occur of ten years from the date of grant or termination of
employment, except terminations of employment occurring due to death,
disability or retirement.
(2) Grant date present value has been calculated using the Black-Scholes option
pricing model.
The following table presents information with respect to stock options
exercised during fiscal 1997 by the named executive officers, as well as the
number of unexercised options (adjusted for the 5% stock dividend declared in
May 1997) and the value of unexercised stock options held as of December 31,
1997.
9
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values Table
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, December 31,
Acquired 1997 1997
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
---- -------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Betsy Z. Cohen ........... 0 0 151,402/0 $4,024,512/0
Harmon S. Spolan ......... 0 0 99,515/0 2,895,508/0
Edward E. Cohen .......... 0 0 60,638/0 1,786,779/0
James R. Sibel ........... 0 0 33,481/0 830,462/0
</TABLE>
- ------------
(1) Calculated as the difference between market value (closing sale price) per
share of Common Stock as of December 31, 1997 ($46.00 per share) and the
option exercise prices per share.
Employment Agreement
The Company entered into an employment agreement with Betsy Z. Cohen,
effective as of January 1, 1997, pursuant to which Mrs. Cohen serves as the
Chairman of the Board of Directors and Chief Executive Officer. Under the
agreement, Mrs. Cohen receives base compensation of $475,000 per year, which
may be increased by the Compensation Committee based upon its evaluation of
Mrs. Cohen's performance. Pursuant to an understanding between Mrs. Cohen and
the Compensation Committee, Mrs. Cohen's base compensation for 1997 was
allocated $350,000 to base compensation and $125,000 to agreed upon bonus
compensation.
Mrs. Cohen is eligible to receive incentive bonuses and stock option
grants in amounts to be determined by the Compensation Committee and to
participate in all employee benefit plans in effect during her period of
employment. The Company has also established a Supplemental Employment
Retirement Plan ("SERP") for Mrs. Cohen's benefit which will pay to Mrs. Cohen,
upon the later of her actual retirement or her reaching age 65, a monthly
retirement benefit equal to one-twelfth of the product of (i) 2 1/4% multiplied
by (ii) the number of years that she shall have been employed by the Company,
or its affiliates, multiplied by (iii) her "Average Compensation" (defined as
the average of the compensation received by Mrs. Cohen in the three most highly
compensated years during the previous eight years of employment). The agreement
requires Mrs. Cohen to devote as much of her business time to the Company as is
necessary to fulfill her duties, although it permits her to have outside
business interests. The Company will also pay the cost of premiums for a
second-to-die insurance policy on the life of Mrs. Cohen and her husband,
Edward E. Cohen, in a face amount of not less than $2,500,000.
The agreement has a term of three years which is automatically extended so
that, on any day on which the agreement is in effect, it has a then-current
three year term. The Company may elect to cease the automatic extension of the
agreement by providing Mrs. Cohen with notice of such election. The agreement
may be sooner terminated in the event of Mrs. Cohen's disability extending for
more than 240 days, death or retirement. Mrs. Cohen also has the right to
terminate the agreement upon a change in control of the Company (as described
below) and for cause. Otherwise, Mrs. Cohen may terminate the agreement upon 90
days' notice.
The agreement provides the following termination benefits: (i) upon
termination due to death, Mrs. Cohen's estate will receive an amount equal to
three times Average Compensation (payable over 36 months); (ii) upon
termination due to disability, Mrs. Cohen will receive a monthly benefit equal
to one-twelfth of the product of (a) Average Compensation and (b) 75%, which
will terminate upon the commencement of retirement benefits; (iii) upon
termination by Mrs. Cohen for cause, by the Company
10
<PAGE>
without cause, or upon a change in control, Mrs. Cohen will receive an amount
equal to three times Average Compensation plus continuation of life, health,
accident and disability insurance benefits for a period of 36 months; and (iv)
upon termination by the Company for cause, Mrs. Cohen will receive her SERP
benefits. In the event that any amounts payable to Mrs. Cohen pursuant to items
(i) through (iv) above ("Total Benefits") become subject to any excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, the Company is
required to pay Mrs. Cohen an additional sum such that the net amounts retained
by Mrs. Cohen, after payment of excise, income and withholding taxes, shall
equal Total Benefits. Upon any termination of Mrs. Cohen's employment, any
option to purchase securities of the Company that has not previously vested
will automatically vest on the later of the effective date of her termination
or six months after the date such option was granted.
For the purposes of Mrs. Cohen's employment agreement, the term "change in
control" means the occurrence of any of the following: (i) beneficial ownership
of 25% or more of the voting securities of the Company being held by any
person, entity or group, excluding employee benefit plans of the Company and
any person, entity or group holding such combined voting powers on January 1,
1997; (ii) approval by the shareholders of (or, in the event no approval is
required, the Company consummates) a merger, consolidation, share exchange,
division or other reorganization of the Company (each, a "Fundamental
Transaction"), other than a Fundamental Transaction that would result in the
voting securities of the Company outstanding immediately prior to such
Fundamental Transaction continuing to represent at least 60% of the combined
voting power of (a) in case the Company is the surviving entity, the Company's
outstanding securities immediately after such Fundamental Transaction, (b) the
surviving entity's outstanding securities; or (c) in the case of a division,
the outstanding securities of each entity resulting from the division; (iii)
the approval by the shareholders of a plan of liquidation or winding-up of the
Company or an agreement to sell all or substantially all of the Company's
assets; or (iv) during any 24 consecutive months, individuals who at the
beginning of such period constituted the Board of Directors no longer
constituting at least a majority of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
During 1997, Messrs. Lamb, Kozlov, Makadon and Neff served as members of
the Compensation Committee. Messrs. Lamb, Kozlov, Makadon and Neff are neither
officers nor employees of the Company or its subsidiary banks and are not
members of any board of directors (other than of the Company or a subsidiary
bank) which has as a member, an officer, employee or director of the Company.
Certain Relationships and Related Party Transactions
Directors and officers of the Company, and certain business organizations
and individuals associated with them, have been customers of, and have had
normal banking transactions with, Jefferson Bank and Jefferson NJ. As of
December 31, 1997, Jefferson Bank and Jefferson NJ had loans outstanding to
directors and officers of the Company, and certain business organizations and
individuals associated with them, totalling $19,486,000 on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated parties. The aggregate
outstanding balance of loans to directors and officers of the Company and their
affiliates made by Jefferson Bank represented 20% of its shareholder's equity
at December 31, 1997, while such loans made by Jefferson NJ represented 13% of
its shareholder's equity at such date. In the aggregate, such loans were 19% of
the Company's shareholders' equity at December 31, 1997. These loans do not, in
management's opinion, represent a greater than normal risk of collectibility or
present any other unfavorable features.
In addition, in March 1998 RAI, of which Edward E. Cohen is an executive
officer and director, established an $18.0 million revolving credit facility
with Jefferson Bank for RAI's commercial mortgage loan operations. No
borrowings have been made under this facility to date. The facility was made
available to RAI in the ordinary course of Jefferson Bank's business on
substantially the same terms, including interest rate and collateral, as those
prevailing for comparable transactions with unrelated parties. In the event
that any part of this facility is drawn down, it is management's opinion that
the loan will not represent a greater than normal risk of collectibility or
present other unfavorable features.
11
<PAGE>
The Pennsylvania banking laws prohibit state-chartered banks from owning
property (fixed assets) having a total book value in excess of 25% of the
aggregate of capital, surplus, undivided profits and capital securities of such
bank. In light of this restriction, Jefferson Bank and Jefferson NJ have
determined to rent, rather than own, their branches and Jefferson Bank's
executive office. In the case of the five leases between Jefferson Bank and
related parties and the one lease between Jefferson NJ and a related party,
described below, management believes that the rental paid for each of these
offices is comparable to, or lower than, the rental which would have been
required by unrelated parties in similar commercial transactions for similar
locations.
Until February 1998, Jefferson Bank rented premises for its executive
offices from Jefferson Associates, a Pennsylvania limited partnership comprised
principally of persons related to the Company and Jefferson Bank as officers,
directors or legal counsel. Messrs. Cohen and Spolan are limited partners of
Jefferson Associates. The rent for the year ended December 31, 1997 was
$21,468, and Jefferson Bank paid $1,789 for the balance of the term of its
occupancy.
In January 1998, Jefferson Bank entered into a 10-year lease (with one
ten-year and three five-year renewal options) for 12,943 square feet
(increasing to 17,328 square feet in May 1999) of office space at 1845 Walnut
Street. Minimum annual rent will be $207,088 for the first full year of the
lease term, $277,248 for the next two years thereafter (reflecting the
increased space), $303,240 for the next four years and $324,900 for the final
three years. 1845 Walnut Street is owned by a partnership, one of whose
partners is a limited partnership of which subsidiaries of RAI are the general
and limited partners. RAI and RAIT (of which RAI is a 15% shareholder) are the
principal creditors of the partnership that owns the building. Jefferson Bank
also leases 2,164 square feet on the first floor of 1845 Walnut Street pursuant
to a September 1996 lease with a ten-year term and two five-year renewal
options. The annual rent on such space is $91,970.
Jefferson Bank leases facilities at 1607-1609 Walnut Street from Jefferson
Associates II. Jefferson Associates II is a Pennsylvania limited partnership,
the partners of which are also comprised principally of persons related to the
Company and Jefferson Bank as officers, directors or legal counsel. Messrs.
Cohen and Spolan, and Patricia K. Lamb, the wife of Mr. Lamb, are limited
partners of Jefferson Associates II. A lease was executed in December 1985 and
amended effective April 1988 to include the 1609 Walnut Street space. As
amended, the lease provides for a twenty-year term, with a five-year renewal
option, at an annual gross rental base of $152,216. The lease provides for
yearly escalations based upon increases in the cost of living, with a minimum
increase of 3% and a maximum increase of 7% in any such year. In addition,
under the terms of the lease, Jefferson Bank is responsible for payment of
taxes, utilities and insurance on the building. Jefferson Bank intends to
sublet a portion of the space not used for its branch location to Brandywine
Construction & Management, Inc., of which Mr. Cohen is a director and minority
shareholder.
Jefferson Bank has also leased premises for its Manayunk branch office
from Canal House Historic Associates, a Pennsylvania limited partnership which
may be deemed to be an affiliate of Mr. Cohen. The initial term of the lease
expired in May 1995, whereupon Jefferson Bank exercised the first of three
five-year renewal options at an annual base rent of $46,095. During the second
and third renewal terms, base rent will be the prevailing market rent, provided
that the minimum annual rent payable during the second renewal term is $48,250
and during the third renewal term is $53,372. The maximum annual rent in any
renewal period cannot exceed 120% of the rent paid at the expiration of the
prior period.
Jefferson NJ has leased premises for its Haddon Heights branch office from
Jefferson Associates NJ, L.P., a New Jersey limited partnership comprised of
directors of Jefferson NJ. Mrs. Cohen and Messrs. Cohen and Spolan are limited
partners of the partnership. The lease provides for a term expiring March 1,
2001 at an annual rental of $133,860.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation program of the Company is administered by the
Compensation Committee, which is composed of four independent, non-employee
directors (Messrs. Lamb, Kozlov, Makadon and Neff). The function of the
Compensation Committee is to review general compensation policies, to establish
the compensation for the senior executive officers of the Company (Mrs. Cohen
and Messrs. Cohen, Sibel and Spolan) and to recommend appropriate compensation
levels for senior officers of the Company's subsidiary banks.
Overall Policy
The Board of Directors and the Compensation Committee subscribe to The
Business Roundtable's statement of principles in considering executive
compensation: "Executive compensation and share ownership programs should be
designed to attract, motivate, reward and retain the management talent required
to achieve corporate objectives and increase shareholder value." Compensation
decisions for all executive officers, including those for the Company's Chief
Executive Officer, Mrs. Cohen, are based on the same criteria, consisting
primarily of consideration of the Company's overall general performance, its
performance relative to its competitors and peer group institutions, and the
performance of particular areas of the Company's operations for which the
executive is responsible. In establishing compensation for its executive
officers, the Company seeks to:
1. Link rewards to results of operations and shareholder returns;
2. Encourage the creation of shareholder value and achievement of
strategic objectives;
3. Attract and retain, on a long-term basis, highly qualified executive
personnel; and
4. Provide a total compensation program that is competitive with the
Company's competitors and linked to individual responsibility and
performance.
Key Elements
The Company's compensation program consists of three components: base
salary, short-term incentives and long-term incentives.
Base Salary. Base salaries for executive officers are substantially
dependent upon salaries paid for comparable positions by the Company's
competitors. The responsibilities undertaken and the competence with which
these responsibilities are carried out by the particular executive officer are
taken into account. In determining the level of any year-to-year salary
increase for a particular executive, the general overall performance of the
Company and the person's contribution to that performance are also taken into
account, although the Compensation Committee has not applied arithmetic
guidelines in so doing. In addition, the Compensation Committee will consider
whether a particular aspect of the Company's operations (as, for example, asset
quality) under the direct supervision and control of an officer has achieved
significant improvement (or experienced deterioration) irrespective of the
Company's overall performance.
Bonus. Bonus compensation is a short-term incentive program, discretionary
with the Compensation Committee, which makes cash awards based upon what it
determines to be outstanding performance in achieving particular strategic
goals of the Company as well as the overall performance of the Company. Bonus
determinations are made on a case-by-case basis and, accordingly, are not the
result of the application of a particular formula. For 1997, bonus compensation
for senior executives was set at an average of slightly less than 18% of 1996
compensation, reflecting the Company's improved performance, including
increased income, improved operating ratios, loan growth and the expansion of
the Company through acquisitions.
Long-Term Incentives. As with bonus compensation, long-term incentive
compensation is based on contributions to the Company's performance. These
programs are designed not only to develop and maintain strong management but
also to align the interests of executives with the enhancement of
13
<PAGE>
shareholder value. The Company's Key Employee Stock Option Plan, the 1996 Stock
Option Plan, the ESOP and the 401(k) Plan are used to motivate key employees
and executive officers to achieve long-term results beneficial to shareholders:
the value of awards under such programs are directly linked to the value of the
Common Stock. As with bonus compensation, long-term incentive compensation is
awarded on a case-by-case basis and, for 1997, reflected the longer-term
growth, since 1993, in the Company's net income, loans, non-interest income,
return on assets, return on equity and the improvement since that date in the
Company's asset quality.
1997 Compensation of Chief Executive Officer
Historically, the compensation of Betsy Z. Cohen, the Company's Chief
Executive Officer, was determined in the same manner as that of other senior
executives, as described above. In 1996, the Compensation Committee determined
that it would be in the best interest of the shareholders to secure Mrs.
Cohen's services in the future through an employment agreement between herself
and the Company. For a description or the terms of that agreement, see
"Compensation of Executive Officers and Directors - Employment Agreement." The
Compensation Committee recommended, and the Board of Directors approved, the
employment agreement which provides for a base salary of $475,000. Pursuant to
an understanding between Mrs. Cohen and the Compensation Committee, her 1997
compensation was allocated $350,000 to base compensation and $125,000 to bonus
compensation. In making its recommendations as to both the agreement and the
level of Mrs. Cohen's compensation, the Compensation Committee considered the
following:
The continued increase in fully diluted per share earnings of the Company.
The five-year growth of non-interest income.
The five-year growth of the Company's total assets and loan portfolio.
The five-year growth of the Company's return on average assets.
The substantial increase in the Company's return on average common equity
over a five year period.
The substantial improvements in the Company's asset quality.
The Company's successful acquisitions of new branches and other banks.
1997 Compensation Committee
William H. Lamb
Hersh Kozlov
Arthur Makadon
P. Sherrill Neff
14
<PAGE>
Share Investment Performance
The following graph compares the change in the cumulative total
shareholder return on the Common Stock from November 12, 1993 (inception of
trading) to December 31, 1997, with the performance of the Nasdaq Broad Market
Index and the performance of the Nasdaq Banking Index for the same period. The
Company's shares are traded on The Nasdaq Stock Market under the symbol "JEFF."
The total return indices reflect reinvestment of dividends.
COMPARE CUMULATIVE TOTAL RETURN
AMONG JEFFBANKS, INC.,
MASDAQ MARKET INDEX AND BANKING INDICES
375 |----------------------------------------------------------------------|
| |
350 |----------------------------------------------------------------------|
| # |
325 |----------------------------------------------------------------------|
| |
300 |----------------------------------------------------------------------|
| * |
275 |----------------------------------------------------------------------|
| |
D 250 |----------------------------------------------------------------------|
O | |
L 225 |----------------------------------------------------------------------|
L | |
A 200 |------------------------------------------------------#-----------@---|
R | |
S 175 |----------------------------------------------------------------------|
| |
150 |-----------------------------------------#------------*@--------------|
| @ |
125 |-----------------------------------------*----------------------------|
| # |
100 |*#@------------@------------*#@---------------------------------------|
| |
75 |---------------*------------------------------------------------------|
| |
50 |----------------------------------------------------------------------|
11/12/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
* = JEFFBANKS, INC. # = NASDAQ BANKING INDEX @ = NASDAQ MARKET INDEX
FROM INCEPTION OF TRADING THROUGH DEC. 31, 1997
ASSUMES $100 INVESTED ON NOV. 12, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1997
PROPOSAL 2: RATIFICATION OF AUDITORS
The Board of Directors recommends that the shareholders ratify the
selection of Grant Thornton LLP, independent certified public accountants, to
audit the financial statements of the Company for the fiscal year ending
December 31, 1998. A plurality of the votes cast at the Meeting is required for
ratification.
Representatives of Grant Thornton LLP are not expected to be present at
the Meeting.
15
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next Annual Meeting
of Shareholders and included in the Company's Proxy Statement relating to that
meeting must be received by the Company at its executive offices not less than
120 days prior to the date corresponding to the date of the release of the
Company's Proxy Statement to shareholders in connection with this Meeting.
Accordingly, shareholder proposals to be presented at the 1998 Annual Meeting
of Shareholders must be submitted to and received by the Company no later than
December 17, 1998.
16
<PAGE>
Please mark
your votes
as this /X/
I plan
to attend
the meeting
/ /
1. ELECTION OF DIRECTORS.
The nominees for election are Harmon S. Spolan, Hersh Kozlov, Arthur Makadon
and John G. Hoopes.
FOR all nominees Withhold authority to To withhold authority to vote for
listed above vote for all nominees any individual nominee, write
(except as marked listed above that nominee's name in the space
to the contrary at provided below.
the right)
/ / / / ---------------------------------
2. RATIFICATION OF SELECTION OF GRANT THORNTON LLP AS INDE
PENDENT AUDITORS OF THE COMPANY FOR FISCAL 1998.
FOR AGAINST ABSTAIN
/ / / / / /
This proxy, when properly executed,
will be voted in the manner
described herein by the undersigned.
If no direction is made, this proxy
will be voted FOR all nominees
listed and FOR the ratification of
Grant Thornton LLP. Please sign
exactly as your name appears on this
proxy card. When shares are held by
joint tenants, both should sign.
When signing as an attorney,
executor, administrator, trustee, or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by President
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Signature Date
----------------------------------------- ------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- FOLD AND DETACH HERE -
<PAGE>
PROXY
JEFFBANKS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF JEFFBANKS, INC.
The undersigned hereby appoints Betsy Z. Cohen and Harmon S. Spolan,
or either of them, as and for the undersigned's proxies, each with the
power to appoint such proxy's substitute, and hereby authorizes them,
or either of them, to vote all of the shares of Common Stock of
JeffBanks, Inc. held of record by the undersigned on March 18, 1998 at
the Annual Meeting of Shareholders of JeffBanks, Inc. to be held
Friday, May 29, 1998 and at any and all adjournments thereof as
follows:
- FOLD AND DETACH HERE -
