<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 21, 1999
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 21, 1999, at 10:00 a.m. (the "Meeting") for the following purposes:
1. To elect four Class C directors to serve until the expiration of their
three-year terms and until their successors shall have been duly elected
and qualified.
2. To consider and act upon a proposal to amend the JeffBanks, Inc. 1996
Stock Option Plan (the "Option Plan") to increase the maximum number of
shares of Common Stock which may be issued under the Option Plan by
300,000 shares.
3. To ratify the selection of Grant Thornton LLP as independent public
auditors for the Company for the fiscal year ending December 31, 1999.
4. 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 22, 1999 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, 1999
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
JEFFBANKS, 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 21, 1999 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, 1999.
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 increase the maximum number of shares
issuable under the Option Plan and on the proposal to ratify the selection of
independent auditors for the 1999 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 has received voting instructions from a
beneficial owner of shares on a particular matter, and delivers a proxy with
respect thereto, but does not receive voting instructions from the beneficial
owner on another matter, and indicates on the proxy that it does not have
discretionary authority to vote on such other matter, those shares will be
considered as present and entitled to vote with respect to such other 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 22, 1999 are
entitled to vote at the Meeting. As of March 22, 1999, there were 10,487,715
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, FOR the amendment of the Option Plan and FOR the ratification of
independent auditors for the 1999 fiscal year, except as described above with
respect to brokers' proxies on behalf of beneficial owners. 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 a proxy unless the shareholder so attending so notifies the
1
<PAGE>
inspectors of election in writing prior to voting of the proxy. A beneficial
owner who intends to vote shares at the Meeting should obtain a legal proxy or
power of attorney from his or her broker and present it at the Meeting to
establish his or her 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. These costs are not expected to
exceed $10,000. 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 31, 1999, 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. This
information is reported in accordance with the beneficial ownership rules of
the Securities and Exchange Commission under which a person is deemed to be the
beneficial owner of a security if that person has or shares voting power or
investment power with respect to such security or has the right to acquire such
ownership within 60 days. 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 ............................................. 1,137,402 (2) 10.8%
Edward E. Cohen ............................................ 1,137,402 (2) 10.8%
Robert J. Coleman .......................................... 234,052 (3) 2.2%
Robert B. Goldstein ........................................ 213,141 (4) 2.0%
John G. Hoopes ............................................. 116,327 (5) 1.1%
Hersh Kozlov ............................................... 58,561 (6) *
William H. Lamb ............................................ 526,013 (7) 5.0%
Arthur Makadon ............................................. 11,008 (8) *
P. Sherrill Neff ........................................... 14,183 (9) *
John W. Rose ............................................... 49,288 (10) *
James R. Sibel ............................................. 56,565 (11) *
Harmon S. Spolan** ......................................... 373,564 (12) 3.6%
William D. White ........................................... 11,467 (13) *
Paul Frenkiel .............................................. 76,797 (14) *
All directors and executive officers as a group (14 persons) 2,877,198 27.4%
</TABLE>
- ------------
* Less than 1%.
** Harmon S. Spolan retired as an officer and director of the Company and its
subsidiaries on February 28, 1999.
(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
<PAGE>
(2) Consists of 7,526 shares held in the Company's Cash and Deferred Savings
Plan (the "401(k) Plan") for the benefit of Mrs. Cohen; 4,956 shares held
in the 401(k) Plan for the benefit of Mr. Cohen; 433 shares held in an
individual retirement account ("IRA") for the benefit of Mrs. Cohen;
28,586 shares held in an IRA for the benefit of Mr. Cohen; 2,709 shares
held by the Jefferson Bank Employee Stock Ownership Plan (the "ESOP") for
the benefit of Mrs. Cohen; 1,170 shares held by the ESOP for the benefit
of Mr. Cohen; 17,984 shares held by Mrs. Cohen as custodian for the
benefit of their children; 118,623 shares held by trustees for the benefit
of Mr. and Mrs. Cohen's children; 15,801 shares held by Mr. Cohen as
trustee for Mr. Spolan and his wife (Mr. Cohen disclaims beneficial
ownership of such shares); 97,302 shares held by Mr. and Mrs. Cohen as
trustees of a charitable foundation (Mr. and Mrs. Cohen disclaim
beneficial ownership of such shares); and 529,143 shares held by a limited
partnership for which Mr. and Mrs. Cohen are officers of the general
partner. The share amount also includes 248,855 shares issuable to Mrs.
Cohen upon the exercise of stock options and 64,314 shares issuable to Mr.
Cohen upon the exercise of stock options.
(3) Consists of 112,069 shares held by Mr. Coleman directly, 118,650 shares
issuable to him pursuant to a warrant and 3,333 shares issuable to him
upon the exercise of stock options.
(4) Consists of 54,058 shares held by Mr. Goldstein jointly with his wife and
159,083 shares issuable to him upon the exercise of stock options.
(5) Consists of 83,333 shares held by Mr. Hoopes directly, 29,661 shares
issuable to him pursuant to a warrant and 3,333 shares issuable to him
upon the exercise of stock options.
(6) Consists of 25,092 shares held by Mr. Kozlov directly; 20,974 shares held
in an IRA for his benefit; 1,602 shares held in an IRA for the benefit of
his wife; 385 shares held by Mr. Kozlov as custodian for the benefit of
his minor child; and 10,508 shares issuable to Mr. Kozlov upon the
exercise of stock options.
(7) Consists of 267,407 shares held by Mr. Lamb directly; 109,091 shares held
jointly with his wife; 92,763 shares held by his wife; 9,705 shares held
by Mr. Lamb as trustee for his children; 30,413 shares held by the Lamb,
Windle & McErlane Money Purchase Pension Trust (of which Mr. Lamb is sole
trustee); 6,126 shares held by Mrs. Lamb as trustee for her child; and
10,508 shares issuable to Mr. Lamb upon the exercise of stock options.
(8) Consists of 500 shares held by Mr. Makadon directly and 10,508 shares
issuable to him upon the exercise of stock options.
(9) Consists of 3,675 shares held by Mr. Neff directly and 10,508 shares
issuable to him upon the exercise of stock options.
(10) Consists of 1,010 shares held by Mr. Rose directly and 48,278 shares held
by Mr. Rose as a general partner of Castle Creek Capital Partners Fund,
L.P. ("Castle Creek Shares"). Mr. Rose holds shared voting and dispositive
powers over the Castle Creek Shares.
(11) Consists of 6,440 shares held by Mr. Sibel directly; 73 shares held in the
401(k) Plan for the benefit of Mr. Sibel; 2,389 shares held in the ESOP
for his account; and 47,663 shares issuable to him upon the exercise of
stock options.
(12) Consists of 1,600 shares owned by Mr. Spolan directly; 173,381 shares
owned jointly with his wife; 21,194 shares held by Mrs. Spolan; 3,203
shares held in the 401(k) Plan for the benefit of Mr. Spolan; 15,801
shares held in a trust for Mr. and Mrs. Spolan of which Mr. Cohen is
trustee; 4,029 shares held by the ESOP for the account of Mr. Spolan;
54,208 shares held by Mr. Spolan as trustee for the children of Mr. and
Mrs. Cohen; 2,500 shares held by a foundation for which Mr. Spolan is a
director and officer; 805 shares held in a benefit plan for the benefit of
Mr. Spolan; and 96,843 shares issuable to him upon the exercise of stock
options.
(13) Consists of 959 shares held in a pension plan for the benefit of Mr. White
and 10,508 shares issuable to him upon the exercise of stock options.
3
<PAGE>
(14) Consists of 9,910 shares held by Mr. Frenkiel directly; 6,484 shares held
in the 401(k) Plan for his benefit; 4,031 shares held in an IRA for his
benefit; 910 shares held by the ESOP for his account; 3,828 shares held by
Mr. Frenkiel as custodian for his child; and 51,634 shares issuable to Mr.
Frenkiel upon the exercise of stock options.
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 C directors expire
at the Meeting. The Nominating Committee of the Board of Directors (the
"Nominating Committee") has nominated Betsy Z. Cohen, William H. Lamb, William
D. White and Robert J. Coleman as directors in Class C. Should any nominee
become unable or refuse to accept nomination for election as a director in
Class C, 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 C directors receiving a
plurality of the votes cast at the Meeting will be elected.
During 1998, the Board of Directors held seven meetings. No absences were
reported at any of meetings of the Board of Directors or at meetings of the
standing committees (described below) on which directors 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 Subsidiaries
----- --- ---------- ----------------------------------
<S> <C> <C> <C>
Nominees for election as
Class C Directors
Betsy Z. Cohen(1) ......... 57 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 and Jefferson
Bank of New Jersey ("Jefferson NJ") since
1974 and 1988, respectively. Mrs. Cohen is
also Chairman, Chief Executive Officer
and a trustee of Resource Asset Invest-
ment Trust, a publicly-traded real estate
investment trust ("RAIT") since 1997,
Chairman, Chief Executive Officer and a
director of JeffMortgage, Inc. (a mortgage
lending subsidiary of Jefferson Bank) since
1998 and a director of Aetna Inc. (an insur-
ance company) since 1996. Mrs. Cohen is
married to Edward E. Cohen.
</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 Subsidiaries
---- --- ---------- -----------------------------------
<S> <C> <C> <C>
William H. Lamb(1)(4) .......... 59 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) ......... 65 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) ........... 62 1997 From 1988 until their acquisition by the
Company in January 1997, Robert J. Cole-
man was a director of United Valley Ban-
corp, Inc. ("UVBI") and its wholly-owned
banking subsidiary, United Valley Bank
("UVB"). Mr. Coleman is the Chairman of
the Executive Committee of Marshall,
Dennehey, Warner, Coleman & Goggin (a
regional law firm based in Philadelphia).
Mr. Coleman is also a director of the Hero
Scholarship Fund of Delaware County and
the Insurance Society of Philadelphia.
Class B Directors
Hersh Kozlov(3)(4) ............. 51 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) .............. 56 1995 Arthur Makadon is a senior partner at the
Philadelphia, Pennsylvania law firm of Bal-
lard Spahr Andrews & Ingersoll, with
which he has been affiliated since 1975.
John G. Hoopes(2) .............. 54 1997 From 1988 to 1997, John Hoopes was
Chairman of the board of directors and a
director of UVBI and UVB. Mr. Hoopes is
the Chairman of Penn Business Credit, a
privately owned commercial finance com-
pany located in Philadelphia, Pennsylvania.
</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 Subsidiaries
---- --- ---------- ----------------------------------
<S> <C> <C> <C>
Class A Directors
Edward E. Cohen(1)(3) .......... 60 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 Company's Executive Committee. Mr.
Cohen is Chairman and Chief Executive
Officer of Resource America, Inc, a
publicly-held specialty finance company
("RAI"). 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) .............. 55 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) ......... 47 1994 P. Sherrill Neff has been President, Chief
Financial Officer and a director of Neose
Technologies, Inc., a biotechnology firm
based in Horsham, Pennsylvania since
1994. From 1993 to 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. From
1984 to 1993, Mr. Neff was a Managing
Director in the Investment Banking Divi-
sion of Alex. Brown & Sons Incorporated,
Baltimore, Maryland.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Served As Principal Occupation for Past Five
A Director Years and Position Held with the
Name Age Since Company or Its Subsidiaries
---- --- ---------- ----------------------------------
<S> <C> <C> <C>
Robert B. Goldstein(1) ......... 58 1998 Robert B. Goldstein has been Vice Chair-
man of the Company since July 1998, and
upon the retirement of Harmon S. Spolan
on February 28, 1999, its President and
Chief Operating Officer. He has also been
President and Chief Operating Officer of
Jefferson Bank and a director of Jefferson
NJ since July 1998. From 1997 until its
acquisition by the Company in 1998, Mr.
Goldstein was President, Chief Executive
Officer and a director of Regent Banc-
shares Corp. ("RBC") and Chairman, Chief
Executive Officer and a director of its sub-
sidiary, Regent National Bank ("Regent").
From 1993 to 1997, Mr. Goldstein served as
President, Chief Executive Officer and a
director of Lafayette American Bank in
Bridgeport, Connecticut.
John W. Rose ................... 49 1998 From 1997 to 1998, Mr. Rose served as a
director of RBC and of Regent. Mr. Rose
has been a general partner and head of the
investment committee of Castle Creek
Capital Partners Funds, LP (a fund that
invests in turnaround banking situations)
since 1996 and President and owner of
McAllen Capital Partners (an investment
banking firm that specializes in bank turn-
around investments) since 1992. Mr. Rose
has been a director of Jacksonville Bancorp
(a Florida bank holding company) since
1998. From 1995 to 1997, Mr. Rose was an
executive Vice President of F.N.B. Corpo-
ration (a multi-bank holding company in
Hermitage, Pennsylvania).
</TABLE>
- ------------
(1) Member of the 1998 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 1998, the
Executive Committee held five meetings.
(2) Member of the 1998 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 1998, the
Audit Committee held four meetings.
(3) Member of the 1998 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 2000 Annual Meeting of Shareholders,
provided that such recommendations are received by the Company at its
executive offices not later than December 16, 1999. During 1998, the
Nominating Committee held one meeting.
7
<PAGE>
(4) Member of the 1998 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, Goldstein and Sibel) and recommends
appropriate compensation levels to the Boards of Directors of the
Company's subsidiary banks for their senior executive officers. During
1998, the Compensation Committee held three meetings.
Executive Officers
Paul Frenkiel, CPA, 46, 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
representations from certain reporting persons that no filings were required
for those persons, the Company believes that, during the fiscal year ended
December 31, 1998, its officers, directors and greater than ten percent
shareholders complied with all applicable filing requirements except that, due
to a delay by the Company in delivering certain option grants reported herein,
a Form 4 was filed late by each of Mr. Kozlov, Mr. Lamb, Mr. Makadon, Mr. Neff,
Mr. Coleman, Mr. Hoopes, Mr. White and Mr. Rose. In addition, a Form 3 was
filed late by Mr. Rose and a Form 5 was filed late by Mr. Kozlov.
8
<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 ("ESOP") 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 1996, 1997 and 1998 for the Company's
Chief Executive Officer and the four other executive officers of the Company
whose salary plus bonus exceeded $100,000 for the fiscal year ended December
31, 1998. The table includes compensation paid by the Company, Jefferson Bank
and Jefferson NJ to the individuals listed. Compensation to the Company's
executive officers and directors is allocated among the Company and its
subsidiary banks based upon the relative amount of time spent by such persons
on the affairs of the Company and the subsidiary banks. The subsidiary banks
further allocate between themselves the compensation of persons employed by
both based upon their relative amount of total assets and the amount of time
spent on the affairs of each subsidiary bank.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------------
Other
Name and Annual
Principal Position Year Salary($) Bonus($) Compensation($)
- --------------------------------- ------ ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Betsy Z. Cohen .................. 1998 400,000(5) 175,000(5) 0
Director, Chairman and 1997 350,000 125,000 0
Chief Executive Officer 1996 310,000 125,000 0
Robert B. Goldstein ............. 1998 141,000(6) 25,000 54,500(7)
Director and Vice 1998 129,500(6) 148,500(6) 0
Chairman of the Company; 1997 0 0 0
President and Chief 1996 0 0 0
Operating Officer of
Jefferson Bank(8)
Harmon S. Spolan ................ 1998 310,000 30,000 0
Director, President and 1997 300,000 25,000 0
Chief Operating Officer* 1996 290,000 25,000 0
Edward E. Cohen ................. 1998 175,000 0 0
Director and Chairman 1997 175,000 0 0
of Executive Committee 1996 175,000 0 0
James R. Sibel .................. 1998 199,000 17,500 0
Director, Executive Vice 1997 185,000 20,000 0
President and Chief 1996 175,000 15,000 0
Credit Officer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------
Awards
-------------------------------------------
Restricted Securities All
Name and Stock Underlying Other Com-
Principal Position Year Awards ($)(1) (2) Options (#)(3) pensation($)(4)
- --------------------------------- ---- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Betsy Z. Cohen .................. 1998 7,350 33,334 12,116
Director, Chairman and 1997 14,766 30,500 2,760
Chief Executive Officer 1996 2,807 0 2,000
Robert B. Goldstein ............. 1998 0 83,335 0
Director and Vice 1998 -- -- 0
Chairman of the Company; 1997 0 0 0
President and Chief 1996 0 0 0
Operating Officer of
Jefferson Bank(8)
Harmon S. Spolan ................ 1998 11,000 0 5,644
Director, President and 1997 22,080 6,175 1,400
Chief Operating Officer* 1996 4,172 0 750
Edward E. Cohen ................. 1998 3,300 0 12,324
Director and Chairman 1997 6,624 0 2,760
of Executive Committee 1996 3,776 0 0
James R. Sibel .................. 1998 8,150 4,166 1,489
Director, Executive Vice 1997 16,376 8,675 170
President and Chief 1996 4,172 0 360
Credit Officer
</TABLE>
- ------------
* Mr. Spolan retired from the Company on February 28, 1999.
(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 1998 and the dollar value of shares actually allocated to their
accounts in 1997 and 1996.
(2) The total number of shares held in the ESOP, including estimated share
allocation for 1998, and their aggregate market value as of December 31,
1998 are as follows: Mrs. Cohen - 2,709 shares,
9
<PAGE>
$128,544; Mr. Spolan -- 4,029 shares, $189,089; Mr. Cohen -- 1,170 shares,
$58,000; and Mr. Sibel -- 2,389 shares, $113,880. 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, 1998 ($19.75
per share).
(3) Adjusted for a 5 for 3 stock split effected in the form of a 66 2/3% stock
dividend on July 31, 1998.
(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, 1998 ($19.75 per
share).
(5) Pursuant to an understanding between Mrs. Cohen and the Compensation
Committee, $400,000 of the $475,000 base compensation required by her
employment agreement with the Company, was allocated to base compensation
and $75,000 was allocated to bonus compensation. See "Compensation of
Executive Officers and Directors -- Employment Agreements."
(6) Represents $141,000 paid by the Company to Mr. Goldstein and $278,000 paid
in combined salary and bonus by RBC to Mr. Goldstein during 1998 prior to
the Company's acquisition of RBC in July 1998.
(7) Represents automobile and housing expenses reimbursed to Mr. Goldstein in
1998 pursuant to his employment agreement. See "Compensation of Executive
Officers and Directors -- Employment Agreements."
(8) During fiscal year 1998, Mr. Goldstein held the positions of Vice Chairman
and director of the Company and the positions of President and Chief
Operating Officer of Jefferson Bank. Upon Mr. Spolan's retirement from the
Company on February 28, 1999, Mr. Goldstein also became President and
Chief Operating Officer of the Company.
Option Grants and Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth the number of options granted to the
executive officers and directors listed in the Summary Compensation Table. The
exercise price of those options and certain related information is stated as of
December 31, 1998 (as adjusted to reflect the 5 for 3 stock split during the
year).
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
----------------------------------------------------------------------- -----------------
Number of
Securities
Underlying % of Total Options/SARs Base or
Options/SARs Granted to Employees Exercise Expiration Grant Date
Name Granted in Fiscal Year Price ($/sh) Date(1) Present Value(2)
- ----------------------------- -------------- ------------------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Betsy Z. Cohen .............. 33,334 13.0% $ 31.425 7/10/08 $303,800
Robert B. Goldstein ......... 83,335 32.6% 28.80 7/28/08 700,000
Harmon S. Spolan ............ 0 -- -- -- --
Edward E. Cohen ............. 0 -- -- -- --
James R. Sibel .............. 4,166 1.6% 31.425 7/10/08 37,975
</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, subject to certain exemptions relating to the death,
disability or retirement of the option holder.
(2) Grant date present value has been calculated using the Black-Scholes option
pricing model.
10
<PAGE>
The following table presents information with respect to stock options
exercised during fiscal 1998 by the named executive officers, as well as the
number of unexercised stock options and the value of unexercised stock options
held as of December 31, 1998 (as adjusted to reflect a 5 for 3 stock split
during the year).
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 1998 1998
on Value Exercisable/ Exercisable/
Name Exercise Realized(1) Unexercisable Unexercisable(2)
- ----------------------------- ---------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Betsy Z. Cohen .............. 0 0 248,920/0 $2,245,013/0
Robert B. Goldstein ......... 0 0 159,083/0 483,285/0
Harmon S. Spolan* ........... 18,313 $ 232,499.87 96,876/0 864,987/0
24,513 317,811.04
26,157 315,027.75
Edward E. Cohen ............. 0 0 64,313/0 567,607/0
James R. Sibel .............. 3,858 $ 116,260.83 47,663/0 281,496/0
3,525 120,555.00
</TABLE>
- ------------
* Mr. Spolan retired from the Company on February 28, 1999.
(1) Calculated as the difference between market value (closing sale price) per
share of Common Stock on the exercise date and the option exercise price
per share.
(2) Calculated as the difference between market value (closing sale price) per
share of Common Stock on December 31, 1998 ($19.75 per share) and the
option exercise prices per share.
Employment Agreements
Betsy Z. Cohen. 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 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 compensation for 1998 was
allocated $400,000 to base compensation and $75,000 to bonus compensation
(total bonus compensation awarded to Mrs. Cohen for 1998 was $175,000).
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.
11
<PAGE>
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 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 the
effective date of the agreement; (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.
Robert B. Goldstein. The Company and Jefferson Bank entered into an
employment agreement with Robert B. Goldstein, effective as of July 28, 1998,
pursuant to which Mr. Goldstein serves as the President and Chief Operating
Officer of Jefferson Bank and as Vice Chairman of the Company. As of February
28, 1999, Mr. Goldstein was also appointed President and Chief Operating
Officer of the Company. Under the agreement, Mr. Goldstein receives base
compensation of $350,000 per year, which may be increased annually by the
Boards of the Company and Jefferson Bank. Mr. Goldstein received $141,000 in
base salary and $25,000 in bonus compensation for the portion of fiscal year
1998 in which he was employed by the Company and Jefferson Bank (July through
December 1998).
Mr. Goldstein is eligible to receive incentive bonuses in amounts to be
determined by the respective Boards and to participate in all employee benefit
plans in effect during his period of employment. The agreement requires Mr.
Goldstein to devote substantially all of his business time to the performance
of his duties to the Company and Jefferson Bank.
12
<PAGE>
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, upon written notice, earlier terminate Mr.
Goldstein's employment at any time for cause, other than for cause or on
account of his death or disability extending for more than 240 days. Mr.
Goldstein also has the right to terminate the agreement upon a change in
control of the Company (as described below) and for good reason (as described
below).
The agreement provides the following termination benefits:
1. If the termination is: (a) by the Company for cause, (b) by Mr.
Goldstein other than for good reason or (c) due to Mr. Goldstein's death or
disability which does not occur during a period 270 days before or 180 after
the consummation of a change of control ("change of control period"), Mr.
Goldstein will receive base salary accrued through the termination date, any
required bonus, excise taxes imposed under Section 4999 of the Internal Revenue
Code of 1986, and the present value of all other employee benefits to which he
participated on the termination date (collectively the "accrued benefits").
2. If the termination is within the change of control period and is: (a)
by the Company for any reason other than for cause, (b) due to Mr. Goldstein's
death or disability or (c) by Mr. Goldstein for good reason or within 180 days
after the consummation of a change of control, Mr. Goldstein will receive
accrued benefits and a severance payment equal to 2.99 times the sum of Mr.
Goldstein's base salary at termination and any bonus payable in the year of
termination.
3. If the termination is as of an effective date not within the change of
control period and is: (a) by the Company other than for cause or (b) by Mr.
Goldstein for good reason, Mr. Goldstein will receive accrued benefits plus the
amount of base salary payable for the remainder of the term of his employment
contract had he remained employed, ($50,000 if termination occurs in the first
year of employment) and an amount equal to all of the insurance benefits that
would have been paid by the Company on behalf of Mr. Goldstein for the
remainder of the term of his employment contract had he remained employed.
For the purposes of Mr. Goldstein's employment agreement, the definition
of the term "change in control" is substantially similar to the definition in
Mrs. Cohen's employment agreement except that a sale, lease, exchange or other
transfer of all or substantially all of the assets of Jefferson Bank rather
than of the Company would constitute a change of control. The definition of the
term "good reason" is a material diminution of responsibilities or position
without Mr. Goldstein's consent, uncured breach of obligations under the
employment agreement, termination without cause or failure to elect him as a
director of the Company due to negligence in voting by other Board members.
Compensation Committee Interlocks and Insider Participation
During 1998, Messrs. Lamb, Kozlov, Makadon and Neff served as members of
the Compensation Committee. None of the Compensation Committee members are
officers or employees of the Company or its subsidiary banks. Further, during
1998, no executive officer of the Company was a director or compensation
committee member of any other entity, that had any of its executive officers
serving on the Company's Board or compensation committee.
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 relationships with, Jefferson Bank and Jefferson NJ. As of
December 31, 1998, Jefferson Bank and Jefferson NJ had loans outstanding to
directors and officers of the Company, and certain business organizations and
individuals associated with them, totaling $13,425,000 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 10% of its shareholders' equity
at December 31, 1998, while such
13
<PAGE>
loans made by Jefferson NJ represented 12% of its shareholders' equity at such
date. In the aggregate, such loans were 10% of the Company's shareholders'
equity at December 31, 1998. 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 February 1999, RAI, of which Edward E. Cohen is an
executive officer and director, obtained an $18.0 million revolving credit
facility (requiring specific approval of any advances that would bring the
amount drawn under the facility over $12 million) from Jefferson Bank for RAI's
commercial mortgage loan operations and other approved corporate investments.
The entire $18.0 million was drawn down in February 1999 in connection with a
specific transaction (approved by Jefferson Bank) whereby RAI acquired the
assets of JLA Credit Corp., a small ticket leasing company with $350 million in
assets. The facility is collateralized by a pool of first mortgage loans on
commercial property whose underlying real properties have an aggregate
appraised value of $37.5 million and net operating income of $3.3 million. 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. It is management's opinion that the loan does not represent a greater
than normal risk of collectibility or present any other unfavorable features.
RAI and its subsidiaries maintain an aggregate deposit account relationship
with Jefferson Bank in excess of $20 million.
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. Mr. Cohen is a limited partner of Jefferson
Associates. Jefferson Bank paid $1,789 in rent for the portion of the year that
it occupied the premises.
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 was $207,088 for the first full year of the lease
term, and will be $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 (for which Mrs. Cohen is the Chairman and
Chief Executive Officer and of which RAI is a 13.5% 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. Mr. Cohen
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
14
<PAGE>
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 sublets 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. Mr. and Mrs. Cohen are limited partners of the
partnership. The lease provides for a term expiring March 1, 2001 at an annual
rental of $133,860. Finally, Ballard Spahr Andrews & Ingersoll, LLP, (of which
Mr. Makadon is a member) has provided legal services to the Company during
1998.
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 Goldstein) and to recommend appropriate
compensation levels for senior officers of the Company's subsidiaries.
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
15
<PAGE>
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.
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 shareholder
value. The Company's 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
1998 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.
1998 Compensation of Chief Executive Officer
In 1997, 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 of the terms of that agreement, see "Compensation of Executive
Officers and Directors - Employment Agreements." Pursuant to an understanding
between Mrs. Cohen and the Compensation Committee in 1998, the compensation
called for under Mrs. Cohen's employment agreement was allocated $400,000 to
base compensation and $75,000 to bonus compensation. The Compensation Committee
also awarded Mrs. Cohen $100,000 in additional bonus compensation. In so doing,
the Committee particularly noted the successful integration into the Company of
Regent and UVB following their acquisitions in 1998 and 1997, respectively, and
the growth in the Company's total assets, total loans, shareholders' equity,
net income (excluding non-recurring Regent merger expenses) and non-interest
income during both the most recent one and five year periods. The Compensation
Committee believes that this growth has significantly improved the Company's
ability to compete with other financial institutions in its service area.
1998 Compensation Committee
William H. Lamb
Hersh Kozlov
Arthur Makadon
P. Sherrill Neff
Share Investment Performance
The following graph compares the change in the cumulative total
shareholder return on the Common Stock from December 31, 1993 to December 31,
1998, with the performance of the Nasdaq Composite Index and the performance of
the SNL Securities $1-5 Billion Bank Asset-Size 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.
16
<PAGE>
COMPARES CUMULATIVE TOTAL RETURN
AMONG JEFFBANKS, INC., THE NASDAQ
COMPOSITE INDEX AND THE SNL SECURITIES
$1B-$5B BANK ASSET-SIZE INDEX
JeffBanks, Inc.
Total Return Performance
[CHART OMITTED]
<TABLE>
<CAPTION>
Period Ending
---------------------------------------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JeffBanks, Inc. 100.00 125.45 153.80 196.39 359.18 261.86
NASDAQ Composite 100.00 97.75 138.26 170.01 208.58 293.21
SNL $1B-$5B Bank Asset-Size Index 100.00 105.28 141.58 183.54 306.09 305.38
</TABLE>
ASSUMES $100 INVESTED ON DECEMBER 31, 1993
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DECEMBER 31 1998
17
<PAGE>
PROPOSAL 2. AMENDMENT OF THE 1996 STOCK OPTION PLAN
The Board of Directors recommends that the shareholders ratify an
amendment to the Company's 1996 Stock Option Plan to increase the maximum
number of shares of Common Stock which may be issued under the Option Plan
("Option Shares") by 300,000 shares. A plurality of the votes cast at the
meeting either in person or by proxy is required for approval.
The Option Plan currently provides that a maximum of 250,000 shares of
Common Stock may be issued to executive officers, key employees and directors
of the Company and its subsidiaries. The Option Plan also provides that the
Company's Compensation Committee may adjust the number of shares of Common
Stock which may be issued under the Option Plan in the event of any change in
the outstanding Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or similar transaction. The number of shares issuable by the Option Plan
has been adjusted by a 5% stock dividend in 1997 and a 5 for 3 stock split
issued in the form of a 66 2/3% stock dividend in 1998. The number of shares
issuable under the Option Plan is currently 437,500 shares. As of the record
date, all but 38,301 of the available Option Shares have been issued pursuant
to the Option Plan.
The purpose of the proposed increase is to provide sufficient shares for
future option grants to executive officers, key employees and directors. The
Board believes that the Company and its shareholders significantly benefit from
having the Company's management and directors receive options to purchase the
Company's Common Stock and that the opportunity thus afforded these persons to
acquire Common Stock is an essential element of an effective management
incentive program. The Board also believes that stock options are very valuable
in attracting and retaining highly qualified management personnel and in
providing additional motivation to management to use its best efforts on behalf
of the Company and its shareholders.
If approved by the shareholders, Section 1.06(a) of the Option Plan would
be amended to read as follows: "Shares of stock which may be issued under the
Plan shall be Common Stock. The maximum number of shares of Common Stock which
may be issued under the Plan shall be 737,500."
PROPOSAL 3. 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, 1999. 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.
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 2000 Annual Meeting
of Shareholders must be submitted to and received by the Company no later than
December 16, 1999. In addition, proxies for the 2000 annual meeting of
shareholders may confer upon management of the Company discretionary authority
to vote on any matters brought before that meeting ( and not included in the
proxy statement for that meeting) if the Company has not received notice of the
matter on or before March 1, 2000.
18
<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 Paul Frenkiel, and each
of them, as and for the proxies, each with the power to appoint such proxys
substitute, and hereby authorizes them, or any of them, to vote all of the
shares of Common Stock of JeffBanks, Inc. held of record by the undersigned on
March 22, 1999 at the Annual Meeting of Shareholders of JeffBanks, Inc. to be
held Friday, May 21, 1999 and at any and all adjournment, postponements or
continuations thereof as set forth on the reverse side hereof:
- -------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
Please mark /X/
your votes
as this
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS.
The nominees for election are Betsy Z. Cohen, William H. Lamb, William D. White I plan to attend
and Robert J. Coleman. the meeting
FOR all nominees Withhold Authority To withhold authority to vote for any individual nominee, / /
listed above (except as to vote for all nominees write thatnominee's name in the space provided below.
marked to the contrary listed above
at the right) ---------------------------------------------------------
/ / / /
2. PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN. 3. PROPOSAL TO RATIFY THE SELECTION 4. IN THEIR DISCRETION, THE
OF GRANT THORNTON LLP AS INDEPENDENT PROXIES ARE AUTHORIZED TO
PUBLIC AUDITORS FOR 1999 FISCAL YEAR VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY BE BROUGHT
BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 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 approval of the
amendment to the 1996 Stock Option Plan and FOR
ratification of Grant Thornton LLP as independent
public auditors for the Company for fiscal 1999.
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.
- -----------------------------------------------------------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
</TABLE>
