<PAGE>
As filed with the Securities and Exchange Commission on December 11, 1998
Registration No. 333-66749
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_____________________________________
RICHMOND COUNTY FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 6036 06-1498455
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1214 CASTLETON AVENUE
STATEN ISLAND, NEW YORK 10310
(718) 448-2800
(Address, including Zip Code and Telephone Number,
including Area Code, of Registrant's Principle Executive Offices)
MICHAEL F. MANZULLI
CHIEF EXECUTIVE OFFICER
1214 CASTLETON AVENUE
STATEN ISLAND, NEW YORK 10310
(718) 448-2800
(Name, Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service)
______________________________________________________
COPIES TO:
Douglas P. Faucette, Esq. Michael M. Horn, Esq.
Marc P. Levy, Esq. McCarter & English, LLP
Muldoon, Murphy & Faucette 100 Mulberry Street
5101 Wisconsin Avenue, N.W. Newark, New Jersey 07102
Washington, D.C. 20016 (973) 622-4444
(202) 362-0840
__________________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT AND
THE SATISFACTION OR WAIVER OF ALL OTHER CONDITIONS TO THE MERGER
DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS.
If the securities being registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box.[_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering.[_]
_________________________________________________
Calculation of Registration Fee
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<CAPTION>
- ----------------------------------------------------------------------------------------------
Title of Each Amount Proposed Proposed Amount of
Class of Securities Being To Be Maximum Maximum Registration
Registered Registered(1) Offering Aggregate Fee (2)
Price Offering
Per Share(2) Price (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $0.01 per 10,041,277 N/A $143,150,359 $39,796(3)
share ("Common Stock")
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par value
$.01 per share, issuable by Richmond County Financial Corp. ("Richmond
County") upon consummation of the acquisition of Bayonne Bancshares, Inc.
("Bayonne") by Richmond County.
(2) The registration fee has been computed pursuant to Rules 457(f)(1) and
457(c) under the Securities Act of 1933, as amended, based on the average of
the high and low prices for shares of common stock of Bayonne reported on
the Nasdaq National Market of the Nasdaq Stock Market on October 30, 1998,
($14.969) and the estimated maximum number of such shares (9,563,121),
including shares issuable upon the exercise of outstanding stock options,
that may be exchanged for the securities being registered.
(3) Registration fee previously paid with Form S-4 filed on November 3, 1998.
______________________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OR THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
RICHMOND COUNTY FINANCIAL CORP.'S COMMON STOCK IS LISTED ON THE NASDAQ
NATIONAL MARKET OF THE NASDAQ STOCK MARKET AND IS TRADED UNDER THE SYMBOL"RCBK."
<PAGE>
LOGO OF LOGO OF
RICHMOND COUNTY FINANCIAL CORP. BAYONNE BANCSHARES, INC.
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Richmond County Financial Corp. and Bayonne
Bancshares, Inc. have agreed on a merger of Richmond County and Bayonne. The
combined company will be an effective competitor on many fronts in its New York
and New Jersey market areas, with total assets approaching $2.4 billion,
deposits of approximately $1.5 billion and stockholders' equity of approximately
$435 million. We are convinced that this merger will position our two companies
to grow and flourish as the financial services business evolves and
consolidates.
As a result of the merger, each share of Bayonne common stock that you hold will
be converted automatically into a right to receive 1.05 shares of common stock
of Richmond County.
We cannot complete the merger unless the stockholders of both of our companies
approve it. Each of us will hold a meeting of our stockholders to vote on this
merger proposal. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to
attend your stockholder meeting, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you want to vote, your proxy will be counted as a
vote in favor of the merger. Not returning your card or not instructing your
broker how to vote any shares held for you in "street name" will have the same
effect as a vote against the merger.
The dates, times and places of the meetings are as follows:
FOR RICHMOND COUNTY FINANCIAL CORP. FOR BAYONNE BANCSHARES, INC.
__________, 1999, __:__ local time __________, 1999, __:__ local time
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
This document provides you with detailed information about these meetings and
the proposed merger. You can also get information about our companies from
publicly available documents that our companies have filed with the Securities
and Exchange Commission. We encourage you to read this entire document
carefully.
We strongly support this combination of our companies and join with all of the
other members of our Boards of Directors in enthusiastically recommending that
you vote in favor of the merger.
Michael F. Manzulli Patrick F.X. Nilan
Chairman and Chief Executive Officer Chairman
Richmond County Financial Corp. Bayonne Bancshares, Inc.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF ANY
OF THE PARTIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------
RICHMOND COUNTY'S AND BAYONNE'S COMMON STOCK ARE BOTH TRADED ON THE NATIONAL
MARKET SYSTEM OF THE NASDAQ STOCK MARKET. THE TRADING SYMBOL FOR RICHMOND COUNTY
COMMON STOCK IS "RCBK." THE TRADING SYMBOL FOR BAYONNE COMMON STOCK IS
"FSNJ."
JOINT PROXY STATEMENT/PROSPECTUS DATED ______________, 199_
AND FIRST MAILED TO STOCKHOLDERS ON ______________, 199_
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________ __, 199_
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of Richmond
County Financial Corp. ("Richmond County"), _______________, New York will be
held at the _______________________________, _____________________________,
_________, New York, _____ on __________ __, 199__ at _:__ a.m., local time,
(the "Richmond County Meeting") for the following purposes, all of which are
more completely set forth in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, amended and restated as of
October 14, 1998, by and between Richmond County Financial Corp. and
Bayonne Bancshares, Inc. (the "Bayonne Merger Agreement"), pursuant
to which each share of common stock of Bayonne, par value $0.01 per
share, will be converted into the right to receive 1.05 shares of the
common stock of Richmond County, par value $0.01 per share, plus cash
in lieu of any fractional share interest (the "Bayonne Merger
Consideration"), subject to possible adjustment as set forth in the
Bayonne Merger Agreement.
2. To transact such other business as may properly come before the
Richmond County Meeting and any adjournment or postponement thereof.
Pursuant to Richmond County's Bylaws, the Board of Directors has fixed
__________ __, 199_ as the record date for the determination of stockholders
entitled to notice of and to vote at the Richmond County Meeting and any
adjournment or postponement thereof. Only stockholders of record at the close
of business on that date will be entitled to notice of and to vote at the
Richmond County Meeting. A list of Richmond County stockholders entitled to
vote at the Richmond County Meeting will be available for examination for any
purpose germane to the Richmond County Meeting, during ordinary business hours,
at the principal executive offices of Richmond County located at 1214 Castleton
Avenue, Staten Island, New York 10310 for ten days prior to the Richmond County
Meeting and will also be available at the Richmond County Meeting.
In the event that there are not sufficient votes to approve the foregoing
proposal at the time of the Richmond County Meeting, the Richmond County Meeting
may be adjourned in order to permit further solicitation by Richmond County.
By Order of the Board of Directors
Thomas R. Cangemi
Senior Vice President and Corporate Secretary
Staten Island, New York
_______, 199_
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE THE BAYONNE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE RICHMOND COUNTY MEETING, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
PRE-ADDRESSED POSTAGE-PAID ENVELOPE. YOUR PROXY MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH THE CORPORATE SECRETARY OF RICHMOND COUNTY PRIOR TO THE
RICHMOND COUNTY MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE, OR BY ATTENDING THE RICHMOND COUNTY MEETING, FILING A
WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF THE MEETING AND VOTING IN
PERSON.
<PAGE>
BAYONNE BANCSHARES, INC.
568 Broadway
Bayonne, New Jersey 07002
(201) 437-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________ __, 199_
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Bayonne
Bancshares, Inc. ("Bayonne") will be held at ____________, ________________,
________, New Jersey on ______, ________ __, 199_ at _:__ a.m., local time, (the
"Bayonne Meeting") for the following purposes, all of which are more completely
set forth in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, amended and restated as of
October 14, 1998, by and between Richmond County Financial Corp.
("Richmond County") and Bayonne (the "Bayonne Merger Agreement")
pursuant to which each share of common stock of Bayonne, par value
$0.01 per share, will be converted into the right to receive 1.05
shares of the common stock of Richmond County, par value $0.01 per
share, plus cash in lieu of any fractional share interest, subject to
possible adjustment as set forth in the Bayonne Merger Agreement.
2. The election of two directors to three-year terms of office each.
3. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of Bayonne for the fiscal year ending March 31,
1999.
4. To transact such other business as may properly come before the
Bayonne Meeting or any adjournment or postponement thereof.
Pursuant to Bayonne's Bylaws, the Board of Directors has fixed
____________________, 199_ as the record date for the determination of
stockholders entitled to notice of and to vote at the Bayonne Meeting and any
adjournment or postponements thereof. Only stockholders of record at the close
of business on that date will be entitled to notice of and to vote at the
Bayonne Meeting. A list of Bayonne stockholders entitled to vote at the Bayonne
Meeting will be available for examination for any purpose germane to the Bayonne
Meeting, during ordinary business hours, at the principal executive offices of
Bayonne located at 568 Broadway, Bayonne, New Jersey 07002 for ten days prior to
the Bayonne Meeting and will also be available at the Bayonne Meeting.
In the event that there are not sufficient votes to approve any one or more
of the foregoing proposals at the time of the Bayonne Meeting, the Bayonne
Meeting may be adjourned in order to permit further solicitation by Bayonne.
By Order of the Board of Directors
Thomas Coughlin
Corporate Secretary
Bayonne, New Jersey
_______, 199_
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE AND ADOPT THE BAYONNE MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE BAYONNE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING PRE-
ADDRESSED POSTAGE-PAID ENVELOPE. YOUR PROXY MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH THE CORPORATE SECRETARY OF BAYONNE PRIOR TO THE BAYONNE
MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE, OR BY ATTENDING THE BAYONNE MEETING, FILING A WRITTEN NOTICE OF REVOCATION
WITH THE SECRETARY OF THE BAYONNE MEETING AND VOTING IN PERSON.
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY................................................................................................. 1
The Companies...................................................................................... 1
Richmond County Financial Corp................................................................ 1
Bayonne Bancshares, Inc....................................................................... 1
The Stockholders' Meetings......................................................................... 1
Richmond County Stockholders.................................................................. 1
Bayonne Stockholders.......................................................................... 1
Record Date; Vote Required......................................................................... 1
Richmond County Stockholders.................................................................. 1
Bayonne Stockholders.......................................................................... 2
Our Reasons for the Merger......................................................................... 2
Our Recommendations to Stockholders................................................................ 2
Richmond County Stockholders.................................................................. 2
Bayonne Stockholders.......................................................................... 2
The Bayonne Merger................................................................................. 2
General....................................................................................... 2
Exchange of Shares............................................................................ 2
Bayonne Stockholders..................................................................... 2
Opinions of Financial Advisors................................................................ 3
Richmond County.......................................................................... 3
Bayonne.................................................................................. 3
Stock Options................................................................................. 3
Bayonne Stock Options.................................................................... 3
Management and Operations after the Merger.................................................... 3
What We Need to do to Complete the Merger..................................................... 4
Termination of the Agreement; Expenses........................................................ 4
Waiver and Amendment.......................................................................... 5
Accounting Treatment.......................................................................... 5
Regulatory Approvals.......................................................................... 5
Bayonne Merger Stock Option Agreement......................................................... 5
Interests of Directors and Officers in the Merger that are Different From
Your Interests........................................................................... 5
Appraisal Rights.............................................................................. 6
Richmond County Stockholders............................................................. 6
Bayonne Stockholders..................................................................... 6
Certain Federal Income Tax Consequences....................................................... 6
Bayonne Stockholders.......................................................................... 6
Certain Differences in the Rights of Stockholders............................................. 6
The Ironbound Merger............................................................................... 7
Selected Historical Financial Data of
Richmond County and Bayonne.............................................................. 8
Selected Historical Unaudited Financial and Other Data............................................. 9
Selected Historical Unaudited Financial And Other Data............................................. 11
Unaudited Pro Forma Combined Selected
Financial Information.................................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Selected Unaudited Pro Forma Financial Data
of Richmond County, Ironbound and Bayonne..................................................... 15
Comparative Per Share Data......................................................................... 16
INDEX OF DEFINED TERMS.................................................................................. 17
THE COMPANIES........................................................................................... 20
Richmond County.................................................................................... 20
Bayonne............................................................................................ 20
WHERE YOU CAN FIND MORE INFORMATION..................................................................... 21
FORWARD-LOOKING STATEMENTS.............................................................................. 23
MARKET PRICES AND DIVIDEND INFORMATION.................................................................. 24
THE MEETINGS............................................................................................ 25
MEETING OF RICHMOND COUNTY STOCKHOLDERS................................................................. 25
Date, Time and Place; Purpose of Meeting........................................................... 25
Record Date........................................................................................ 25
Proxies; Voting and Revocation of Proxies.......................................................... 25
Vote Required; Principal Stockholders.............................................................. 27
MEETING OF BAYONNE STOCKHOLDERS......................................................................... 28
Date, Time and Place; Purpose of Meeting........................................................... 28
Record Date........................................................................................ 28
Proxies; Voting and Revocation of Proxies.......................................................... 28
Vote Required; Principal Stockholders.............................................................. 29
BENEFICIAL OWNERSHIP OF RICHMOND COUNTY COMMON STOCK.................................................... 31
Principal Security Ownership....................................................................... 31
Directors and Executive Officers................................................................... 32
BENEFICIAL OWNERSHIP OF BAYONNE COMMON STOCK............................................................ 33
Principal Security Ownership....................................................................... 33
Directors and Executive Officers................................................................... 34
THE BAYONNE MERGER...................................................................................... 35
General............................................................................................ 35
Background of the Bayonne Merger................................................................... 35
Recommendation of the Richmond County Board; Richmond County's Reasons
for the Merger................................................................................ 38
Opinion of Richmond County's Financial Advisor..................................................... 39
Stock Trading Analysis........................................................................ 41
Contribution Analysis......................................................................... 41
Pro Forma Merger Analysis..................................................................... 41
Analysis of Selected Acquisition Transactions................................................. 42
Analysis of Selected Publicly Traded Companies................................................ 42
Evaluation of Amended and Restated Agreement and Plan of Merger............................... 44
Recommendation of the Bayonne Board; Bayonne's Reasons for the Merger.............................. 45
</TABLE>
<PAGE>
<TABLE>
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Opinion of Bayonne's Financial Advisor............................................................. 47
Exchange of Bayonne Shares......................................................................... 52
Procedures for Exchange of Certificates............................................................ 54
Richmond County............................................................................... 54
Bayonne....................................................................................... 54
Interests of Directors and Officers in the Bayonne Merger that are Different
from Your Interests........................................................................... 55
Existing Employment, Change in Control and Consulting Agreements.............................. 55
Vesting of Restricted Stock................................................................... 55
Establishment of Divisional Board............................................................. 55
Appointment to Richmond County Board of Directors............................................. 55
New Employment Agreements..................................................................... 55
Bayonne Stock Options......................................................................... 56
Indemnification............................................................................... 56
Management and Operations Following the Bayonne Merger............................................. 56
Employee Matters................................................................................... 57
Conditions to the Bayonne Merger................................................................... 58
Regulatory Approvals Needed to Complete the Bayonne Merger......................................... 63
Conduct of Business Pending the Bayonne Merger..................................................... 64
Representations and Warranties..................................................................... 68
Acquisition Proposals.............................................................................. 69
Waiver and Amendment; Termination.................................................................. 70
Price-Based Termination............................................................................ 72
Nasdaq National Market Listing..................................................................... 73
Anticipated Accounting Treatment................................................................... 73
Federal Income Tax Consequences of the Bayonne Merger.............................................. 73
Resales of Richmond County Common Stock............................................................ 74
No Appraisal Rights................................................................................ 75
Expenses........................................................................................... 75
Bayonne Effective Time............................................................................. 75
CERTAIN RELATED TRANSACTIONS............................................................................ 76
Bayonne Merger Stock Option Agreement.............................................................. 76
Effect of the Bayonne Merger Stock Option Agreements.......................................... 78
Bayonne Bank Merger Agreement...................................................................... 78
THE IRONBOUND MERGER.................................................................................... 79
REGULATION AND SUPERVISION.............................................................................. 79
General............................................................................................ 79
New York State Law................................................................................. 79
FDIC Regulations................................................................................... 81
Capital Requirements.......................................................................... 81
Standards for Safety and Soundness............................................................ 82
Real Estate Lending Standards................................................................. 82
Dividend Limitations.......................................................................... 82
Investment Activities.............................................................................. 83
Transactions with Affiliates....................................................................... 84
Enforcement........................................................................................ 85
Insurance of Deposit Accounts...................................................................... 85
</TABLE>
<PAGE>
<TABLE>
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Payment of FICO Bonds.............................................................................. 86
Federal Reserve System............................................................................. 86
Community Reinvestment Act......................................................................... 86
New York State Regulation..................................................................... 86
Federal Regulation............................................................................ 87
Holding Company Regulation......................................................................... 87
Federal Regulation............................................................................ 87
New York State Holding Company Regulation..................................................... 88
Interstate Banking and Branching................................................................... 89
DESCRIPTION OF RICHMOND COUNTY CAPITAL STOCK............................................................ 90
General............................................................................................ 90
Common Stock....................................................................................... 90
Preferred Stock.................................................................................... 91
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS............................................................ 91
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS............................................................................... 92
ADDITIONAL MATTERS TO BE CONSIDERED AT THE BAYONNE MEETING.............................................. 100
Election of Directors.............................................................................. 100
Information with Respect to the Nominees, Continuing Directors and Executive
Officers of Bayonne........................................................................... 100
Compensation Committee Interlocks and Insider Participation................................... 102
Directors' Compensation............................................................................ 102
Directors' Fees............................................................................... 102
Consulting Agreement.......................................................................... 102
Incentive Plan................................................................................ 102
Executive Compensation............................................................................. 103
Compensation Committee Report on Executive Compensation....................................... 103
Compensation Policies and Procedures.......................................................... 103
Base Salary................................................................................... 104
Annual Incentives............................................................................. 104
Stock-Based Compensation...................................................................... 105
Bayonne 1995 Stock Option Plan................................................................ 105
Bayonne 1995 RRP.............................................................................. 105
Bayonne Incentive Plan........................................................................ 105
Chief Executive Officer....................................................................... 106
Stock Performance Graph............................................................................ 108
Summary Compensation Table......................................................................... 109
Employment Agreements.............................................................................. 110
Change in Control Agreements....................................................................... 111
Retirement Plan.................................................................................... 111
Supplemental Executive Retirement Income-Deferred Compensation
Agreements............................................................................... 112
Option Exercises and Year-End Value................................................................ 114
Transactions With Certain Related Persons.......................................................... 114
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS..................................................... 115
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ADDITIONAL INFORMATION.................................................................................. 115
Stockholder Proposals.............................................................................. 115
Notice of Business to be Conducted at a Bayonne Meeting............................................ 115
LEGAL MATTERS........................................................................................... 116
EXPERTS................................................................................................. 116
STOCKHOLDER PROPOSALS................................................................................... 116
INFORMATION NOT REQUIRED IN PROSPECTUS.................................................................. II-1
SIGNATURES.............................................................................................. II-8
EXHIBIT INDEX
</TABLE>
ANNEX A Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc.
ANNEX B Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp.
ANNEX C Opinion of Tucker Anthony Incorporated.
ANNEX D Opinion of Sandler O'Neill & Partners, L.P.
<PAGE>
SUMMARY
This brief summary highlights selected information from the Joint Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. You should carefully read the entire Join Proxy
Statement/Prospectus and the other documents to which this document refers you
to fully understand the merger. See "Where You Can Find More Information" on
page __. We have included page references parenthetically to direct you to a
more complete description of the topics presented in this summary.
THE COMPANIES (PAGE __)
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
Richmond County is a savings and loan holding company organized under the laws
of the State of Delaware in 1997. We operate Richmond County Savings Bank,
which has 14 banking offices in the New York City Borough of Staten Island, one
banking office in the New York City Borough of Brooklyn, and one multi-family
loan processing center in Jericho, Long Island. At September 30, 1998, Richmond
County had total assets of $1.7 billion, deposits of $953.5 million and
stockholders' equity of $329.8 million.
BAYONNE BANCSHARES, INC.
568 Broadway
Bayonne, New Jersey 07002
(201) 437-1000
Bayonne is a savings and loan holding company organized under the laws of the
State of Delaware in 1997. We operate First Savings Bank of New Jersey, SLA,
which has four banking offices and one financial center in Bayonne, New Jersey.
At September 30, 1998, Bayonne had total assets of $672.7 million, deposits of
$420.7 million and stockholders' equity of $95.2 million.
THE STOCKHOLDERS' MEETINGS (PAGE __)
Richmond County Stockholders. The Richmond County special meeting will be held
on ________, ________, 199__ at _____ .m., local time, at the ____________,
______________. At the Richmond County special meeting, you will be asked:
1. to approve the merger of our company with Bayonne Bancshares, Inc.
2. to act on any other items that may be submitted to a vote at the
meeting.
Bayonne Stockholders. The Bayonne Bancshares, Inc. annual meeting will be held
on ____________, at ___ .m., local time, at ________________, ______________.
At the Bayonne annual meeting, you will be asked:
1. to approve the merger of our company with Richmond County;
2. to elect Patrick F.X. Nilan and Joseph L. Wisniewski to the board of
directors of Bayonne for a term of three years;
3. to ratify the appointment by the board of directors of KPMG Peat Marwick
LLP as independent auditors of Bayonne Bancshares, Inc.; and
4. to act on any other items that may be submitted to a vote at the annual
meeting.
RECORD DATE; VOTE REQUIRED (PAGES _ AND _)
Richmond County Stockholders. You can vote at the meeting of Richmond County
stockholders if you owned Richmond County common stock at the close of business
on _______, 199_. You can cast one vote for each share of Richmond County
common stock that you owned at that time. In order to approve the merger, the
holders of a majority of the shares of Richmond County's common stock
1
<PAGE>
outstanding must vote in its favor. You can vote your shares by telephone, by
attending the Richmond County meeting and voting in person or you can mark the
enclosed proxy card with your vote, sign it and mail it in the enclosed return
envelope. We have printed additional instructions on how to vote by telephone
on the proxy card. You can revoke your proxy as late as the date of the meeting
either by sending in a new proxy changing your vote by telephone or by attending
the meeting and voting in person.
Bayonne Stockholders. You can vote at the meeting of Bayonne stockholders if
you owned Bayonne common stock at the close of business on ______, 199__. You
will be able to cast one vote for each share of Bayonne common stock you owned
at that time. In order to approve the merger, the holders of a majority of the
shares of Bayonne common stock outstanding must vote in its favor. You can vote
your shares by telephone, by attending the Bayonne meeting and voting in person,
or by marking the enclosed proxy card with your vote, signing it and mailing it
in the enclosed return envelope. We have printed additional instructions on how
to vote by telephone on the proxy card. You can revoke your proxy as late as
the date of the meeting either by sending in a new proxy, changing your vote by
telephone, or by attending the meeting and voting in person.
OUR REASONS FOR THE MERGER (PAGES __ AND __)
Our companies are proposing to merge because we believe that by combining them
we can create a stronger and more diversified company that will provide
significant benefits to our stockholders and customers alike. We believe that
by bringing our customers and banking products together, we can do a better job
of increasing our combined revenues than we could if we did not merge. We
believe that the merger will strengthen our position as a competitor in the
financial services business, which is rapidly changing and growing more
competitive. While no assurances can be made, we expect to achieve cost savings
and additional revenue opportunities in the merger that should have a beneficial
effect on our earnings per share. To review our reasons for the merger in
greater detail, as well as how we came to agree on the merger, please see pages
__ through __.
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGES __ AND __)
Richmond County Stockholders. The board of directors of Richmond County
believes that the merger is fair to you and in your best interests, and
unanimously recommends that you vote "FOR" the proposal to approve the
merger.
Bayonne Stockholders. The board of directors of Bayonne believes that the
merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve the merger.
THE BAYONNE MERGER (PAGE __)
We have attached the Agreement and Plan of Merger to this document as ANNEX
A. Please read the Agreement. It is the legal document that governs the
merger.
GENERAL
We propose a combination in which Bayonne will merge with and into Richmond
County. The resulting company will be named "Richmond County Financial Corp."
We hope to complete this merger by the first quarter of 1999.
EXCHANGE OF SHARES (PAGE __)
Bayonne Stockholders. As a Bayonne stockholder, each of your shares of Bayonne
common stock will automatically become exchangeable for 1.05 shares of Richmond
County common stock. The total number of shares you receive will therefore be
equal to 1.05 times the number of shares of Bayonne common stock you own.
Richmond County will not issue fractional shares. Instead, you will receive the
value of any fractional share in cash. Following the merger, you will be
entitled to exchange your shares of Bayonne common stock for shares of Richmond
County common stock by sending your Bayonne common stock
2
<PAGE>
share certificates and a form that we will send to you to ___________________,
which will then exchange them for shares of Richmond County common stock. For
more information on how this exchange procedure works, see "Exchange of Bayonne
Shares" on page __ of this document. For example, if you owned ten shares of
Bayonne common stock, after the merger you will send in the letter of
transmittal and your old Bayonne certificates and in exchange you will receive
ten shares of the Richmond County common stock and a check for the market value
of one-half of a share of Richmond County common stock.
Shares of Richmond County and Bayonne are quoted on the National Market System
of the Nasdaq Stock Market. On October 13, 1998, the last trading day before we
announced the merger, Richmond County common stock closed at $12.25 per share
and Bayonne common stock closed at $12.00 per share. On _______, Richmond
County common stock closed at $_____ per share and Bayonne common stock closed
at $_____ per share.
Based on the exchange ratio in the merger, which is 1.05, the market value of
the consideration that Bayonne stockholders will receive in the merger for each
share of Bayonne common stock would be $_____ based on Richmond County's closing
stock price on ________, 199_ , and $_____ based on Richmond County's closing
stock price on _____________. Of course, the market price of Richmond County
will fluctuate prior to the merger, while the exchange ratio is fixed. You
should obtain current stock price quotations for Richmond County common stock
and Bayonne common stock. These quotations are available from your stock
broker, in major newspapers such as The Wall Street Journal and on the Internet.
OPINIONS OF FINANCIAL ADVISORS (PAGES ___ AND ___)
Richmond County. Tucker Anthony Incorporated has delivered to the Richmond
board of directors its opinion that, as of the date of this document, the
Bayonne exchange ratio is fair to Richmond County from a financial point of
view. We have attached the opinion to this document as ANNEX C. You should
read it completely to understand the assumptions made, matters considered and
limitations of the review made by Tucker Anthony Incorporated in providing this
opinion.
Bayonne. Sandler O'Neill & Partners, L.P. has delivered to the Bayonne board
of directors its opinion that, as of the date of this document, the Bayonne
exchange ratio is fair to the holders of Bayonne common stock from a financial
point of view. We have attached this opinion to this document as ANNEX D. You
should read it completely to understand the procedures followed, assumptions
made, matters considered, qualifications and limitations on the review made by
Sandler O'Neill & Partners, L.P. in providing this opinion.
STOCK OPTIONS (PAGE __)
Bayonne Stock Options. Upon completion of the merger, each option to acquire
Bayonne common stock granted under Bayonne stock option plans that is
outstanding and unexercised immediately before completing the merger will become
an option to purchase Richmond County common stock. The option will be governed
by the terms of Richmond County stock option plan. The number of shares of
Richmond County common stock subject to Bayonne stock options, as well as the
exercise price of those stock options, will be adjusted to account for the
exchange ratio in the merger.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE __)
After the merger, the Richmond County board of directors will be made up of the
directors on the board immediately before the merger, plus Patrick F.X. Nilan.
Mr. Nilan is currently Chairman of the Bayonne board of directors. Mr. Nilan
will serve on the Richmond County board until the year 2000. The remainder of
Bayonne's board of directors willing to serve will serve on an advisory board
after the merger.
3
<PAGE>
WHAT WE NEED TO DO TO COMPLETE THE MERGER (PAGE __)
The completion of the merger depends on a number of conditions being met. In
addition to the parties complying with the Agreement, these include:
1. Approval of the Agreement by both the Richmond County stockholders and the
Bayonne stockholders.
2. Approval of the Agreement by certain federal and state regulatory
authorities.
3. Receipt by Richmond County and Bayonne of a legal opinion from their
respective tax counsel that, for United States federal income tax purposes,
Bayonne stockholders who exchange their shares for shares of Richmond
County common stock, will not recognize any gain or loss as a result of the
merger, except in connection with the payment of cash instead of fractional
shares. These opinions will be subject to various limitations and we
recommend that you read the fuller description of tax consequences provided
in this document beginning at page __.
4. Approval by the National Market System of the Nasdaq Stock Market of the
listing of the shares of Richmond County common stock to be issued in
exchange for Bayonne's common stock.
5. The absence of any injunction or legal restraint blocking the merger or
government proceedings trying to block the merger.
Where the law permits, Richmond County or Bayonne could decide to complete the
merger even though one or more of these conditions has not been met. We cannot
be certain when (or if) the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
TERMINATION OF THE AGREEMENT; EXPENSES (PAGE __)
We can agree at any time to terminate the Agreement without completing the
merger, even if the stockholders of both our companies have approved it. Also,
either of us can decide, without the consent of the other, to terminate the
Agreement if:
1. Any government agency denies an approval we need to complete the merger,
and that denial has become final and nonappealable, or if any governmental
entity issues a final, nonappealable order blocking the merger.
2. The merger has not been completed by April 30, 1999, unless the failure to
complete the merger by that time is due to the failure to obtain a
governmental or regulatory approval, consent or waiver, then by July 31,
1999.
3. One party breaches the Agreement (and does not correct the breach promptly)
in a way that would entitle the terminating party to do so, as long as the
party seeking to terminate the Agreement has not materially breached the
Agreement.
4. If Richmond County's and/or Bayonne's stockholders do not approve the
merger.
Bayonne can also terminate the Agreement if the price of Richmond County common
stock is less than $15.41, and if the price has declined by more than 15%
compared to a select group of its peers during a period prior to the anticipated
closing. If Bayonne elects to terminate on this basis, Richmond County may
preclude termination by increasing the consideration to be received by Bayonne
stockholders.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses, except that we will evenly divide the costs and expenses that we have
incurred in printing and mailing this document and the registration fees
4
<PAGE>
that we will have to pay to the Securities and Exchange Commission.
WAIVER AND AMENDMENT (PAGE __)
We can agree to amend the Agreement, and each of us can waive our right to
require the other party to adhere to the terms and conditions of the Agreement,
where the law allows. However, we may not do so after our stockholders approve
the Agreement if the amendment or waiver reduces or changes the consideration
that will be received by Bayonne stockholders unless the affected stockholders
approve the amendment or waiver.
ACCOUNTING TREATMENT (PAGE __)
We expect the merger to qualify as a "purchase" accounting. This means that,
for accounting and financial reporting purposes, we will treat our companies as
one company beginning as of the date of the combination. Additionally, under
this method of accounting, Richmond County will record the fair market value of
Bayonne's assets, less liabilities, on its financial statements.
REGULATORY APPROVALS (PAGE __)
The merger must be approved by the Federal Deposit Insurance Corporation, the
Office of Thrift Supervision, the Superintendent of Banks of New York State, and
the Commissioner of the New Jersey Department of Banking and Insurance.
We have filed, or soon will file, all of the required applications or notices
with these regulatory authorities.
As of the date of this document, we have not yet received the required
approvals. While we do not know of any reason why we would not be able to
obtain the necessary approvals in a timely manner, we cannot be certain when or
if we will get them.
BAYONNE MERGER STOCK OPTION AGREEMENT (PAGE __)
Bayonne, at the request of Richmond County, entered into a stock option
agreement granting Richmond County an option to purchase Bayonne common stock.
Bayonne granted the option to increase the likelihood that we would complete the
merger. The option agreement could discourage other companies from trying or
proposing to combine with Bayonne before we complete the merger.
The most shares that can be purchased if the option is exercised is 19.9% of the
total number of outstanding shares of Bayonne common stock. The purchase price
per share under the option agreement is $15.50 per share.
Richmond County cannot exercise its option unless certain events occur. These
events are business combination or acquisition transactions relating to Bayonne
and certain related activities (other than the merger we are proposing in this
document) such as a merger or the sale of a substantial amount of assets or
stock. We do not know of any event that has occurred as of the date of this
document that would permit either of us to exercise our option.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT FROM YOUR
INTERESTS (PAGE __)
Some of our directors and officers have interests in the merger that are
different from, or in addition to, their interests as stockholders in our
companies. These include provisions in the Agreement relating to the payout of
cash benefits under existing employment agreements, and the acceleration of
benefits and the vesting of benefits under employee benefit plans. Mr. Michael
A. Nilan (currently the President, Chief Executive Officer and a director of
Bayonne) will become an officer of Richmond County Savings Bank. In addition,
Richmond County has agreed to increase its board of directors by one member and
to appoint Mr. Patrick F.X. Nilan to fill that seat until the year 2000.
Additionally, Mr. Patrick F.X. Nilan's consulting agreement with Bayonne will
also be terminated after the merger, in return for which he will receive
$100,000.
5
<PAGE>
Also, following the merger, Richmond County will purchase directors' and
officers' insurance for the officers and directors of Bayonne and will indemnify
directors and officers of Bayonne for events occurring before the merger,
including events that are related to the merger. This indemnity and insurance
will be in addition to the indemnification and insurance to which the officers
and directors of Richmond County entitled while acting in that capacity at and
after the merger. Additional interests of some of our directors and executive
officers are described under "Management and Operations After the Merger" at
page __ of this document.
The members of our boards of directors knew about these additional interests,
and considered them, when they approved the Agreement and the merger.
APPRAISAL RIGHTS (PAGE __)
Richmond County Stockholders. Delaware law does not provide you with
dissenters' appraisal rights in the merger.
Bayonne Stockholders. Delaware law does not provide you with dissenters'
appraisal rights in the merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGE __)
Bayonne Stockholders. We expect that for United States federal income tax
purposes, your exchange of shares of Bayonne common stock for shares of Richmond
County common stock generally will not cause you to recognize any gain or loss.
You will, however, have to recognize gain in connection with any cash received
instead of fractional shares.
Our obligation to complete the merger depends on our receipt of legal opinions
about the federal income tax treatment of our companies and our stockholders.
These opinions will not bind the Internal Revenue Service, which could take a
different view. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE __)
After the merger is completed, Bayonne's stockholders automatically will become
stockholders of Richmond County. Their rights as stockholders of Richmond
County will be governed by Delaware General Corporation Law and by Richmond
County's Certificate of Incorporation and Bylaws. The rights of stockholders of
Richmond County, as defined in its Certificate of Incorporation and Bylaws, do
not materially differ from the rights of the stockholders of Bayonne.
6
<PAGE>
THE IRONBOUND MERGER (PAGE__)
In a separate and unrelated transaction, Richmond County is also acquiring
Ironbound Bankcorp, NJ. Ironbound is a New Jersey bank holding company. It
operates Ironbound Bank. Ironbound Bank is a commercial bank that operates three
branches in the New Jersey counties of Union and Essex. At September 30, 1998,
Ironbound had total assets of $115.3 million, deposits of $102.8 million, and
stockholders' equity of $11.5 million. The Ironbound Merger does not require the
approval of the Richmond County or Bayonne stockholders.
7
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF
RICHMOND COUNTY AND BAYONNE
(Unaudited)
The following tables show summarized historical financial data for each of
us.
The information in the following tables is based on historical financial
information that we have presented in our prior Securities and Exchange
Commission filings. All of the summary financial information we provide in the
following tables should be read in connection with this historical financial
information and with the more detailed financial information we provide in this
document, which you can find beginning at page __. The historical financial
statements of Richmond County and Bayonne are incorporated by reference into
this document. See "WHERE YOU CAN FIND MORE INFORMATION."
Because Richmond County's fiscal year ends on June 30 and Bayonne's fiscal
year ends on March 31, the financial data for Bayonne for the three months ended
September 30 have been presented to coincide with the fiscal reporting period
for Richmond County. Following the Bayonne Merger, the combined company's
fiscal year, like that of Richmond County, will end on June 30.
Richmond County was organized under Delaware law in September 1997.
Therefore, all financial information contained herein for periods prior to
December 31, 1997 relates solely to Richmond County Savings Bank. Richmond
County's audited annual historical financial statements were audited by Ernst &
Young LLP, independent certified public accountants, and Bayonne's audited
annual historical financial statements were audited by KPMG Peat Marwick LLP,
independent certified public accountants.
8
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
------------------------ ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL CONDITION
DATA:
Total assets............................. $1,692,615 $1,023,780 $1,595,844 $993,370 $914,483 $851,751 $825,663
Federal funds sold....................... 4,200 4,000 26,000 6,000 20,000 18,000 17,500
Debt and equity securities, net /(1)/:
Available for sale.................. 237,956 40,764 238,890 19,706 21,659 607 --
Held to maturity.................... -- 187,469 -- 205,201 307,700 287,879 328,779
Mortgage-backed and mortgage-related
securities, net /(1)/:
Available for sale.................. 593,714 76,286 604,304 27,398 1,394 1,683 --
Held to maturity.................... -- 147,737 -- 185,122 80,284 92,404 74,961
Loans receivable, net /(2)/.............. 774,558 515,516 644,469 496,258 419,270 392,409 355,850
Federal Home Loan Bank of................ 20,375 -- 15,550 -- -- -- --
New York stock
Intangible assets........................ 1,130 1,447 1,209 1,527 1,802 2,115 2,428
Deposits................................. 953,506 887,489 950,808 885,818 819,216 766,231 750,216
Borrowings............................... 400,000 25,639 306,000 -- -- -- --
Stockholders' equity..................... 329,826 104,253 328,595 100,865 89,901 81,166 73,550
SELECTED OPERATING DATA:
Interest income.......................... 27,662 17,754 86,754 65,781 59,063 54,321 51,608
Interest expense......................... 12,599 7,596 37,512 27,707 26,254 22,456 20,207
---------- ---------- ---------- -------- -------- -------- --------
Net interest income before
provision.......................... 15,063 10,158 49,242 38,074 32,809 31,865 31,401
for possible loan losses
Provision for possible loan losses....... 750 450 2,200 1,080 1,600 600 859
---------- ---------- ---------- -------- -------- -------- --------
Net interest income after provision
for possible loan losses.......... 14,313 9,708 47,042 36,994 31,209 31,265 30,542
---------- ---------- ---------- -------- -------- -------- --------
Non-interest income...................... 1,844 817 3,601 2,861 2,827 2,659 2,961
Non-interest expense /(3)/............... 7,632 4,955 44,046 19,667 18,503 18,139 17,287
---------- ---------- ---------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of changes in
accounting principles.................. 8,525 5,570 6,597 20,188 15,533 15,785 16,216
Provision for income taxes............... 3,171 2,717 2,071 9,463 6,803 6,919 7,305
---------- ---------- ---------- -------- -------- -------- --------
Income before cumulative effect of
changes in accounting principles....... 5,354 2,853 4,526 10,725 8,730 8,866 8,911
---------- ---------- ---------- -------- -------- -------- --------
Cumulative effect of changes in
accounting principles /(4)/............ -- -- -- -- -- (1,316) 1,232
---------- ---------- ---------- -------- -------- -------- --------
Net income............................... $ 5,354 $ 2,853 $ 4,526 $ 10,725 $ 8,730 $ 7,550 $ 10,143
========== ========== ========== ======== ======== ======== ========
Basic and diluted income (loss)
per share since Conversion /(5)/......... $.22 N/A $(0.16) N/A N/A N/A N/A
========== ==========
</TABLE>
(footnotes on next page)
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
------------------------ ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL RATIOS
AND OTHER DATA /(6)/:
Performance Ratios /(7)/:
Return on average assets............... 1.32% 1.13% 1.26% 1.13% 0.99% 0.91% 1.27%
Return on average stockholders' equity. 6.48 10.96 8.36 11.25 10.25 9.80 14.97
Average stockholders' equity to
average assets....................... 20.37 10.27 15.05 10.07 9.70 9.29 8.50
Stockholders' equity to total assets
at end of period..................... 19.49 10.18 20.59 10.15 9.83 9.53 8.91
Net interest rate spread /(8)/......... 2.81 3.60 3.29 3.64 3.48 3.66 3.85
Net interest margin /(9)/.............. 3.87 4.22 4.10 4.22 3.96 4.06 4.16
Average interest-earning assets
to average interest-bearing liabilities 132.95 119.74 126.04 118.94 114.99 113.96 111.64
Total non-interest expense to
average assets /(10)/................ 1.88 1.94 1.93 1.99 2.07 2.15 2.13
Net interest income to operating
expenses............................ 197.37 205.01 201.09 193.59 177.32 175.67 181.65
Efficiency ratio /(11)/................ 44.68 44.43 45.75 46.08 51.04 51.63 49.40
Asset Quality Ratios:
Non-performing loans as a percent
of loans, net........................ 0.49% 0.84% 0.85% 0.78% 0.91% 0.76% 1.51%
Non-performing assets as a percent
of total assets...................... 0.24 0.50 0.37 0.46 0.48 0.39 0.71
Allowance for loan losses
as a percent of loans receivable, net 1.01 1.13 1.12 1.10 1.14 0.83 0.87
Allowance for loan losses as a percent
of total non-performing loans........ 208.59 135.08 131.50 141.09 125.55 109.35 57.64
Regulatory Capital Ratios and Other Data:
Leverage capital....................... 12.38% 9.64% 12.81% 9.54% 9.65% 9.25% 8.60%
Total risk-based capital............... 22.49 18.52 24.81 18.91 19.20 18.33 16.23
Tier I capital......................... 21.60 17.63 23.87 17.98 18.33 17.92 15.71
Number of customer facilities............ 14 13 13 13 13 13 13
</TABLE>
________________________
(1) Richmond County Savings Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities," as of July 1, 1994, and
reclassified securities having a market value of $26 million from its held
to maturity portfolio to its available for sale portfolio in November 1995,
pursuant to Financial Accounting Standards Board ("FASB") special report or
implementation of SFAS No 115. In February 1998, Richmond County
transferred its entire securities held to maturity portfolio to its
securities available for sale portfolio as part of a balance sheet
restructuring initiative implemented at that time, primarily in connection
with a reassessment by Richmond County of its asset/liability management
strategy.
(2) Loans receivable, net, consist of gross loans receivable, less unamortized
discounts, plus deferred loan costs, less deferred loan fees and the
allowance for loan losses. The allowance for loan losses at September 30,
1998, 1997, and June 30, 1998, 1997, 1996, 1995 and 1994 were $7.9 million,
$5.9 million, $7.3 million, $5.5 million, $4.8 million, $3.3 million and
$3.1 million, respectively. Loan receivable, net, at June 30, 1996,
includes $1.2 million of loans held for sale.
(3) Includes the one-time non-recurring charge of $19.6 million ($11.2 million,
net of tax) for funding of the Richmond County Savings Foundation (the
"Foundation") at the time of Richmond County Savings Bank's mutual-to-stock
conversion (the "Conversion").
(4) Cumulative effect of changes in accounting principles reflects a charge,
net of tax, of $1.3 million for fiscal 1995, resulting from the adoption of
SFAS No. 106 ("SFAS No. 106"), "Employer's Accounting For Post-Retirement
Benefits Other than Pensions," and a credit to earnings of $1.2 million for
fiscal 1994, resulting from the adoption of SFAS No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes."
(5) Pro forma earnings per share for fiscal year 1998, calculated as if
Richmond County Savings Bank had converted to stock form as of July 1,
1997, was $0.19.
(6) Asset Quality Ratios and Regulatory Capital Ratios are end of period
ratios. With the exception of end of period ratios and fiscal year 1998,
which is based on daily average balances, all ratios are based upon average
balances during the indicated period. Averages for the periods ended fiscal
1997, 1996, 1995 and 1994, utilize average month-end balances.
(7) All performance ratios for the year ended June 30, 1998, exclude the one-
time non-recurring charge of $19.6 million ($11.2 million net of tax) for
the funding of the Foundation at the time of the Conversion.
(8) The net interest margin spread represents the difference between the
weighted average yield on average interest-earning assets and the weighted
average cost of average interest-bearing liabilities.
(9) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(10) Total non-interest expense excludes the effect of amortization of goodwill.
The 1997 ratio excludes the one-time special assessment of $493,000 to
recapitalize the Savings Association Insurance Fund ("SAIF"). Including
the effects of the amortization of goodwill and funding of the Foundation,
total non-interest expense to average assets for the year ended June 30,
1998 would be 3.52%.
(11) The efficiency ratio represents the ratio of non-interest expense,
excluding the effect of amortization of goodwill and the SAIF special
assessment, divided by the sum of net interest income and non-interest
income. Including the effects of the amortization of goodwill and the
contribution to the Foundation, the efficiency ratio for the year ended
June 30, 1998 would be 83.35%.
10
<PAGE>
BAYONNE BANCSHARES, INC.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, MAY 31,
-------------------- -------------------------------------------- --------
1998 1997 1998 1997 1996 1995 1994(4)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL CONDITION DATA:
Total assets...................................$672,657 $609,053 $646,058 $577,004 $651,945 $512,126 $547,550
Cash and cash equivalents...................... 3,047 14,221 16,617 15,472 11,791 6,111 47,839
Loan receivable, net:
Real estate................................. 278,802 203,262 208,723 207,262 198,658 197,240 172,552
Consumer.................................... 29,987 28,558 26,742 28,362 25,370 21,314 16,428
-------- -------- -------- -------- -------- -------- --------
Total loans receivable, net/(1)/....... 308,789 231,820 235,465 235,624 224,028 218,554 188,980
U.S. Government and agency obligations,........ 88,208 76,931 77,446 76,489 101,729 148,062 146,806
net of valuation allowance /(2)/
Mortgage securities, net/(3)/.................. 244,179 262,646 274,652 222,980 289,848 117,205 141,271
Deposits....................................... 420,749 432,131 423,545 444,139 445,424 444,380 471,681
Borrowed funds................................. 147,022 75,489 115,380 75,598 151,334 15,032 --
Stockholders' equity........................... 95,152 95,161 98,649 48,079 49,519 46,625 34,066
</TABLE>
_______________________
(1) Excludes loans to joint ventures of First Savings Bank of New Jersey, SLA
subsidiaries.
(2) At September 30, 1998 and 1997, March 31, 1998, 1997, 1996 and 1995, and May
31, 1994, $80.3 million, $61.1 million, $69.5 million, $67.6 million, $92.6
million, $64.3 million and $64.1 million of such securities, respectively,
net of valuation allowance, were classified as available for sale, and $7.9
million, $7.9 million, $7.9 million, $8.9 million, $8.9 million, $83.7
million and $82.7 million, respectively, of such securities were classified
as held to maturity.
(3) Includes mortgage-backed securities and mutual funds that invest primarily
in mortgage-backed securities, net of valuation allowance. At March 31,
1998, 1997, 1996 and 1995, and May 31, 1994, all such securities were
classified as available for sale.
(4) At the time of First Savings' reorganization into the mutual holding company
structure in 1995 (the "1995 MHC Reorganization"), First Savings Bank of New
Jersey, SLA changed its fiscal year end from May 31, to March 31.
(5) At June 30, 1998, Bayonne had total assets of $700.0 million, deposits of
$422.0 million and stockholders' equity of $96.0 million. Net income for
the three months ended June 30, 1998 was $1.1 million, compared to $838,000
for the three months ended June 30, 1997.
11
<PAGE>
<TABLE>
<CAPTION>
TEN
MONTHS YEAR
THREE MONTHS ENDED ENDED ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31, MARCH 31, MAY 31,
------- ------- ---------------------------------------------- -------
1998 1997 1998 1997 1996 1995/(1)/ 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED OPERATING DATA:
Total interest and dividend income...........$11,137 $10,293 $40,860 $41,126 $37,309 $28,431 $35,616
Total interest expense....................... 6,735 6,429 24,872 27,469 23,842 15,831 20,795
------- ------- ------- ------- ------- ------- -------
Net interest income /(8)/................... 4,402 3,864 15,988 13,657 13,467 12,600 14,821
Provision for loan losses /(8)/.............. 75 45 180 320 450 350 500
------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
loan losses /(8)/.......................... 4,327 3,819 15,808 13,337 13,017 12,250 14,321
------- ------- ------- ------- ------- ------- -------
Other income (loss):
Loan fees and service charges............... 69 63 238 294 307 285 428
Deposit fees................................ 159 147 611 576 327 256 305
Gain (loss) on sale of securities
available for sale, net/(2)/............... 197 (5) (5) (2,878) (2,217) (547) 262
Income from subsidiary...................... 69 26 204 168 251 85 18
Gain (loss) on sale of real estate
acquired in settlement of loans............ (8) (1) (9) (92) (7) -- 62
Other....................................... 52 53 304 136 126 49 705
------- ------- ------- ------- ------- ------- -------
Total other income (loss) /(8)/............ 538 283 1,343 (1,796) (1,213) 128 1,780
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Compensation and employee benefits.......... 1,588 1,476 5,619 7,184 5,821 4,674 4,735
Occupancy and equipment..................... 310 311 1,179 1,201 1,211 1,000 1,035
Data processing service expense.............. 210 207 821 707 683 488 585
SAIF assessment /(3)/....................... -- -- -- 2,895 -- -- --
Federal insurance premiums.................. 134 142 569 974 1,163 990 1,210
Other....................................... 526 428 1,982 1,641 1,937 1,799 1,951
------- ------- ------- ------- ------- ------- -------
Total operating expenses................... 2,768 2,564 10,170 14,602 10,815 8,951 9,516
------- ------- ------- ------- ------- ------- -------
Income/(loss) before income tax
expenses and cumulative effect of
accounting changes.......................... 2,097 1,538 6,981 (3,061) 989 3,427 6,585
Income tax expense........................... 776 569 2,602 154 374 1,236 2,247
------- ------- ------- ------- ------- ------- -------
Income/(loss) before cumulative effect of
accounting changes.......................... 1,321 969 4,379 (3,215) 615 2,191 4,338
Cumulative effect of accounting changes:
Income taxes................................ -- -- -- -- -- -- 400
Postretirement benefits..................... -- -- -- -- -- -- (1,216)
Investments................................. -- -- -- -- -- -- 471
------- ------- ------- ------- ------- ------- -------
Net income/(loss) /(8)/....................$ 1,321 $ 969 $ 4,379 $(3,215) $ 615 $ 2,191 $ 3,993
======= ======= ======= ======= ======= ======= =======
Basic earnings/(loss) per share.............. $0.15 $0.11 $0.49 $(0.37) $0.07 N/A(4) N/A/(4)/
======= ======= ======= ======= =======
Diluted earnings/(loss) per share............ $0.15 $0.11 $0.49 $(0.37) $0.07 N/A(4) N/A/(4)/
======= ======= ======= ======= =======
</TABLE>
(continued on next page)
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS TEN MONTHS
ENDED ENDED YEAR ENDED
SEPTEMBER 30, /(9)/ YEARS ENDED MARCH 31, MARCH 31, MAY 31,
------------ -------- -------------------------- ----------- ----------
1998 1997 1998 1997 1996 1995 1994
------------ -------- ------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance ratios:
Equity to assets at period end /(7)/................... 14.15% 15.62% 15.27% 8.33% 7.60% 9.10% 6.22%
Net interest rate spread (difference between average
yield on interest-earning assets and average cost of
interest-bearing liabilities) /(7)/................... 2.05 2.12 2.18 1.99 2.16 2.92 2.52
Net interest margin (net interest income as a
percentage of average interest-earning assets) /(7)/.. 2.66 2.63 2.72 2.28 2.48 3.12 2.71
Return on average assets (net income divided by
average total assets) /(7)/........................... 0.78 0.64 0.72 (0.52) 0.11 0.52 0.71
Return on average equity (net income divided by
average equity) /(7)/................................. 5.53 6.85 5.82 (6.56) 1.20 7.06 10.22
Dividend payout ratio /(5)/............................ 41.67% 38.64% 24.64% N/A/(4)/ 238.0% N/A/(4)/ N/A/(4)/
Stockholders' equity to average assets ratio (average
stockholders' equity divided by average
total assets)......................................... 14.04 9.30 12.39 7.90 9.08 7.30 6.92
Total other income to average assets /(7)/............. 0.32 0.19 0.22 (0.29) (0.21) 0.03 0.31
Total operating expenses to average assets /(6)(7)/.... 1.63 1.69 1.68 1.87 1.91 1.76 1.68
Net interest income to total operating expense /(6)/... 1.59x 1.51x 1.57x 1.18x 1.25x 1.41x 1.56x
Net interest income after provision for loan losses,
to total operating expense /(6)/...................... 1.56x 1.49x 1.55x 1.15x 1.20x 1.37x 1.51x
Average interest-earning assets to average
interest-bearing liabilities /(7)/.................... 1.15x 1.12x 1.13x 1.06x 1.07x 1.05x 1.05x
Asset quality ratios:
Loans 90 days or more past due to net loans............ 1.39% 2.77% 1.62% 2.38% 2.66% 2.55% 3.64%
Loans 90 days past due and other nonperforming
assets to total assets................................ 0.71% 1.05% 0.64% 1.08% 1.00% 1.29% 1.53%
Allowance for loan losses to loans 90 days
past due and other nonperforming assets............... 63.43% 50.56% 71.21% 50.66% 45.54% 40.62% 34.74%
Allowance for loan losses as a percent of net loans
receivable at end of period........................... 0.98% 1.40% 1.25% 1.34% 1.33% 1.22% 1.54%
Regulatory capital ratios:
Tangible capital /(7)/................................. 12.24% 11.99% 12.01% 8.99% 8.48% 10.83% 6.22%
Core capital /(7)/..................................... 12.24 11.99 12.01 8.99 8.48 10.83 6.22
Risk-based capital /(7)/............................... 27.30 34.67 33.85 25.31 26.10 32.21 20.61
Number of full-service offices.......................... 4 4 4 4 4 4 4
</TABLE>
_________________
(1) At the time of the 1995 MHC Reorganization, First Savings Bank of New
Jersey, SLA changed its fiscal year end from May 31 to March 31.
(2) The loss on securities available for sale in 1997 and 1996 resulted from the
sale of investment securities as part of First Savings Bank of New Jersey,
SLA restructuring of its investment portfolio.
(3) Reflects the SAIF Special Assessment of $2.9 million as of September 30,
1996.
(4) Not applicable.
(5) Aggregate dividends per share divided by net income per share.
(6) Total operating expense does not include income tax expense, the provision
for loan losses or the SAIF Special Assessment.
(7) At June 30, 1998 Bayonne had an equity to assets ratio of 13.10%, a net
interest rate spread ratio of 2.00%, a net interest rate margin ratio of
2.61%, a return on average assets ratio of .67%, a return on average equity
ratio of 4.56%, a total other income to assets ratio of .19, a total
operating expenses to average assets ratio of 1.64%, an average interest-
earning assets to average interest-bearing liabilities ratio of 1.15x, a
tangible capital ratio of 11.42%, a core capital ratio of 11.42% and a risk-
based capital ratio of 25.9%.
(8) Net interest income was $4.2 million for the quarter ended June 30, 1998
compared to $3.6 million for the comparable prior year quarter. Non-
interest income totalled $311,000 for the three months ended June 30, 1998,
compared to $398,000 for the quarter ended June 30, 1997. Total interest
expense was $6.4 million for the three months ended June 30, 1998, compared
to $6.3 million for the three months ended June 30, 1997. The provision for
loan losses totalled $50,000 for the three months ended June 30, 1998 as
compared to $45,000 for the prior year's three month period.
(9) Annualized where appropriate.
13
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL INFORMATION
The following unaudited pro forma combined basis selected financial
information combine Richmond County's historical results with Bayonne's
historical results as if the Bayonne Merger had become effective as of the dates
indicated in the case of the balance sheet information presented, and as if the
Bayonne Merger had become effective at the beginning of the periods indicated in
the case of the income statement information presented (which we refer to as
"pro forma" information). In addition, because the Bayonne Merger and the
Ironbound Merger are expected to be completed during the same time period, the
following pro forma tables reflect the Bayonne Merger and the Ironbound
---
Merger. The pro forma information in the tables assumes that the Bayonne Merger
and the Ironbound Merger are accounted for using the purchase method of
accounting.
The merger will be accounted for as a "purchase," which means that the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the time the companies are combined.
For a more detailed description of purchase accounting, see "THE BAYONNE MERGER
- -- Anticipated Accounting Treatment."
Because Richmond County's fiscal year ends on June 30, Bayonne's fiscal year
ends on March 31, and Ironbound Bankcorp, NJ's ends on December 31, the
financial data for Bayonne and Ironbound Bankcorp, NJ for the three months ended
September 30 have been presented to coincide with the fiscal reporting period
for Richmond County. Following the Bayonne Merger, the combined company's
fiscal year, like that of Richmond County, will end on June 30.
When reviewing these tables, you should also read the historical financial
statements, including their notes, of Richmond County and Bayonne. See "WHERE
YOU CAN FIND MORE INFORMATION" on page __ of this document. You should also read
the more detailed pro forma financial information, including their notes, that
are found on page ___ of this document.
This information is presented for informational purposes only. You should not
assume that Richmond County, Bayonne and Ironbound would have achieved the
combined pro forma results if they had actually been combined during the periods
shown.
There may be certain cost savings and/or revenue enhancements that will result
from the Bayonne Merger and the Ironbound Merger. Except as described in Note __
found on page __ of this document, the information furnished in these tables
does not reflect either the cost savings or the revenue enhancements.
14
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
OF RICHMOND COUNTY, IRONBOUND AND BAYONNE
<TABLE>
<CAPTION>
AT
SEPTEMBER 30,
-------------------
1998
-------------------
PRO FORMA CONDENSED COMBINED BALANCE SHEET
<S> <C>
Total assets (end of period................. $2,522,691
Long term borrowings (end of period)........ 548,582
Total stockholders' equity (end of period).. 478,377
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR
THREE MONTHS THE YEAR
ENDED ENDED
SEPTEMBER 30, JUNE 30,
------------------- --------------
1998 1998
------------------- --------------
PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME
<S> <C> <C>
Net interest income after provision for
loan losses................................. $19,809 $67,597
Net income.................................. 6,378 8,049/(1)/
Earnings from per common share:
Basic..................................... 0.18 0.23/(1)/
Diluted................................... 0.18 0.23/(1)/
Cash dividends declared per common share.. $0.068 $0.127
</TABLE>
____________________
(1) Includes a one-time non-recurring charge of $19.6 million ($11.2
million, net of tax) for funding of the Foundation at the time of the
Conversion.
15
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth information about our earnings per share,
dividends per share and book value per share, and similar information reflecting
the Bayonne Merger. In addition, we have included similar information relating
to the Ironbound Merger. The information set forth below is only a summary and
you should read it together with the historical financial statements and related
notes contained in the annual reports and other information that Richmond County
and Bayonne have either attached to this document or have filed previously with
the SEC. See "WHERE YOU CAN FIND MORE INFORMATION" on page __.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
1998 1998
-------------------------------------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE /(1)/:
Richmond County............................................................. $ 0.22 $ (0.16) /(4)/
Bayonne..................................................................... 0.15 0.49
Richmond County pro forma (with Bayonne only)............................... 0.18 0.21
Bayonne pro forma equivalent................................................ 0.19 0.22
Bayonne pro forma equivalent with Ironbound................................. 0.19 0.24
DILUTED EARNINGS (LOSS) PER SHARE /(2)/:
Richmond County............................................................. $ 0.22 $ (0.16) /(4)/
Bayonne..................................................................... 0.15 0.49
Richmond County pro forma (with Bayonne only)............................... 0.18 0.22
Bayonne pro forma equivalent................................................ 0.19 0.23
Bayonne pro forma equivalent with Ironbound................................. 0.19 0.24
CASH DIVIDENDS DECLARED PER SHARE /(3)/:
Richmond County............................................................. $0.070 $ 0.110
Bayonne..................................................................... 0.063 0.170
Richmond County pro forma (with Bayonne only)............................... 0.070 0.110
Bayonne pro forma equivalent................................................ 0.074 0.116
Bayonne pro forma equivalent with Ironbound................................. 0.074 0.116
BOOK VALUE PER SHARE AT PERIOD END /(1)/:
Richmond County............................................................. $12.48 $ 12.44
Bayonne..................................................................... 10.43 10.85
Richmond County pro forma (with Bayonne only)............................... 12.58 N/A
Bayonne pro forma equivalent................................................ 13.21 N/A
Bayonne pro forma equivalent with Ironbound................................. 12.78 N/A
TANGIBLE BOOK VALUE PER SHARE AT PERIOD END:
Richmond County............................................................. $12.44 12.39
Bayonne..................................................................... 10.43 10.85
Richmond County pro forma (with Bayonne only)............................... 11.78 N/A
Bayonne pro forma equivalent................................................ 12.37 N/A
Bayonne pro forma equivalent with Ironbound................................. 12.16 N/A
</TABLE>
___________________________________
(1) The pro forma combined net income per share of Richmond County Common Stock
is based upon the combined historical net income for Richmond County and
Bayonne for the periods indicated divided by the average pro forma fully
diluted common share of the combined entities.
(2) Richmond County pro forma cash dividends per share represent historical cash
dividends declared by Richmond County and assumes no changes in cash
dividends declared per share. Bayonne pro forma equivalent cash dividends
per share represent such amounts multiplied by the Exchange Ratio of 1.05.
(3) Richmond County pro forma stated and tangible book value per share amounts
are based on the historical total stockholders' equity of the combined
entity divided by the total pro forma common shares of the combined entity
based on the Exchange Ratio of 1.05. The Bayonne pro forma equivalent
stated book value and tangible book value per share amounts are computed by
multiplying the Richmond County pro forma amounts by the Exchange Ratio of
1.05.
(4) Richmond County converted to stock form on February 18, 1998, accordingly,
earnings per share for the fiscal year ended June 30, 1998 are presented on
an historical basis from February 18, 1998 (date of the Conversion) to June
30, 1998. Includes the one-time non-recurring charge of $19.6 million
($11.2 million, net of tax) for funding of the Foundation at the time of the
Conversion.
16
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"1995 MHC Reorganization".......................................................
"Acquisition Proposal"..........................................................
"Acquisition Transaction".......................................................
"adequately capitalized"........................................................
"affiliate".....................................................................
"bank holding company"..........................................................
"Bank Index"....................................................................
"Bank Merger Act"...............................................................
"Bayonne".......................................................................
"Bayonne 401(k) Plan"...........................................................
"Bayonne 1995 RRP"..............................................................
"Bayonne 1995 Stock Option Plan"................................................
"Bayonne Bank Merger"...........................................................
"Bayonne Bank Merger Agreement".................................................
"Bayonne Board".................................................................
"Bayonne Common Stock"..........................................................
"Bayonne Continuing Employee"...................................................
"Bayonne Effective Date"........................................................
"Bayonne Effective Time"........................................................
"Bayonne Employment Agreements".................................................
"Bayonne Employee Plans"........................................................
"Bayonne ESOP"..................................................................
"Bayonne ESOP Committee"........................................................
"Bayonne ESOP Trustee"..........................................................
"Bayonne Exchange Ratio"........................................................
"Bayonne Incentive Plan"........................................................
"Bayonne Indemnified Party".....................................................
"Bayonne Limit".................................................................
"Bayonne Meeting"...............................................................
"Bayonne Merger"................................................................
"Bayonne Merger Agreement"......................................................
"Bayonne Merger Consideration"..................................................
"Bayonne Merger Stock Option"...................................................
"Bayonne Merger Stock Option Agreement".........................................
"Bayonne Merger Stock Option Shares"............................................
"Bayonne MHC"...................................................................
"Bayonne Option"................................................................
"Bayonne Record Date"...........................................................
"beneficially own"..............................................................
"BHC Act".......................................................................
"BIF"...........................................................................
"broker non-vote"...............................................................
"capital asset".................................................................
"CIC Agreements"................................................................
"Code"..........................................................................
"Commissioner"..................................................................
"Compensation Committee"........................................................
"Conversion"....................................................................
"Costs".........................................................................
"covered transaction"...........................................................
"CRA"...........................................................................
"critically undercapitalized"...................................................
"Department of Justice".........................................................
"DGCL"..........................................................................
</TABLE>
17
<PAGE>
"Directors' Awards".............................................................
"Dissenters' Shares"............................................................
"domestic building and loan association"........................................
"ERISA".........................................................................
"Exchange Act"..................................................................
"Exchange Agent"................................................................
"Exchange Offer"................................................................
"Excluded Shares"...............................................................
"Executive".....................................................................
"FASB"..........................................................................
"FDI Act".......................................................................
"FDIC"..........................................................................
"FDICIA"........................................................................
"Federal Reserve Act"...........................................................
"FHLB"..........................................................................
"FICO"..........................................................................
"Final Index Price".............................................................
"First Savings".................................................................
"First Savings Common Stock"....................................................
"Foundation"....................................................................
"FRB"...........................................................................
"GAAP"..........................................................................
"Guidelines"....................................................................
"Highly Valued Group"...........................................................
"HOLA"..........................................................................
"Index Group"...................................................................
"Index Ratio"...................................................................
"Initial Index Price"...........................................................
"Initial Richmond County Market Value"..........................................
"Initial Termination Date"......................................................
"Interstate Banking Act"........................................................
"Investment Group"..............................................................
"Ironbound".....................................................................
"Ironbound Merger"..............................................................
"Issuer Termination"............................................................
"investment power"..............................................................
"Large Thrift Highly Valued Group"..............................................
"Limit".........................................................................
"Limited Rights"................................................................
"Material Adverse Effect".......................................................
"Meetings.......................................................................
"Named Executive Officers"......................................................
"Nasdaq National Market"........................................................
"Nationwide Transactions".......................................................
"NYBB"..........................................................................
"NYBD"..........................................................................
"NYBL"..........................................................................
"NYCRA".........................................................................
"opt in"........................................................................
"opt out".......................................................................
"OTS"...........................................................................
"Peer Group"....................................................................
"Plan Exchange Ratio"...........................................................
"Pooling-of-interests"..........................................................
"portfolio assets"..............................................................
"Preliminary Purchase Event"....................................................
"pro forma".....................................................................
"purchase"......................................................................
18
<PAGE>
"Purchase Event"................................................................
"prudent person"................................................................
"QTL"...........................................................................
"QTL Test"......................................................................
"qualified thrift investments"..................................................
"Regional Group"................................................................
"Regional Transactions".........................................................
"Registration Statement"........................................................
"Richmond County"...............................................................
"Richmond County Board".........................................................
"Richmond County Common Stock"..................................................
"Richmond County Incentive Plan"................................................
"Richmond County Savings ESOP"..................................................
"Richmond County Savings ESOP Committee"........................................
"Richmond County Savings ESOP Trustee"..........................................
"Richmond County Market Value"..................................................
"Richmond County Meeting".......................................................
"Richmond County Preferred Stock"...............................................
"Richmond County Ratio".........................................................
"Richmond County Record Date"...................................................
"Richmond County Savings".......................................................
"Richmond County Savings 401(k) Plan............................................
"risk-based capital ratio"......................................................
"S&P Index".....................................................................
"SAIF"..........................................................................
"Sandler O'Neill"...............................................................
"Sandler O'Neill Agreement".....................................................
"Sandler O'Neill Fairness Opinion"..............................................
"SEC"...........................................................................
"Second-Step Conversion"........................................................
"Securities Act"................................................................
"Selected Market Transactions"..................................................
"Selected U.S. Transactions"....................................................
"Service".......................................................................
"SFAS"..........................................................................
"SFAS No. 115"..................................................................
"SFAS No. 106"..................................................................
"SFAS No. 109"..................................................................
"significantly undercapitalized"................................................
"Stock Awards"..................................................................
"Stockholders"..................................................................
"Superintendent"................................................................
"Superior Proposal".............................................................
"Tender Offer"..................................................................
"Tier I"........................................................................
"Tier II".......................................................................
"Tucker Anthony"................................................................
"undercapitalized"..............................................................
"Valuation Date"................................................................
"voting power"..................................................................
"well capitalized"..............................................................
19
<PAGE>
THE COMPANIES
RICHMOND COUNTY
Richmond County is a savings and loan holding company organized under the laws
of the State of Delaware in 1997. Richmond County's wholly owned subsidiary,
Richmond County Savings Bank ("Richmond County Savings"), operates 14 banking
offices in the New York City Borough of Staten Island, one banking office in the
New York City Borough of Brooklyn, and one multi-family loan processing center
in Jericho, Long Island. Richmond County Savings is a New York State-chartered
savings bank which has operated since 1886. Richmond County Savings' deposits
are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC").
At September 30, 1998, Richmond County had total assets of $1.7 billion,
deposits of $953.5 million and stockholders' equity of $329.8 million.
For more information about Richmond County, reference is made to the 1998
Richmond County Form 10-K, which is incorporated herein by reference. See "WHERE
YOU CAN FIND MORE INFORMATION."
BAYONNE
Bayonne is a savings and loan holding company organized under the laws of the
State of Delaware in 1997. Bayonne's wholly owned subsidiary, First Savings Bank
of New Jersey, SLA ("First Savings"), operates four banking offices and one
financial center in Bayonne, New Jersey. First Savings is a New Jersey savings
association which has operated since 1889. First Savings' deposits are insured
by the SAIF.
In January 1995, First Savings reorganized from a New Jersey chartered mutual
savings and loan association into the federal mutual holding company form of
organization. In connection with the 1995 MHC Reorganization, First Savings
became a New Jersey chartered stock savings association and issued approximately
54% of its outstanding common stock to Bayonne Bankshares, M.H.C., a federal
mutual holding company ("Bayonne MHC"). First Savings sold the remaining shares
of outstanding common stock to certain members of the general public.
In August 1997, First Savings and Bayonne MHC completed a conversion and
reorganization from the mutual holding company to the stock holding company form
of organization (the "Second-Step Conversion"). Pursuant to the Second-Step
Conversion, First Savings formed Bayonne and as the result of a series of
corporate reorganizations became a wholly owned subsidiary of Bayonne. Bayonne
exchanged 2.933 shares of its common stock for each share of common stock of
First Savings held by public stockholders and sold an additional 4.8 million
shares of its common stock to certain members of the general public. The shares
of First Savings common stock held by Bayonne MHC were cancelled and the
separate corporate existence of Bayonne MHC was terminated.
At September 30, 1998, Bayonne had total assets of $672.7 million, deposits of
$420.7 million and stockholders' equity of $95.2 million.
For more information about Bayonne, reference is made to the 1998 Bayonne Form
10-K, which is incorporated herein by reference. See "WHERE YOU CAN FIND MORE
INFORMATION."
20
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Richmond County and Bayonne file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). You may read and copy any reports, statements or other information
that the companies file at the SEC's public reference rooms in Washington, D.C.,
New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Richmond County and
Bayonne public filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Website maintained by the SEC
at "http://www.sec.gov."
Richmond County has filed the Registration Statement to register with the SEC
the shares of Richmond County Common Stock to be issued to Bayonne stockholders
in the Bayonne Merger (the "Registration Statement"). This Joint Proxy
Statement/Prospectus is a part of the Registration Statement and constitutes a
Prospectus of Richmond County, a Proxy Statement of Richmond County for the
Richmond County Special Meeting and a Proxy Statement of Bayonne for the Bayonne
Annual Meeting.
As allowed by SEC rules, this Joint Proxy Statement/Prospectus does not
contain all the information that stockholders can find in the Registration
Statement or the exhibits to the Registration Statement.
The SEC allows Richmond and Bayonne to "incorporate by reference" information
into this Joint Proxy Statement/Prospectus, which means that Richmond County and
Bayonne can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this Joint Proxy Statement/Prospectus, except
for any information superseded by information contained directly in the Joint
Proxy Statement/Prospectus. This Joint Proxy Statement/Prospectus incorporates
by reference the documents set forth below that Richmond and Bayonne have
previously filed with the SEC. The documents contain important information
about their financial condition.
RICHMOND COUNTY SEC FILINGS (FILE NO. 0-23271)
Registration Statement on Form 8-A Dated October 27, 1997
Quarterly Report on Form 10-Q Three months ended March 31, 1998
Annual Report on Form 10-K Year ended June 30, 1998
Quarterly Report on Form 10-Q Three months ended September 30, 1998
Current Report on Form 8-K Dated July 27, 1998
Current Report on Form 8-K Dated October 16, 1998
BAYONNE SEC FILINGS (FILE NO. 0-22499)
Registration Statement on Form 8-A Dated April 30, 1997
Annual Report on Form 10-K Year ended March 31, 1998
Quarterly Report on Form 10-Q Three months ended June 30, 1998
Quarterly Report on Form 10-Q Three months ended September 30, 1998
Current Report on Form 8-K Dated July 27, 1998
Current Report on Form 8-K/A Dated October 16, 1998
21
<PAGE>
Richmond County and Bayonne incorporate by reference additional documents
that then might file with the SEC between the date of this Joint Proxy
Statement/Prospectus and the date of its Annual Meeting their meetings. These
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. The
Bayonne Annual Report on Form 10-K for the Year Ended March 31, 1998 and the
Form 10-Q for the Quarter Ended September 30, 1998 are also being mailed along
with the Proxy Statement to Bayonne stockholders.
Richmond County has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Richmond
County.
Bayonne has supplied all information contained or incorporated by reference
in this Joint Proxy Statement/Prospectus relating to Bayonne.
If you are a stockholder of Richmond County or Bayonne, as the case may be,
we may have sent you some of the documents incorporated by reference, but you
can obtain any of them through Richmond County or Bayonne, as the case may be,
or the SEC or the SEC's Internet World Wide Website described above.
Documents incorporated by reference are available from the companies
without charge, excluding all exhibits unless specifically incorporated by
reference as an exhibit to this Joint Proxy Statement/Prospectus. Stockholders
of Richmond County or Bayonne may obtain documents incorporated by reference in
this Joint Proxy Statement/Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Attention: Thomas R. Cangemi, Secretary
Telephone No. (718) 448-2800
Bayonne Bancshares, Inc.
568 Broadway
Bayonne, New Jersey 07002
Attention: Thomas Coughlin, Secretary
Telephone No. (201) 437-1000
If you would like to request documents from either company, please do so by
_________________ to receive them before the Richmond County Special Meeting
and/or Bayonne Annual Meeting. If you request any incorporated documents from
us we will mail them to you by first-class mail, or other equally prompt means,
within one business day of our receipt of your request.
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus to vote your shares at the
Richmond County Special Meeting and/or Bayonne Annual Meeting. Richmond County
and Bayonne have not authorized anyone to provide you with information that is
different from what is contained in this Joint Proxy Statement/Prospectus. This
Joint Proxy Statement/ Prospectus is dated ______________, 199_. You should not
assume that the information contained in the Joint Proxy Statement/Prospectus is
accurate as of any date other than that date, and neither the mailing of this
Joint Proxy Statement/Prospectus to stockholders nor the issuance of Richmond
County's securities in the merger shall create any implication to the
contrary.
22
<PAGE>
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this Joint Proxy Statement/Prospectus or in any
of the materials that have been incorporated into this document. Therefore, if
anyone does give you information of this sort, you should not rely on it. If
you are in a jurisdiction where offers to exchange or sell, or solicitations of
offers to exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus, the documents incorporated by
reference herein or any other written or oral statements made by or on behalf of
Richmond County and Bayonne may include forward-looking statements with respect
to the financial condition, results of operations and business of Richmond
County and Bayonne, based on management's belief and information currently
available to management. Such forward-looking statements are subject to risks,
uncertainties and assumptions. Actual results may vary materially from those
anticipated, estimated, projected or expected. Among, but not limited to, the
factors that may cause variations from such forward-looking statements are:
(1) fluctuations in the economy, especially in the market areas of
Richmond County and its proposed acquisition entities;
(2) changes in the interest rate environment;
(3) Richmond County's ability to realize anticipated cost savings relating
to pending acquisitions;
(4) Richmond County's success in assimilating acquired operations in
Richmond County's culture, including its ability to instill Richmond
County's credit culture into acquired operations;
(5) the continued growth of the markets in which Richmond County operates;
and
(6) the enactment of legislation impacting Richmond County.
Readers are cautioned not to place undue reliance on any forward-looking
statements made by or on behalf of Richmond County and Bayonne. Richmond County
and Bayonne undertake no obligation to update or revise any forward-looking
statements. Additional information with respect to factors that may cause the
results to differ materially from those contemplated by such forward-looking
statements is included in Richmond County's and Bayonne's current and subsequent
filings with the SEC.
23
<PAGE>
MARKET PRICES AND DIVIDEND INFORMATION
Richmond County Common Stock is listed on the Nasdaq National Market under
the symbol "RCBK." Bayonne Common Stock is listed on the Nasdaq National Market
under the symbol "FSNJ."
The following table sets forth, for the calendar periods indicated, the
high and low prices per share for the Richmond County Common Stock and Bayonne
Common Stock as reported on the Nasdaq National Market and the quarterly cash
dividends declared by each company for the periods indicated. Richmond County
Common Stock began trading on the Nasdaq National Market on February 18, 1998.
After the Second-Step Conversion, the common stock of Bayonne began trading on
the Nasdaq National Market in August, 1997.
<TABLE>
<CAPTION>
RICHMOND COUNTY COMMON STOCK BAYONNE COMMON STOCK
--------------------------------------- --------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
--------- ----------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997
Quarter ended March 31.................... N/A N/A N/A $ 8.35 $ 7.16 $.0425
Quarter ended June 30..................... N/A N/A N/A 9.21 7.93 .0425
Quarter ended September 30................ N/A N/A N/A 13.06 9.20 .0425
Quarter ended December 31................. N/A N/A N/A 13.38 11.63 .0425
1998
Quarter ended March 31.................... $19.63 $15.68 $0.05 14.88 12.06 .0425
Quarter ended June 30..................... 19.75 17.75 0.06 17.38 15.25 .0625
Quarter ended September 30................ 18.69 11.88 0.07 17.13 10.00 .0625
Quarter ended December 31
(As of ________, 1998)..................
</TABLE>
The following table sets forth the closing price per share of Richmond
County Common Stock, Bayonne Common Stock and the equivalent per share price for
Bayonne Common Stock giving effect to the Bayonne Merger on (i) October 13, 1998
the last business day preceding the public announcement of the amendments to the
Bayonne Merger Agreement and (ii) _________, 199_, the last practicable trading
day prior to the mailing of this Joint Proxy Statement/Prospectus. The
equivalent per share price of Bayonne Common Stock was computed by multiplying
the price of Richmond County Common Stock by the 1.05 Bayonne Exchange Ratio.
<TABLE>
<CAPTION>
RICHMOND COUNTY BAYONNE COMMON EQUIVALENT PRICE PER
COMMON STOCK STOCK SHARE OF
BAYONNE COMMON STOCK
--------------- -------------- --------------------
<S> <C> <C> <C>
October 13, 1998....... $12.25 $12.00 $12.86
________ __, 1998...... $_____ $_____ $_____
</TABLE>
You should obtain current market quotations for Richmond County Common
Stock and Bayonne Common Stock as the market price of Richmond County Common
Stock will continue to fluctuate between the date of this Joint Proxy
Statement/Prospectus and the date on which the Bayonne Merger is consummated and
thereafter. Because the number of shares of Richmond County Common Stock to be
received by Bayonne stockholders in the Bayonne Merger is fixed (subject to
possible increase in certain limited circumstances) and because the market price
of Richmond County Common Stock fluctuates, the value of the shares of Richmond
County Common Stock that holders of Bayonne Common Stock would receive in the
Bayonne Merger may increase or decrease prior to the Bayonne Merger. No
assurance can be given concerning the market price of Richmond County Common
Stock before or after the Bayonne effective time (the time specified in the
Certificate of Merger filed with the Delaware Secretary of State (the "Bayonne
Effective Time")). See "THE BAYONNE MERGER -- Exchange of Bayonne Shares" and
"-- Waiver and Amendment; Termination."
24
<PAGE>
THE MEETINGS
MEETING OF RICHMOND COUNTY STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Richmond County in connection with the solicitation of proxies by the Richmond
County Board of Directors (the "Richmond County Board") for use at the Richmond
County Meeting to be held at ________________________, _____________________,
_________, New York _____, on ________, ___________ __, 199_ at _:__ a.m., local
time. At the Richmond County Meeting, the stockholders of Richmond County will
be asked to consider and vote upon:
(1) a proposal to approve and adopt the Bayonne Merger and the
consummation of the transactions contemplated thereby, which are more
fully described herein; and
(2) such other matters as may properly be brought before the Richmond
County Meeting. A copy of the Bayonne Merger Agreement is attached as
ANNEX A.
THE RICHMOND COUNTY BOARD HAS UNANIMOUSLY APPROVED THE BAYONNE MERGER
AGREEMENT AND HAS DETERMINED THAT THE TERMS OF THE BAYONNE MERGER AND THE
BAYONNE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF RICHMOND
COUNTY AND ITS STOCKHOLDERS. THE RICHMOND COUNTY BOARD THEREFORE UNANIMOUSLY
RECOMMENDS THAT RICHMOND COUNTY'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION
OF THE BAYONNE MERGER AGREEMENT.
See "THE BAYONNE MERGER -- Background of the Bayonne Merger" and "--
Recommendation of the Richmond County Board; Richmond County's Reasons for the
Merger."
RECORD DATE
The Richmond County Board has fixed __________ __, 199_ as the Richmond
County Record Date (the "Richmond County Record Date") for the determination of
those Richmond County stockholders entitled to notice of and to vote at the
Richmond County Meeting. Only holders of record of Richmond County Common Stock
at the close of business on the Richmond County Record Date will be entitled to
notice of and to vote at the Richmond County Meeting. As of the Richmond County
Record Date, there were __________ shares of Richmond County Common Stock
outstanding and entitled to vote, which were held by approximately ____ holders
of record.
PROXIES; VOTING AND REVOCATION OF PROXIES
Each holder of record of shares of Richmond County Common Stock on the
Richmond County Record Date is entitled to cast one vote per share on the
proposal to approve and adopt the Bayonne Merger Agreement and on any other
matter properly submitted for the vote of the Richmond County stockholders at
the Richmond County Meeting.
Richmond County's Certificate of Incorporation provides that record holders
of Richmond County Common Stock who beneficially owns more than 10% of the
outstanding shares of Richmond County Common Stock (the "Limit") can only vote
their stock up to the Limit.
25
<PAGE>
A person or entity is deemed to beneficially own shares owned by an affiliate as
well as persons acting in concert with such person or entity. Beneficial
ownership includes shares beneficially owned by such person or any of his or her
affiliates (as defined in the Certificate of Incorporation). It also includes
shares which such person or his or her affiliates have the right to acquire
pursuant to any agreement, or upon the exercise of any rights, warrant, option,
or otherwise and shares as to which such person and his or her affiliates have
sole or shared voting or investment power. Beneficial ownership does not include
shares that are subject to a publicly solicited revocable proxy and that are not
otherwise deemed to be beneficially owned by such person and his or her
affiliates.
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Richmond County Common Stock
entitled to vote at the Richmond County Meeting is necessary to constitute a
quorum at the Richmond County Meeting. To determine if a quorum exists Richmond
County will count shares of Richmond County Common Stock present in person at
the meeting but not voted, and shares of stock for which it has received proxies
but with respect to which holders have abstained on any matter, as present at
the meeting. Because the approval and adoption of the Bayonne Merger Agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of Richmond County Common Stock entitled to vote thereon, each non-
voting share and abstention will have the effect of a vote AGAINST the approval
and adoption of the Bayonne Merger Agreement. In addition, brokers who hold
shares in street name for customers who are beneficial owners of such shares are
prohibited from giving a proxy to vote shares held for such customers on the
approval and adoption of the Bayonne Merger Agreement without specific
instructions from such customers. Given that the approval and adoption of the
Bayonne Merger Agreement requires a majority vote, the failure to provide
specific instructions to a broker with respect to shares (a "broker non-vote")
will be counted as a vote AGAINST the Bayonne Merger Agreement.
All shares of Richmond County Common Stock which are entitled to be voted
and are represented at the Richmond County Meeting by properly executed proxies
received prior to or at the Richmond County Meeting, and which are not revoked,
will be voted in accordance with the instructions indicated on such proxies. If
no instructions are indicated, such proxies will be voted:
(1) FOR approval and adoption of the Bayonne Merger Agreement, and
(2) otherwise in the discretion of the proxy holders as to any other
matter which may come before the Richmond County Meeting, including,
among other things, a motion to adjourn or postpone the Richmond
County Meeting to another time and/or place, for the purpose of
soliciting additional proxies or otherwise. However, no proxy which is
voted against a proposal will be voted in favor of any adjournment or
postponement for the purpose of soliciting additional votes in favor
of that proposal.
If any other matters are properly presented for consideration at the
Richmond County Meeting, the persons named in the form of proxy enclosed
herewith and acting thereunder will have discretionary authority to vote on such
matters in accordance with their best judgment. However, discretionary authority
will only be exercised to the extent allowable under applicable federal and
state securities and corporation laws. Richmond County does not have any
knowledge of any matters to be presented at the Richmond County Meeting other
than the matters set forth above.
26
<PAGE>
Any proxy given by a Richmond County stockholder pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted by:
(1) delivering to the Corporate Secretary of Richmond County, at or before
the taking of the vote at the Richmond County Meeting, a written
notice of revocation bearing a later date than the date of the proxy;
(2) duly executing a later-dated proxy relating to the same shares and
delivering it to the Corporate Secretary of Richmond County Meeting
before the taking of the vote at the Richmond County Meeting; or
(3) attending the Richmond County Meeting and voting in person (although
attendance at the meeting will not in and of itself constitute
revocation of the proxy).
Any written notice of revocation or subsequently executed proxy should be
sent so as to be delivered to Richmond County Financial Corp., 1214 Castleton
Avenue, Staten Island, New York 10310, Attention: Corporate Secretary, or hand
delivered to Richmond County's Corporate Secretary at such address on or before
the day of the Richmond County Meeting or to the Inspector of Elections of the
Richmond County Meeting before the taking of the vote at the Richmond County
Meeting. IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
--------------------------------------------------------------------
NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO
- --------------------------------------------------------------------------------
BE ADMITTED TO THE RICHMOND COUNTY MEETING.
- -------------------------------------------
Richmond County will bear all expenses of the solicitation of proxies from
the holders of Richmond County Common Stock. In addition to solicitation by use
of the mails, proxies may be solicited by directors, officers and employees of
Richmond County in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Richmond County has retained Kissel-Blake,
Inc., a proxy soliciting firm, to assist in such solicitation. The fee to be
paid to such firm is not expected to exceed $5,000, plus reasonable out-of-
pocket costs and expenses. Further, Richmond County will make arrangements with
brokerage firms and other custodians, nominees and fiduciaries to send proxy
materials to their principals and will reimburse such parties for their expenses
in doing so.
HOLDERS OF RICHMOND COUNTY COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE,
SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO RICHMOND
COUNTY IN THE ENCLOSED POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
VOTE REQUIRED; PRINCIPAL STOCKHOLDERS
The approval and adoption of the Bayonne Merger Agreement by Richmond
County stockholders will require the affirmative vote of at least a majority of
the outstanding shares of Richmond County Common Stock entitled to vote at the
Richmond County Meeting. SUCH STOCKHOLDER APPROVAL IS A CONDITION TO
CONSUMMATION OF THE BAYONNE MERGER.
As of September 30, 1998, directors and executive officers of Richmond
County and their affiliates beneficially owned and were entitled to vote 282,317
shares of Richmond County Common Stock, or 1.10% of the outstanding Richmond
County Common Stock which may be voted at the Richmond County Meeting (exclusive
of shares which may be acquired upon the exercise of options under the Richmond
County Financial Corp. 1998 Stock-Based Incentive Plan (the "Richmond County
Incentive Plan")). Such persons have informed Richmond County that they intend
to vote or direct the vote of all such shares of Richmond County Common Stock
FOR approval of the Bayonne Merger
27
<PAGE>
Agreement. As of September 30, 1998, Bayonne, its subsidiaries and the directors
and executive officers of Bayonne beneficially owned 900 shares of Richmond
County Common Stock. See "CERTAIN RELATED TRANSACTIONS -- Bayonne Merger Stock
Option Agreement."
MEETING OF BAYONNE STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
The Bayonne Meeting will be held on ___________ __, 199_, at _:__ a.m.,
local time, at _____________________, ________________, ________, New Jersey.
At the Bayonne Meeting, holders of Bayonne Common Stock will be asked to
consider and vote upon:
(1) a proposal to approve and adopt the Bayonne Merger Agreement;
(2) the election of two directors of Bayonne to serve until completion of
the Bayonne Merger or, if the Bayonne Merger is not completed, for
three-year terms and until their successors shall have been elected
and qualified;
(3) the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of Bayonne for the fiscal year ending March 31,
1999; and
(4) such other matters as may properly be brought before the Bayonne
Meeting.
See "THE BAYONNE MERGER -- Recommendation of the Bayonne Board; Bayonne's
Reasons for the Merger."
Additional information with respect to the election of directors and the
ratification of independent auditors is set forth under "ADDITIONAL MATTERS TO
BE CONSIDERED AT THE BAYONNE MEETING" in this Joint Proxy Statement/Prospectus.
RECORD DATE
The Bayonne Board of Directors (the "Bayonne Board") has fixed the close of
business on _________, 199_ as the Bayonne Record Date (the "Bayonne Record
Date") for the determination of the holders of Bayonne Common Stock entitled to
receive notice of and to vote at the Bayonne Meeting. Only holders of record of
Bayonne Common Stock at the close of business on the Bayonne Record Date are
entitled to receive notice of and to vote at the Bayonne Meeting. At the close
of business on the Bayonne Record Date, there were _________ shares of Bayonne
Common Stock outstanding and entitled to be voted at the Bayonne Meeting. The
presence, in person or by proxy, of the holders of at least a majority of the
total number of outstanding shares of Bayonne Common Stock entitled to vote at
the Bayonne Meeting is necessary to constitute a quorum thereat.
PROXIES; VOTING AND REVOCATION OF PROXIES
Each holder of Bayonne Common Stock on the Bayonne Record Date will be
entitled to one vote for each share of Bayonne Common Stock held of record
(except for shares held in excess of the Bayonne Limit, as defined below) on
each matter to be voted upon at the Bayonne Meeting.
Bayonne's Certificate of Incorporation, record holders of Bayonne Common
Stock who beneficially own more than 10% of the outstanding shares of Bayonne
Common Stock (the "Bayonne Limit") can only vote their stock up to the Bayonne
Limit. A person or entity is deemed to beneficially own
28
<PAGE>
shares owned by an affiliate as well as persons acting in concert with such
person or entity. Bayonne's Certificate of Incorporation authorizes the Bayonne
Board (1) to make all determinations necessary to implement and apply the
Bayonne Limit, including determining whether persons or entities are acting in
concert, and (2) to demand that any person who is reasonably believed to
beneficially own Bayonne Common Stock in excess of the Bayonne Limit supply
information to Bayonne to enable the Bayonne Board to implement and apply the
Bayonne Limit.
Shares of Bayonne Common Stock represented by properly executed proxies
received by Bayonne in time to be voted at the Bayonne Meeting and not
subsequently revoked prior to the vote at the Bayonne Meeting will be voted in
accordance with the instructions indicated on such proxies. IF NO INSTRUCTIONS
ARE GIVEN, PROPERLY EXECUTED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF
THE BAYONNE MERGER AGREEMENT, FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR
NAMED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND FOR THE RATIFICATION OF KPMG
PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF BAYONNE FOR THE FISCAL YEAR ENDING
MARCH 31, 1999.
The presence of a stockholder at the Bayonne Meeting will not automatically
revoke such stockholder's proxy. However, a stockholder may revoke a proxy at
any time prior to its exercise by:
(1) filing a written notice of revocation with the Corporate Secretary of
Bayonne prior to the Bayonne Meeting;
(2) delivering to the Corporate Secretary of Bayonne prior to the Bayonne
Meeting a duly executed proxy bearing a later date; or
(3) attending the Bayonne Meeting, filing a written notice of revocation
with the secretary of the meeting and voting in person. IF YOU ARE A
------------
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL
----------------------------------------------------------------------
NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO BE
--------------------------------------------------------------------
ADMITTED TO THE BAYONNE MEETING. Examples of such documentation
-------------------------------
include a broker's statement, letter or other document confirming your
ownership of shares of Bayonne Common Stock.
Bayonne will bear the cost of soliciting proxies from the holders of
Bayonne Common Stock. In addition to the solicitation of proxies by mail,
Kissel-Blake, Inc., a proxy solicitation firm, will assist Bayonne in soliciting
proxies for the Bayonne Meeting and will be paid a fee estimated to be $5,000,
plus out-of-pocket expenses. Proxies may also be solicited personally, by
telephone, facsimile or other means, by directors, officers and employees of
Bayonne or its subsidiaries, without additional compensation. Bayonne will also
request persons, firms and corporations holding shares of Bayonne Common Stock
in their names or in the name of their nominees, which are beneficially owned by
others, to forward proxy materials to and obtain proxies from such beneficial
owners, and will reimburse such record holders for their reasonable expenses
incurred in doing so.
HOLDERS OF BAYONNE COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE, SIGN
AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT TO BAYONNE IN THE ENCLOSED
POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
VOTE REQUIRED; PRINCIPAL STOCKHOLDERS
The approval and adoption of the Bayonne Merger Agreement will require the
affirmative vote of the holders of a majority of the outstanding shares of
Bayonne Common Stock entitled to vote at the Bayonne Meeting. Accordingly,
failure to return a properly executed proxy card or to vote in person, or
abstaining from voting, will have the same effect as a vote AGAINST the Bayonne
Merger Agreement. Shares underlying broker non-votes or held in excess of the
Bayonne Limit will not be counted as having
29
<PAGE>
been voted in person or by proxy at the Bayonne Meeting and will have the same
effect as a vote AGAINST the Bayonne Merger Agreement.
As to the election of directors, the proxy card being provided by the
Bayonne Board enables a stockholder to vote "FOR" the election of the nominees
proposed by the Bayonne Board, or to "WITHHOLD" authority to vote for one or
more of the nominees being proposed. Under Delaware law and Bayonne's Bylaws,
directors are elected by a plurality of votes cast, without regard to either (1)
broker non-votes, or (2) proxies as to which authority to vote for one or more
of the nominees being proposed is withheld. Accordingly, the two nominees
receiving the most votes will be elected.
As to the ratification of KPMG Peat Marwick LLP as independent auditors of
Bayonne, the proxy card being provided by the Bayonne Board enables a
stockholder to check the appropriate box on the proxy card to:
(1) vote "FOR" the item;
(2) vote "AGAINST" the item; or
(3) "ABSTAIN" from voting on such item. Under Delaware law and Bayonne's
Bylaws, the affirmative vote of the holders of a majority of the
shares of Bayonne Common Stock present, in person or by proxy, at the
Bayonne Meeting at which a quorum is present and entitled to vote on
this proposal is required to constitute stockholder approval of such
proposal. Shares as to which the "ABSTAIN" box has been selected on
the proxy card with respect to the proposal will be counted as present
and entitled to vote and have the effect of a vote against the matter.
In contrast, shares underlying broker non-votes or in excess of the
Bayonne Limit will not be counted as present and entitled to vote or
as votes cast on the item and have no effect on the vote on the item.
As of September 30, 1998, directors and executive officers of Bayonne and
their affiliates beneficially owned and were entitled to vote 873,465 shares of
Bayonne Common Stock, or 9.58% of the outstanding Bayonne Common Stock which may
be voted at the Bayonne Meeting (exclusive of shares of Bayonne Common Stock
which may be acquired upon the exercise of options under the Bayonne Bancshares,
Inc. Amended and Restated 1995 Stock Option Plan (the "Bayonne 1995 Stock Option
Plan") and shares awarded, but that have not vested, under the Bayonne
Bancshares, Inc. 1998 Stock-Based Incentive Plan (the "Bayonne Incentive
Plan"). Such persons have indicated their intent to vote their shares in favor
of the approval and adoption of the Bayonne Merger Agreement. As of September
30, 1998, Richmond County, its subsidiaries and the directors and executive
officers of Richmond County beneficially owned approximately 443,000 shares of
Bayonne Common Stock. Additionally, Richmond County may also be deemed to be the
beneficial owner of 1,809,804 shares of Bayonne Common Stock issuable pursuant
to the Bayonne Merger Stock Option Agreement attached hereto as ANNEX B.
Pursuant to the Bayonne Merger Stock Option Agreement, Richmond County has the
right to exercise an option to purchase the aforesaid 1,809,804 shares upon the
occurrence of certain events none of which has occurred as of the date hereof.
Richmond County has expressly disclaimed beneficial ownership of such 1,809,804
shares. See "CERTAIN RELATED TRANSACTIONS -- Bayonne Merger Stock Option
Agreement."
30
<PAGE>
BENEFICIAL OWNERSHIP OF RICHMOND COUNTY COMMON STOCK
PRINCIPAL SECURITY OWNERSHIP
Other than those persons listed below, Richmond County is not aware of any
person who is the beneficial owner of more than 5% of the outstanding shares of
Richmond County Common Stock as of September 30, 1998. For the purposes of the
following table and the table set forth under "-- Directors and Executive
Officers," in accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to "beneficially own" any shares of Richmond County Common Stock (1) over
which such person has, directly or indirectly, sole or shared voting or
investment power, or (2) of which such person has the right to acquire
beneficial ownership, including the right to acquire beneficial ownership by the
exercise of stock options, within 60 days after September 30, 1998. As used
herein, "voting power" includes the power to vote, or direct the voting of, such
shares, and "investment power" includes the power to dispose, or direct the
disposition of, such shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL COMMON STOCK
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OUTSTANDING
- ------------------------------- --------------------------------------- --------------------- ------------------
<S> <C> <C> <C>
Common Stock Richmond County Savings Bank 2,113,880/(1)/ 8.0%
Employee Stock Ownership Plan
(the "Richmond County Savings ESOP")
1214 Castleton Avenue
Staten Island, New York 10310
Common Stock Richmond County Savings Foundation 1,957,300/(2)/ 7.4%
1214 Castleton Avenue
Staten Island, New York 10310
Common Stock Thomson, Horstmann & Bryant, Inc. 1,682,350/(3)/ 6.4%
Park 80 West, Plaza One
Saddle Brook, New Jersey 07663
</TABLE>
____________________________
(1) Shares of Richmond County Common Stock were acquired by the Richmond County
Savings ESOP pursuant to Richmond County Savings' Conversion. The Richmond
County Savings ESOP Committee (the "Richmond County Savings ESOP Committee")
administers the Richmond County Savings ESOP. Marine Midland Bank has been
appointed as the corporate trustee for the Richmond County Savings ESOP
("Richmond County Savings ESOP Trustee"). The Richmond County Savings ESOP
Trustee, subject to its fiduciary duty, must vote all allocated shares held
in the Richmond County Savings ESOP in accordance with the instructions of
the Richmond County Savings ESOP participants. As of September 30, 1998, no
shares had been allocated under the Richmond County Savings ESOP. With
respect to unallocated shares, such unallocated shares are required to be
voted by the Richmond County Savings ESOP Trustee in a manner calculated to
most accurately reflect the voting instructions received from Richmond
County Savings ESOP participants, so long as such vote is in accordance with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(2) The Foundation was established and funded by Richmond County in connection
with Richmond County Savings' Conversion with an amount of Richmond County's
Common Stock equal to 8.0% of the total amount of Richmond County Common
Stock sold in the Conversion. The Foundation is a Delaware non-stock
corporation and is dedicated to the promotion of charitable purposes within
the communities in which Richmond County Savings operates. The Foundation
is governed by a board of directors with eight members, all of whom are
directors of Richmond County or Richmond County Savings. Pursuant to the
terms of the contribution of Richmond County Common Stock, as mandated by
federal requirements, all shares of Richmond County Common Stock held by the
Foundation must be voted in the same ratio as all other shares of Richmond
County's Common Stock on all proposals considered by stockholders of
Richmond County.
(3) According to information disclosed on a Schedule 13F, filed with the SEC on
July 27, 1998, as well as a Schedule 13F filed with the SEC in September
1998. Thomson, Horstmann & Bryant, Inc. is an investment adviser under
Section 203 of the Investment Advisers Act of 1940.
31
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the shares of
Richmond County Common Stock beneficially owned by each director of Richmond
County, by Richmond County's Chief Executive Officer and the next four most
highly paid executive officers (the "Named Executive Officers") of Richmond
County. It also includes all directors and executive officers of Richmond
County as a group as of September 30, 1998. Except as otherwise indicated, each
person and each group shown in the table has sole voting and investment power
with respect to the shares of Richmond County Common Stock indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME TITLE OWNERSHIP/(1)//(2)/ OUTSTANDING/(3)/
- -------------------------- ------------------------------------- ------------------------- ------------------
<S> <C> <C> <C>
Michael F. Manzulli Chairman of the Board and Chief 27,225 *
Executive Officer
Anthony E. Burke President, Chief Operating Officer 14,425 *
and Director
Godfrey H. Carstens, Jr. Director 17,032 *
Robert S. Farrell Director 19,945 *
William C. Frederick Director 6,000 *
Maurice K. Shaw Director 6,326 *
James L. Kelley Director 13,640 *
T. Ronald Quinlan, Jr. Director 1,000 *
Thomas R. Cangemi Senior Vice President, Chief 27,175 *
Financial Officer and Secretary
John M. McKenna Executive Vice President 1,063 *
All directors and executive 282,317 1.10%
officers as a group (23 persons)
</TABLE>
________________________
* Represents less than 1% of outstanding Richmond County Common Stock.
(1) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported.
(2) Does not include options and awards intended to be granted pursuant to the
Richmond County Incentive Plan.
(3) Percentages with respect to each person or group of persons have been
calculated on the basis of 26,423,550 shares of Richmond County Common
Stock, the number of shares of Richmond County Common Stock outstanding as
of September 30, 1998.
32
<PAGE>
BENEFICIAL OWNERSHIP OF BAYONNE COMMON STOCK
PRINCIPAL SECURITY OWNERSHIP
Other than those persons listed below, Bayonne is not aware of any person who
is the beneficial owner of more than 5% of the outstanding shares of Bayonne
Common Stock as of September 30, 1998. For the purposes of the following table
and the table set forth under "-- Directors and Executive Officers," in
accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
"beneficially own" any shares of Bayonne Common Stock (1) over which such person
has, directly or indirectly, sole or shared voting or investment power, or (2)
of which such person has the right to acquire beneficial ownership, including
the right to acquire beneficial ownership by the exercise of stock options,
within 60 days after September 30, 1998. As used herein, "voting power"
includes the power to vote, or direct the voting of, such shares, and
"investment power" includes the power to dispose, or direct the disposition of,
such shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
TITLE CLASS OF BENEFICIAL COMMON STOCK
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OUTSTANDING/(1)/
- -------------- ------------------------------------- ------------------- ------------------
<S> <C> <C> <C>
Common Stock First Savings Bank of New Jersey, SLA 708,179/(1)/ 7.76%
Employee Stock Ownership Plan (the
"Bayonne ESOP")
568 Broadway
Bayonne, New Jersey 07002
Common Stock Jeffrey S. Halis 94,846/(2)//(3)/ 1.04%
500 Park Avenue
Fifth Floor
New York, New York 10022
Common Stock Michael Lowenstein 431,151/(4)/ 4.73%
500 Park Avenue
Fifth Floor
New York, New York 10022
</TABLE>
________________________
(1) Shares of Common Stock were acquired by the Bayonne ESOP in the Second-Step
Conversion, which was consummated on August 22, 1997. The Bayonne ESOP
Committee (the "Bayonne ESOP Committee") administers the Bayonne ESOP.
First Security Trust Company has been appointed as the trustee for the
Bayonne ESOP (the "Bayonne ESOP Trustee"). The Bayonne ESOP Trustee,
subject to its fiduciary duty, must vote all allocated shares held in the
Bayonne ESOP in accordance with the instructions of the Bayonne ESOP
participants. At September 30, 1998, 191,186 shares had been allocated
under the Bayonne ESOP and 516,993 shares remain unallocated. Each
participant, however, will be deemed to have one share of Bayonne Common
Stock in the Bayonne ESOP allocated to such participant's account for the
purpose of providing voting instructions to the Bayonne ESOP Trustee. Under
the Bayonne ESOP, unallocated shares and allocated shares as to which voting
instructions are not given by participants are to be voted by the Bayonne
ESOP Trustee in a manner calculated to most accurately reflect the
instructions received from participants regarding the allocated stock so
long as such vote is in accordance with the fiduciary provisions of ERISA.
(2) Based on information disclosed in a Schedule 13D/A filed with the SEC on
June 9, 1998.
(3) The 431,151 shares reported in a Schedule 13D filed by Michael Lowenstein on
September 5, 1997 include shares owned by Tyndall Partners, L.P., Madison
Avenue Partners, L.P., Tyndall Institutional Partners, L.P., and Halo
International, Ltd. (collectively, the "Investment Group"). According to
the Schedule 13D filed on September 5, 1997, Michael Lowenstein possesses
the sole power to vote and dispose of the common stock held by the
Investment Group. However, Jeffrey S. Halis is a general partner of Halo
Capital Partners, L.P., which is the sole general partner of each member of
the Investment Group, and also serves as a member of Jemi Management,
L.L.C., which serves as the investment manager for Halo International, Ltd.
(4) Based on information disclosed in a Schedule 13D filed with the SEC on
September 5, 1997. Mr. Lowenstein disclaims any interest in the shares
owned individually by Mr. Halis.
33
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the shares of
Bayonne Common Stock beneficially owned by each director of Bayonne, by each
Named Executive Officer of Bayonne and by all directors and executive officers
of Bayonne as a group as of September 30, 1998. Except as otherwise indicated,
each person and each group shown in the table has sole voting and investment
power with respect to the shares of Bayonne Common Stock indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME TITLE/(1)/ OWNERSHIP/(1)//(2)//(3)//(4)/ OUTSTANDING/(8)/
- ------------------------------- ---------------------------------- ------------------------------ ------------------
<S> <C> <C> <C>
Patrick F.X. Nilan Chairman of the Board 295,416/(2)//(3)//(4)/ 3.24%
Michael A. Nilan President, Chief Executive 93,655/(4)//(5)//(6)/ 1.03%
Officer and Director
James F. Sisk Director 74,583/(2)//(3)/ *
Patrick D. Conaghan Director 110,440/(2)//(3)/ 1.21%
Frederick G. Whelpley Director 97,360/(2)//(3)/ 1.07%
Joseph L. Wisniewski Director 94,966/(3)//(4)/ 1.04%
Eugene V. Malinowski, C.P.A. Vice President and Chief Financial 43,497/(6)/ *
Officer
James E. Collins Vice President/Loan Officer 35,898/(5)//(6)/ *
Donald Mindiak Treasurer 27,821/(5)//(6)/ *
Thomas M. Coughlin, C.P.A. Corporate Secretary/Controller 15,048/(5)//(6)/ *
All directors and executive 888,684(7) 9.74%
officers as a group (10
persons)
</TABLE>
______________
* Represents less than 1% of outstanding Bayonne Common Stock.
(1) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein.
(2) Includes 3,983, 4,049 and 3,983 options awarded to Messrs. Conaghan,
Whelpley and Sisk, respectively, pursuant to the Bayonne 1995 Stock Option
Plan, that are currently exercisable or will become exercisable within 60
days of September 30, 1998. Upon consummation of the Second-Step
Conversion, Bayonne adopted the Bayonne 1995 Stock Option Plan and thereby
agreed to issue Bayonne Common Stock in accordance with the terms of such
plan. The adjusted exercise price of all of the options that have been
awarded to date pursuant to the Bayonne 1995 Stock Option Plan is $4.43.
(3) Includes 15,932, 3,184, 3,184 and 3,184 shares awarded to Messrs. Patrick
F.X. Nilan, Conaghan, Whelpley and Sisk, respectively, pursuant to the
Bayonne 1995 RRP Bancshares, Inc. Amended and Restated 1995 Recognition and
Retention Plan (the "Bayonne 1995 RRP") that have not vested. Includes
9,738 shares awarded to each of Messrs. Patrick F.X. Nilan, Wisniewski,
Sisk, Conaghan and Whelpley pursuant to the Bayonne Incentive Plan that have
not vested. Awards granted under the Bayonne 1995 RRP and the Bayonne
Incentive Plan vest in equal installments of 20% per year. Upon
consummation of the Second-Step Conversion, Bayonne adopted the Bayonne 1995
RRP and thereby agreed to issue Bayonne Common Stock in accordance with the
terms of such plan. Each recipient has voting power as to the shares
awarded.
(4) Includes 13,429, 7,901 and 10,029 shares allocated to Messrs. Patrick F.X.
Nilan, Joseph L. Wisniewski and Michael A. Nilan, respectively, pursuant to
the Bayonne ESOP for which each has sole voting power.
(5) Includes 6,069, 6,069, 6,069 and 4,957 options awarded to Messrs. Michael A.
Nilan, Collins, Mindiak and Coughlin pursuant to the Bayonne 1995 Stock
Option Plan that are currently exercisable or will become exercisable in 60
days.
(6) Includes 32,709 and 24,348 shares awarded to Mr. Michael A. Nilan under the
Bayonne 1995 RRP and the Bayonne Incentive Plan, respectively, 21,424 shares
awarded to Mr. Malinowski under the Bayonne Incentive Plan, and 3,344, 3,344
and 958 shares awarded to Messrs. Collins, Mindiak and Coughlin,
respectively, under the Bayonne 1995 RRP, that have not vested. Shares
awarded under the Bayonne 1995 RRP vest in equal annual installments of 20%
per year. Approximately 20% of the shares awarded to Messrs. Michael Nilan
and Malinowski, respectively, under the Bayonne Incentive Plan vest in equal
installments during the first and second years after April 27, 1998, the
date of grant. The remaining shares granted to Mr. Michael Nilan under the
Bayonne Incentive Plan vest subject to the attainment by Bayonne during
years three, four and five after the date of grant of certain performance
goals related to earnings per share and return on equity. Approximately 10%
of the shares awarded to Mr. Malinowski under the Bayonne Incentive Plan
vest in equal installments during years three, four and five after the date
of grant, while the remaining shares vest subject to the attainment by
Bayonne during years three, four and five after the date of grant of certain
performance goals relating to earnings per share and return on equity. Each
recipient has voting power as to the shares awarded.
(7) Includes 64,010 shares awarded under the Bayonne 1995 RRP as to which voting
may be directed. Includes 83,337 options awarded under the Bayonne 1995
Stock Option Plan that are currently exercisable or will become exercisable
in 60 days. Includes 208,248 shares of Bayonne Common Stock that may be
purchased pursuant to options awarded under the Bayonne Incentive Plan, none
of which are currently exercisable.
(8) Percentages with respect to each person or group of persons have been
calculated on the basis of 9,119,526 shares of Bayonne Common Stock, the
number of shares of Bayonne Common Stock outstanding as of September 30,
1998.
34
<PAGE>
THE BAYONNE MERGER
The following information concerning the Bayonne Merger, insofar as it relates
to matters contained in the Bayonne Merger Agreement. It describes the
material aspects of the Bayonne Merger but does not purport to be a complete
description and is qualified in its entirety by reference to the Bayonne Merger
Agreement which is incorporated herein by reference and attached hereto as ANNEX
A. Richmond County and Bayonne stockholders are urged to read carefully the
Bayonne Merger Agreement.
GENERAL
Pursuant to the terms of the Bayonne Merger Agreement, subject to the
satisfaction or waiver (where permissible) of certain conditions, including, the
receipt of all necessary regulatory approvals and the approval by the requisite
vote of the stockholders of Richmond County and Bayonne, Bayonne will be merged
with and into Richmond County and Bayonne's stockholders will become
stockholders of Richmond County. Richmond County will be the surviving
corporation in the Bayonne Merger, and will continue its corporate existence
under the laws of the State of Delaware. Upon consummation of the Bayonne
Merger, the separate corporate existence of Bayonne will terminate.
In contemplation of the Bayonne Merger, First Savings, a New Jersey State-
chartered savings and loan association and wholly owned subsidiary of Bayonne
will merge with and into a Federal interim savings bank to be formed by Richmond
County Savings, a New York State-chartered savings bank and a wholly owned
subsidiary of Richmond County. The Federal interim savings bank will then merge
with and into Richmond County Savings, with the surviving bank being named
Richmond County Savings Bank (the "Bayonne Bank Merger"). See "CERTAIN RELATED
TRANSACTIONS -- Bayonne Bank Merger Agreement."
BACKGROUND OF THE BAYONNE MERGER
Since First Savings' conversion to the mutual holding company form of
organization in 1995, the board of directors of First Savings has considered
First Savings' future and how best to enhance value for shareholders given the
competitive position of First Savings in its market area, the growth prospects
of First Savings, the operating results of First Savings and the opportunity for
increasing earnings. In 1997, First Savings undertook a conversion from the
mutual holding company form of organization to the stock holding company form of
organization. The Second-Step Conversion was completed in August 1997, at which
time First Savings became a wholly owned subsidiary of Bayonne.
In February 1998, Richmond County Savings completed its mutual to stock
conversion and became a wholly-owned subsidiary of Richmond County. Richmond
County Savings converted to stock form because, among other reasons, it believed
that this form of organization provided greater ability to expand its operations
and market area through a variety of methods, including potential acquisitions
of other financial institutions. Shortly after the completion of its
conversion, Richmond County began purchasing shares of Bayonne Common Stock in
the open market. Such purchases were unknown to Bayonne at the time.
In March 1998, Bayonne held a special meeting of shareholders for the purpose
of obtaining approval of its Bayonne Incentive Plan. While the Bayonne
Incentive Plan was approved, there was significant opposition to the Plan,
including by certain significant Bayonne stockholders. In April 1998, one such
stockholder notified Bayonne that he intended to nominate himself for election
as a director of
35
<PAGE>
Bayonne at Bayonne's next annual meeting of stockholders. This shareholder later
reiterated his intentions in June 1998.
In the following weeks, due in part to the Bayonne Board's continuing
obligations to its shareholders to attempt to enhance shareholder value and to
the potential proxy contest, the Bayonne Board and senior management considered
its strategic alternatives in light of an increasingly competitive market as
well as the continued consolidation of the banking industry. Strategic
alternatives considered by Bayonne included continued implementation of
Bayonne's business plan, acquisition of other financial institutions or the sale
of Bayonne to another financial institution. While the Bayonne Board believed
it could increase long-term shareholder value by pursuing its business plan,
senior management was authorized to explore the possibility of acquiring another
financial institution. In addition, the Bayonne Board authorized senior
management to explore strategic business combinations with other financial
institutions, particularly in light of the consideration paid in comparable
mergers in and around Bayonne's market area. Bayonne did contact a potential
acquisition target during this time, but discussions remained at a preliminary
stage and Bayonne subsequently terminated consideration of the acquisition.
Throughout this process, Bayonne utilized the services of Sandler O'Neill &
Partners, L.P. ("Sandler O'Neill"), which provided financial advisory services
to Bayonne as well as a significant number of other financial institutions in
the New York metropolitan area. In June 1998, Bayonne learned that Richmond
County had accumulated a block of its common stock. Accordingly, Bayonne
desired to learn the intentions of Richmond County and requested Sandler O'Neill
to arrange a meeting between representatives of Richmond County and Michael A.
Nilan, the President of Bayonne. Sandler O'Neill had provided financial
advisory services for Richmond County as well as Bayonne and, therefore, had
relationships with the management of both companies. The meeting, which was the
first relating to a possible business combination, took place on June 25, 1998.
At the June 25th meeting, the President of Bayonne, the Chief Financial Officer
of Richmond County and a representative of Sandler O'Neill discussed the general
terms for a potential business combination between the two companies. Based on
the results of the June 25th meeting, on June 30, 1998, representatives of
Richmond County met with members of the Bayonne Board to reiterate their
interest in discussing the acquisition of Bayonne and a range of preliminary
values was presented by Richmond County to the Bayonne Board.
Having determined that Richmond County's proposal for a business combination
merited further consideration, in early July 1998 Bayonne requested and received
approval from the Office of Thrift Supervision (the "OTS") to engage in
discussions with Richmond County. Approval from the OTS was necessary pursuant
to customary conditions imposed in the OTS's approval of Bayonne's Second-Step
Conversion. Discussion concerning a potential business combination continued in
early July 1998 and, on July 10, 1998, Richmond County provided Bayonne with an
initial draft of a definitive merger agreement. Over the course of the next
week, representatives of Bayonne and Richmond County negotiated the terms of the
Bayonne Merger Agreement and conducted due diligence investigations with respect
to each other.
On July 17, 1998, the Bayonne Board, along with Sandler O'Neill and Bayonne's
legal counsel, reviewed the contents of the Bayonne Merger Agreement together
with its exhibits. Sandler O'Neill presented the Bayonne Board with a financial
analysis of both Bayonne and Richmond County, a description of the market for
merger transactions, and an analysis of the proposed merger. The Bayonne Board
also considered, among other things, Bayonne's strategic alternatives and the
impact of the proposed transaction on employees and customers of First Savings.
At the conclusion of this meeting, the Bayonne Board authorized management to
continue negotiations with Richmond County.
36
<PAGE>
On July 19, 1998, the Bayonne Board reconvened to review the definitive merger
agreement. At this time the Bayonne Board received Sandler O'Neill's written
opinion that the Bayonne Exchange Ratio was fair to holders of Bayonne Common
Stock from a financial point of view. Thereafter, the Bayonne Board unanimously
approved the Bayonne Merger Agreement.
On July 19, 1998, the Richmond County Board considered and approved, by
unanimous vote, the Bayonne Merger, the Bayonne Merger Agreement and the related
transactions. Presentations were made by both Tucker Anthony Incorporated
("Tucker Anthony") and Richmond County's legal counsel. At the special meeting,
members of Richmond County's senior management, together with its legal and
financial advisors, reviewed with the Richmond County Board, among other things,
the background of the proposed transaction, the potential benefits of the
transaction, including the strategic rationale for the transaction, a summary of
their due diligence findings, financial and valuation analyses of the
transaction and the terms of the proposed agreements. In addition, Tucker
Anthony delivered to the Richmond County Board its written opinion to the effect
that, as of such date, the Bayonne Exchange Ratio was fair to Richmond County
stockholders from a financial point of view.
The merger agreement entered into on July 19, 1998 required that Richmond
County would account for the Bayonne Merger as a "pooling-of-interests."
Subsequent to July 19, 1998, representatives of both Richmond County and
Bayonne, together with their respective financial and legal advisors, and
Richmond County's independent auditors, determined that it would be preferable,
for financial and operational reasons, to account for the Bayonne Merger as a
"purchase." By utilizing purchase accounting, (1) Richmond County and Bayonne
would not be precluded from engaging in certain corporate transactions (such as
share repurchases) which may be inconsistent with pooling-of-interests
accounting, and (2) Richmond would not be precluded following the Bayonne
Merger from engaging in share repurchases in a manner inconsistent with pooling-
of-interests accounting.
On October 14, 1998, the Richmond County Board and the Bayonne Board each
considered presentations by each company's respective management, legal advisors
and financial advisors regarding the possible amendment to the Bayonne Merger
Agreement. In addition, Richmond County considered a presentation by its
independent auditors as well. Richmond County's and Bayonne's financial
advisors each confirmed that the possible amendments to the Bayonne Merger
Agreement did not affect their opinion to their respective clients that, as of
July 19, 1998, the Bayonne Exchange Ratio was fair, from a financial point of
view, to Richmond County or Bayonne and their respective stockholders, as the
case may be. The Richmond County Board and the Bayonne Board each authorized
its management to take further action to cause the Bayonne Merger to be
accounted for as a purchase. On October 14, 1998, Richmond County and Bayonne
formally amended the original agreement entered into by the parties on July 19,
1998 to eliminate certain provisions relating to pooling-of-interests accounting
as a condition to the consummation of the Bayonne Merger, to terminate the
Bayonne ESOP at the consummation of the Bayonne Merger and to condition the
consummation of the Bayonne Merger to be accounted for as a purchase accounting
transaction.
37
<PAGE>
RECOMMENDATION OF THE RICHMOND COUNTY BOARD; RICHMOND COUNTY'S REASONS FOR THE
MERGER
In reaching its decision to approve the Bayonne Merger Agreement, the
Richmond County Board consulted with its legal advisors regarding the legal
terms of the transaction and its obligations in consideration of the proposed
transaction. It also consulted with its financial advisors regarding the
financial aspects and fairness of the proposed transaction as well as with
management of Richmond County. Without assigning any relative or specific
weights, the Richmond County Board considered a number of factors, both from a
short-term and a long-term perspective, including the following:
(1) the Richmond County Board's familiarity with and review of Richmond
County's business, results of operations, financial condition,
competitive position and prospects;
(2) the nature of the industry in which Richmond County operates, both on
a historical and prospective basis;
(3) and the potential growth, development, productivity and profitability
of Richmond County;
(4) the current and prospective environment in which Richmond County
operates, including national and local economic conditions, the
competitive environment for thrifts and other financial institutions
generally, the trend toward consolidation in the financial services
industry and in the thrift industry and the likely effect of the
foregoing factors on Richmond County's potential growth, development,
productivity and profitability;
(5) the Richmond County Board's review, based in part on presentations by
Richmond County's management and advisors, of Bayonne's business,
financial condition, results of operations and management;
(6) the Richmond County Board's review, based in part on presentations by
Richmond County's management and advisors, of and the performance of
the Bayonne Common Stock on both a historical and prospective basis,
the strategic fit between the parties, the enhanced opportunities for
operating efficiencies that could result from the Bayonne Merger and
the respective contributions the parties would bring to a combined
institution;
(7) the Richmond County Board's review of the historical and prospective
market prices of the Richmond County Common Stock and the Bayonne
Common Stock compared to the Bayonne Merger Consideration;
(8) a comparison of the consideration to be paid to Bayonne's stockholders
compared to that paid in other comparable thrift mergers;
(9) the Richmond County Board's review with its legal and financial
advisors of alternatives to the Bayonne Merger, including the
possibility of growing internally;
(10) the Richmond County Board's belief that Bayonne has a strong financial
and capital position and that the combined company presents a high
long-term intrinsic value, substantial capacity for future growth and
considerable potential for long-term strategic value to Richmond
County stockholders;
38
<PAGE>
(11) the presentation by Tucker Anthony and the written opinion of Tucker
Anthony that the Bayonne Exchange Ratio is fair from a financial point
of view to Richmond County stockholders. See "-- Opinion of Richmond
County's Financial Advisor";
(12) the significant similarity between and the compatibility of Richmond
County's and Bayonne's business lines, cultures and management
philosophies and their commitments to the communities and customers
they each serve and to their respective employees;
(13) the expectation that the combined institution will continue to provide
quality service to the communities and customers served by both
companies;
(14) the review by the Richmond County Board with its legal and financial
advisors of the terms and conditions of the Bayonne Merger Agreement,
including the Bayonne Exchange Ratio, and the other documents executed
in connection with the Bayonne Merger;
(15) the review by the Richmond County Board with its legal and financial
advisors of the terms and conditions of the Bayonne Merger Stock
Option Agreement;
(16) the Richmond County Board's recognition of the complementary nature
of the markets served and products offered by Richmond County and
Bayonne and the ability of Richmond County to extend its market area
to include that of Bayonne;
(17) a variety of factors affecting and relating to the overall strategic
focus of Richmond County including, without limitation, opportunities
for growth in deposits, assets and earnings, (including ongoing
potential acquisition opportunities) and opportunities available to
Richmond County in the market areas where Bayonne conducts business;
(18) the anticipated revenue enhancements, cost savings and efficiencies
available from the Bayonne Merger; and
(19) the expectation that the Bayonne Merger would be treated as a tax-
free reorganization for federal income tax purposes (see "-- Federal
Income Tax Consequences of the Bayonne Merger" below).
The Richmond County Board did not assign any specific or relative weights
to the factors under consideration. The Richmond County Board believes that the
Bayonne Merger is fair to, and in the best interests of, Richmond County and its
stockholders. ACCORDINGLY, THE RICHMOND COUNTY BOARD UNANIMOUSLY RECOMMENDS
THAT RICHMOND COUNTY'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE BAYONNE MERGER
AGREEMENT.
OPINION OF RICHMOND COUNTY'S FINANCIAL ADVISOR
Tucker Anthony was retained by Richmond County in July 1998 for the purpose
of rendering a fairness opinion to the Richmond County Board in connection with
Richmond County's proposed acquisition of Bayonne. Richmond County selected
Tucker Anthony for a number of reasons, including its familiarity with Richmond
County and Bayonne and their respective businesses. Richmond County also
considered Tucker Anthony's experience and reputation in the area of valuation
and financial advisory work generally, and in relation to financial institutions
specifically. Tucker Anthony makes a market in Bayonne Common Stock. Tucker
Anthony is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers
39
<PAGE>
and acquisitions, leveraged buyouts, negotiated underwritings, private
placements and valuations for corporate and other purposes. From time to time,
Tucker Anthony and its affiliates may hold long or short positions in Bayonne
Common Stock.
Tucker Anthony has rendered written opinions to the Richmond County Board
to the effect that, as of July 19, 1998 and as of the date of this Joint Proxy
Statement/Prospectus, the consideration to be paid to the holders of Bayonne
Common Stock in the Merger pursuant to the Bayonne Merger Agreement is fair,
from a financial point of view, to the holders of Richmond County Common Stock.
THE FULL TEXT OF THE FAIRNESS OPINION DATED AS OF THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS, SETTING FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE REVIEW UNDERTAKEN BY TUCKER
ANTHONY, IS INCLUDED AS ANNEX C OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
HOLDERS OF RICHMOND COUNTY COMMON STOCK ARE URGED TO READ THE FAIRNESS OPINION
IN ITS ENTIRETY. This opinion is directed to the Richmond County Board only and
does not constitute a recommendation to any holder of Richmond County Common
Stock as to how such shareholder should vote at the Richmond County Meeting.
Richmond County and Tucker Anthony have agreed in the engagement letter pursuant
to which Richmond County engaged Tucker Anthony that they do not believe any
person other than the Richmond County Board has the legal right to rely on the
opinion and, absent any controlling precedent, would resist any assertion
otherwise. The July 19, 1998 opinion is substantially identical to the opinion
attached hereto.
As compensation for its services as financial advisor, including issuance
of the opinions, Richmond County has agreed to pay Tucker Anthony a total of
$150,000, all of which has been paid as of the date hereof. Richmond County has
also agreed to reimburse Tucker Anthony for its out-of-pocket expenses and to
indemnify Tucker Anthony against certain liabilities arising out of its
services.
In arriving at its opinion dated as of the date hereof, Tucker Anthony,
among other things, reviewed the Bayonne Merger Agreement; reviewed the
Registration Statement on Form S-4, including this Joint Proxy
Statement/Prospectus; reviewed certain historical financial and other
information concerning Richmond County for the five fiscal years ended June 30,
1998 [and for the quarter ended September 30, 1998], including Richmond County's
reports on Forms 10-K and 10-Q; reviewed certain historical financial and other
information concerning Bayonne for the five fiscal years ended March 31, 1998
and for the [six months ended September 30, 1998], including Bayonne's reports
on Forms 10-K and 10-Q; held discussions with the senior management of Richmond
County and Bayonne with respect to their past and current financial performance,
financial condition and future prospects; reviewed certain internal financial
data, projections and other information of Richmond County and Bayonne including
financial projections approved by management; analyzed certain publicly
available information of other financial institutions that it deemed comparable
or otherwise relevant to its inquiry, and compared Richmond County and Bayonne
from a financial point of view with certain of these institutions; compared the
consideration to be paid by Richmond County pursuant to the Bayonne Merger
Agreement with the consideration paid by acquirors in other acquisitions of
financial institutions that it deemed comparable or otherwise relevant to its
inquiry; reviewed publicly available earnings estimates, historical trading
activity and ownership data of Richmond County Common Stock and Bayonne Common
Stock; and conducted such other financial studies, analyses and investigations
and reviewed such other information as it deemed appropriate to enable it to
render its opinion. In its review, it also took into account an assessment of
general economic, market and financial conditions and certain industry trends
and related matters. Tucker Anthony's opinions were necessarily based upon
conditions as they existed and could be evaluated on the date thereof and the
information made available to Tucker Anthony through the date hereof.
No limitations were imposed by the Boards of Directors of Richmond County
or Bayonne upon Tucker Anthony with respect to the investigations made or
procedures followed by Tucker Anthony in its
40
<PAGE>
review and analysis. In its review and analysis and in arriving at its opinions,
Tucker Anthony assumed and relied upon the accuracy and completeness of all the
financial information publicly available or provided to it by Richmond County
and Bayonne, and did not attempt to verify any of such information. Tucker
Anthony assumed (1) that the financial projections of Richmond County and
Bayonne provided to it with respect to the results of operations likely to be
achieved by each company were prepared on a basis reflecting the best currently
available estimates and judgments of Richmond County's and Bayonne's management
and advisors as to future financial performance and results, and (2) that such
forecasts and estimates would be realized in the amounts and in the time periods
estimated. Tucker Anthony also assumed, without independent verification, that
the current and projected aggregate reserves for possible loan losses for
Richmond County and Bayonne were adequate to cover such losses. Tucker Anthony
did not make or obtain any independent evaluations or appraisals of any assets
or liabilities of Richmond County, Bayonne or any of their respective
subsidiaries nor did it verify any of Richmond County's or Bayonne's books or
records or review any individual loan credit files.
On July 19, 1998, Tucker Anthony made a presentation, and subsequently
rendered a written fairness opinion, to Richmond County's Board. Set forth
below is a summary of the main elements of the financial analyses performed by
Tucker Anthony in connection with rendering its written opinion of July 19,
1998. In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Tucker Anthony performed procedures to update certain
analyses and reviewed the assumptions on which such analyses were based and the
factors considered in connection therewith.
STOCK TRADING ANALYSIS. Tucker Anthony examined the historical trading
prices, volume and market pricing multiples of Richmond County Common Stock and
Bayonne Common Stock, and compared the historical trading prices of Richmond
County Common Stock and Bayonne Common Stock in relation to movements in certain
stock indices, specifically the Standard & Poor's Major Regional Bank Index and
the Standard and Poor's Savings & Loan Index, as well as to indices of other
selected publicly traded financial institutions. Specifically, the index of
other selected publicly traded financial institutions compared to Richmond
County Common Stock included Commonwealth Bancorp, Inc., Dime Community
Bancshares, Inc., Flushing Financial Corporation, Haven Bancorp, Inc., Ocwen
Financial Corporation, Parkvale Financial Corporation, PennFed Financial
Services, Inc., Queens County Bancorp, Inc., Roslyn Bancorp, Inc., Staten
Island Bancorp, Inc., WSFS Financial Corporation and York Financial Corporation.
The index of other selected publicly traded financial institutions compared to
Bayonne Common Stock included ESB Financial Corporation, Fidelity Bancorp, Inc.,
First Bell Bancorp, Inc., First Keystone Financial, Inc., GA Financial, Inc.,
Harleysville Savings Bank, Little Falls Bancorp, Inc., Pamrapo Bancorp, Inc.,
Pulse Bancorp, Inc., Statewide Financial Corporation and TF Financial
Corporation. Tucker Anthony also compared financial data and financial ratios
for these two groups of financial institutions to Richmond County and Bayonne,
as detailed in the section "-- Analysis of Selected Publicly Traded Companies"
below.
CONTRIBUTION ANALYSIS. Tucker Anthony analyzed the contribution of each
of Richmond County and Bayonne to, among other things, the stockholders' equity
and after-tax net income of the pro forma combined company. This analysis
showed that, among other factors, Bayonne would have contributed 30.5%, 22.7%,
and 22.8% of the assets, stockholders' equity, and net income of the pro forma
combined company as of and for the 12 months ended June 30, 1998, respectively.
This is compared with a proposed ownership of 25.6% of the combined company to
be held by the holders of Bayonne Common Stock following the Bayonne Merger.
PRO FORMA MERGER ANALYSIS. Based on projections provided by Richmond
County, Tucker Anthony analyzed certain pro forma effects of the Bayonne Merger.
Assuming a price per share of Richmond County Common Stock of $18.13 (as of July
17, 1998), this analysis indicated that, while the Bayonne Merger would be
modestly dilutive to tangible book value per share, the Bayonne Merger
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would be accretive to earnings in the first full year following the close of the
Bayonne Merger. In this analysis Tucker Anthony assumed that Richmond County
performed in accordance with the earnings forecasts and expected synergies
provided to Tucker Anthony by Richmond County's senior management.
ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS. Tucker Anthony reviewed
and performed analysis on 38 unassisted acquisitions of thrift institutions in
the New York and surrounding states (the "Selected Market Transactions") and 28
unassisted acquisitions of thrift institutions in the U.S. with a transaction
size between $100 million and $250 million (the "Selected U.S. Transactions")
announced since January 1, 1997, comparing the target financial institutions'
capital structure and profitability to Bayonne's current results of operations
and financial condition. The Selected Market Transactions and Selected U.S.
Transactions were chosen because they represented merger and acquisition
transactions which involved target financial institutions exhibiting certain
characteristics -- including asset size, geographic proximity and business risk
- -- similar to those exhibited by Bayonne. Excluding the highest and lowest
ratios, the target financial institutions involved in the Selected Market
Transactions and the Selected U.S. Transactions had an average return on assets
for the latest 12 months prior to announcement date of 0.89% and 0.93% and an
average return on equity for the latest 12 months prior to announcement date of
9.79% and 9.39%, respectively, as compared to 0.64% and 4.36%, respectively, for
Bayonne. Set forth below is a summary of the analysis with respect to the
Selected Market Transactions and the Selected U.S. Transactions.
<TABLE>
<CAPTION>
Selected Market Selected U.S.
Transactions Transactions
------------ ------------
Bayonne Offer Offer
Offer/(1)/ Median Percentile/(2)/ Median Percentile/(2)/
-------- ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Price/Trailing Twelve Months Earnings 26.8x 22.9x 72% 21.6x 67%
Price/Book Value 1.79x 2.14x 30% 1.97x 37%
Price/Adjusted Book Value/(3)/ 2.47x 1.90x 70% 2.17x 69%
Premium to Market Price/(4)/ 111% 111% 50% 111% 57%
</TABLE>
______________________
(1) Based upon value of $19.03 per share of Bayonne Common Stock (based on the
July 17, 1998 closing price of Richmond County Common Stock of $18.13). If
the value of the Richmond County Common Stock were based on its average
closing bid price per share of $18.45 during the fifteen trading day period
prior to the announcement of the Bayonne Merger, implying a value of $19.38
per share of Bayonne Common Stock, the corresponding multiples in the table
would be: price/trailing twelve months earnings of 27.3x; price/book value
of 1.82x; price/10% book value of 2.51x; and premium to market price of
113%.
(2) Position of the Richmond County offer in relation to percentile rankings of
the Selected Market Transactions and the Selected U.S. Transactions,
respectively.
(3) Because of the extraordinary nature of Bayonne's capital base relative to
most other financial institutions, Tucker Anthony also analyzed the terms
of the proposed transaction and the terms of the selected acquisition
transactions on an adjusted 10% book value basis. This analysis reviews
transaction statistics of premiums paid over a theoretical book value based
on adjusting the aggregate transaction value on a dollar-for-dollar basis
for differentials between actual book value and the theoretical book value
calculated at 10% of total assets.
(4) Premium to market price for Selected Market Transactions and the Selected
U.S. Transactions based on stock price one week prior to announcement;
market price for Bayonne of $17.13 per share reflects closing price on July
17, 1998.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Tucker Anthony compared
selected financial data and financial ratios of Richmond County and Bayonne to
the corresponding data and ratios of certain publicly traded thrift institutions
located in New York, New Jersey and surrounding states with total assets
comparable to Richmond County and Bayonne, respectively. The thrift institutions
included in the comparison to Richmond County were: Commonwealth Bancorp, Inc.,
Dime Community Bancshares, Inc., Flushing Financial Corporation, Haven Bancorp,
Inc., Ocwen Financial Corporation, Parkvale Financial Corporation, PennFed
Financial Services, Inc., Queens County Bancorp, Inc., Roslyn Bancorp, Inc.,
Staten Island Bancorp, Inc., WSFS Financial Corporation and York Financial
Corporation. The thrift institutions included in the comparison to Bayonne were:
ESB Financial
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Corporation, Fidelity Bancorp, Inc., First Bell Bancorp, Inc., First Keystone
Financial, Inc., GA Financial, Inc., Harleysville Savings Bank, Little Falls
Bancorp, Inc., Pamrapo Bancorp, Inc., Pulse Bancorp, Inc., Statewide Financial
Corporation and TF Financial Corporation. The selected thrifts, as groups,
exhibited certain characteristics -- including asset size, geographic proximity
and business risk -- similar to those exhibited by Richmond County and Bayonne,
respectively.
The comparison of Richmond County to its selected thrift peer group showed
among other things that based on financial data as of June 30, 1998 for Richmond
County and March 31, 1998 for the selected thrift peer group:
(1) the ratio of Richmond County's net loans to assets was 40.4% compared
to an average of 59.7% for its peer group;
(2) the ratio of Richmond County's loan loss reserves to non-performing
assets was 124.2% compared to 129.3% for its peer group;
(3) the ratio of Richmond County's non-performing assets (including loans
90 days past due) to the sum of shareholders' equity and loan loss
reserves was 1.74% compared to an average of 7.70% for its peer group;
(4) the ratio of Richmond County's equity to total assets was 20.6% as
compared to an average of 11.4% for its peer group;
(5) the latest quarter annualized return on assets for Richmond County was
1.42% compared to an average of 1.06% for its peer group;
(6) the latest quarter annualized return on equity for Richmond County was
6.74%, compared to an average of 10.50% for its peer group;
(7) the ratio of Richmond County's market price to its book value per
common share was 147% compared to an average of 190% for its peer
group;
(8) the price/earnings ratio for the trailing 12 months earnings for
Richmond County was 30.5x, compared to an average of 20.3x for its
peer group; and
(9) the average latest quarter annualized dividend yield for Richmond
County was 1.3% as compared to 1.5% for its peer group.
The comparison of Bayonne to its selected thrift peer group showed among
other things that based on financial data as of June 30, 1998 for Bayonne and
March 31, 1998 for the selected thrift peer group:
(1) the ratio of Bayonne's net loans to assets was 45.4% compared to an
average of 49.4% for its peer group;
(2) the ratio of Bayonne's loan loss reserves to non-performing assets was
75.7% compared to 153.2% for its peer group;
(3) the ratio of Bayonne's non-performing assets to the sum of
shareholders' equity and loan loss reserves was 3.9% compared to an
average of 5.8% for its peer group;
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(4) the ratio of Bayonne's equity to total assets was 13.8% as compared to
an average of 9.3% for its peer group;
(5) the latest quarter annualized return on assets for Bayonne was 0.61%
compared to an average of 0.85% for its peer group;
(6) the latest quarter annualized return on equity for Bayonne was 4.17%,
compared to an average of 9.46% for its peer group;
(7) the ratio of Bayonne's market price to its book value per common share
was 161% compared to an average of 162% for its peer group;
(8) the price/earnings ratio for the trailing 12 months earnings for
Bayonne was 24.2x, compared to an average of 16.4x for its peer group;
and
(9) the average latest quarter annualized dividend yield for Bayonne was
1.5% as compared to 2.0% for its peer group.
EVALUATION OF AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER. Tucker
Anthony was asked by Richmond County to review the financial implications of an
Amended and Restated Agreement and Plan of Merger for the Bayonne Merger
relative to the proposed accounting change as pertains to the holders of
Richmond County. Tucker Anthony updated its market and pro forma analyses
(incorporating certain additional financial information provided to Tucker
Anthony by Richmond County management) to evaluate the financial implications of
the proposed change in accounting treatment. On October 14, 1998, Tucker
Anthony made a presentation to the Richmond County Board in which it reviewed
the financial implications of purchase and pooling of interests accounting
treatments in connection with the proposed merger and updated the Richmond
County Board on current market conditions of financial institutions similar to
Richmond County and Bayonne as well as comparable merger and acquisition
activity that occurred subsequent to July 19, 1998. Among other observations,
Tucker Anthony noted that, according to financial information provided by
Richmond County management, the amount of goodwill that would result from
accounting for the Bayonne Merger utilizing the purchase method would be
approximately $23 million and would be amortized over 15 years. Pursuant to its
analysis, Tucker Anthony concluded and reported to the Richmond County Board
that accounting for the Bayonne Merger utilizing the purchase method would not
change its opinion rendered July 19, 1998.
The foregoing is a summary of the main elements of the financial analyses
performed by Tucker Anthony, but it does not purport to be a complete
description of such analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
summary description. Accordingly, notwithstanding the separate factors
summarized above, Tucker Anthony believes that its analyses must be considered
as a whole and that selecting portions of its analyses and factors considered by
it, without considering all analyses and factors, or attempting to ascribe
relative weights to some or all of such analyses or factors, could create an
incomplete view of the evaluation process underlying Tucker Anthony's opinion.
In addition, Tucker Anthony may have used the various analyses for different
purposes and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Tucker Anthony's
view of the actual value of Bayonne to Richmond County. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given more weight than any other analyses.
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In performing its analyses, Tucker Anthony made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of Richmond County and
Bayonne. The analyses performed by Tucker Anthony are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by such analyses. Such analyses
were prepared solely as a part of Tucker Anthony's analysis of the fairness,
from a financial point of view, to the holders of Richmond County Common Stock
of the consideration to be paid in the Bayonne Merger to the holders of Bayonne
Common Stock, and were provided to the Richmond County Board in connection
with the delivery of Tucker Anthony's opinion. The analyses do not purport to
be appraisals or to reflect the prices at which Richmond County or Bayonne might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. In addition, as described above, Tucker
Anthony's opinion is just one of the many factors taken into consideration by
Richmond County's Board (see "-- Background of the Bayonne Merger" and "--
Recommendation of the Richmond County Board; Richmond County's Reasons for the
Merger."
RECOMMENDATION OF THE BAYONNE BOARD; BAYONNE'S REASONS FOR THE MERGER
The Bayonne Board believes that the terms of the Bayonne Merger Agreement,
which are the product of arm's length negotiations between representatives of
Bayonne and Richmond County, are fair and in the best interests of Bayonne and
its stockholders. In the course of reaching its determination, the Bayonne
Board consulted with legal counsel with respect to its legal duties, the terms
of the Bayonne Merger Agreement and the issues related thereto. The Bayonne
Board consulted with its financial advisor with respect to the financial aspects
and fairness of the transaction from a financial point of view; and with senior
management regarding, among other things, operational matters.
In reaching its determination to approve the Bayonne Merger Agreement, the
Bayonne Board considered the following:
(1) The Bayonne Board considered that Bayonne and Richmond County serve
contiguous market areas with similar communities and that the expanded
reach of the combined company would benefit existing customers and
make the combined company more attractive to potential customers.
(2) The Bayonne Board considered that Richmond County offers a broader
range of products and services and that the Merger would provide
Bayonne's customers with access to these products and services without
Bayonne having to undergo the expense of introducing them on its own.
(3) The Bayonne Board considered the strength of Richmond County's
management and the similarity of operating philosophies between the
companies.
(4) The Bayonne Board considered that the resources of the charitable
foundation established by Richmond County in connection with the
conversion of Richmond County Savings would become available to
Bayonne's communities as a result of the Bayonne Merger.
(5) The Bayonne Board analyzed information with respect to the financial
condition, results of operations, cash flow, businesses and prospects
of Bayonne. In this regard, the Bayonne Board analyzed the options of
selling Bayonne or continuing on a stand-alone basis. The range of
values on a sale of control basis were determined to generally exceed
the present value of Bayonne shares on a stand-alone basis.
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(6) The Bayonne Board considered the written opinion of Sandler O'Neill
that, as of July 19, 1998, the consideration to be received by holders
of Bayonne Common Stock pursuant to the Bayonne Merger Agreement was
fair to Bayonne stockholders from a financial point of view. The
Bayonne Board also considered that Sandler O'Neill provides financial
advisory services to Richmond County. See "-- Opinion of Bayonne's
Financial Advisor."
(7) The Bayonne Board considered the current operating environment,
including, but not limited to, the continued consolidation and
increasing competition in the banking and financial services
industries and the prospect for further changes in these industries.
(8) The Bayonne Board considered the other terms of the Bayonne Merger
Agreement and exhibits, including the opportunity for Bayonne
stockholders to receive shares of Richmond County Common Stock in a
tax free exchange.
(9) The Bayonne Board considered the detailed financial analyses, pro
forma and other information with respect to Bayonne and Richmond
County discussed by Sandler O'Neill, as well as the Bayonne Board's
knowledge of Bayonne, Richmond County and their respective businesses.
In this regard, the latest publicly-available financial and other
information for Bayonne and Richmond County were analyzed, including a
comparison to publicly-available financial and other information for
other similar financial institutions.
(10) The Bayonne Board considered the likelihood of the merger and related
transactions being approved by the appropriate regulatory authorities,
including factors such as market share analyses, Richmond County's
Community Reinvestment Act ("CRA") rating at that time and the
estimated pro forma financial impact of the transaction on Richmond
County. See "-- Regulatory Approvals Needed to Complete the Bayonne
Merger."
(11) The Bayonne Board considered the fact that the Bayonne Merger
Agreement prohibits Bayonne from initiating or encouraging discussion
with third parties relating to an alternative transaction and that
Richmond County required Bayonne to enter into the Bayonne Merger
Stock Option Agreement, and the fact that Richmond County required
such provisions as a condition to entering into the Bayonne Merger
Agreement.
(12) The Bayonne Board considered that it did not solicit offers from other
possible acquirors or determine whether other institutions would be
interested in acquiring Bayonne and, if so, on what terms. The
Bayonne Board believed that a tax-free transaction pursuant to which
Bayonne stockholders receive shares of the acquiror would be desired
by most stockholders. The Bayonne Board determined that the unique
features of Richmond County, the financial analysis provided by
Sandler O'Neill, the pro forma review of the combined entity, and the
fact that there was no controlling stockholder of Richmond County
provided a reasonable basis for not seeking other offers prior to
recommending the proposed transaction to Bayonne stockholders.
The foregoing discussion of the information and factors considered by the
Bayonne Board is not intended to be exhaustive, but constitutes all material
factors considered by the Bayonne Board. In reaching its determination to
approve and recommend the Bayonne Merger Agreement, the Bayonne Board did not
assign any relative or specific weights to the foregoing factors, and individual
directors may have weighed factors differently.
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The Bayonne Board believes that the Bayonne Merger is in the best interests
of Bayonne and its stockholders. ACCORDINGLY, THE BAYONNE BOARD UNANIMOUSLY
RECOMMENDS THAT BAYONNE'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
BAYONNE MERGER AGREEMENT.
OPINION OF BAYONNE'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated as of March 10, 1998 (the "Sandler
O'Neill Agreement"), Bayonne retained Sandler O'Neill as an independent
financial advisor in connection with Bayonne's general valuation analyses and
its consideration of possible business combinations with a second party.
Sandler O'Neill is a nationally recognized investment banking firm whose
principal business specialty is financial institutions. In the ordinary course
of its investment banking business, Sandler O'Neill is regularly engaged in the
valuation of financial institutions and their securities in connection with
mergers and acquisition and other corporate transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to Bayonne in connection with the Bayonne Merger. In
connection therewith, the Bayonne Board requested Sandler O'Neill to render its
opinion as to the fairness of the Bayonne Exchange Ratio to the shareholders of
Bayonne Common Stock from a financial point of view. On July 19, 1998 Sandler
O'Neill delivered to the Bayonne Board its written opinion that, as of such
date, the Bayonne Exchange Ratio was fair to the holders of shares of Bayonne
Common Stock from a financial point of view. Sandler O'Neill has also delivered
to the Bayonne Board a written opinion dated the date of this Joint Proxy
Statement/Prospectus (the "Sandler O'Neill Fairness Opinion") which reflects the
fact that the Bayonne Merger will be accounted for as a purchase transaction
(and not as a pooling of interests), but is otherwise substantially identical to
the July 19, 1998 opinion. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS
OPINION, WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
CONNECTION WITH RENDERING SUCH OPINION, IS ATTACHED AS ANNEX D TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO ANNEX D. HOLDERS OF SHARES OF BAYONNE COMMON STOCK ARE URGED TO
READ THE SANDLER O'NEILL FAIRNESS OPINION IN ITS ENTIRETY IN CONNECTION WITH
THEIR CONSIDERATION OF THE PROPOSED BAYONNE MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE BAYONNE BOARD FOR
ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE BAYONNE EXCHANGE RATIO TO HOLDERS OF SHARES OF BAYONNE COMMON
STOCK. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF BAYONNE TO
ENGAGE IN THE BAYONNE MERGER OR ANY OTHER ASPECT OF THE BAYONNE MERGER AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES OF BAYONNE COMMON STOCK
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE BAYONNE MEETING WITH RESPECT TO
THE BAYONNE MERGER OR ANY OTHER MATTER RELATED THERETO.
In connection with rendering its July 17, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of the
material analyses performed by Sandler O'Neill, but does not purport to be a
complete description of all the analyses underlying Sandler O'Neill's opinion.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to a partial analysis or summary
description. Sandler O'Neill believes that its analyses must be considered as a
whole and that selecting portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and processes underlying its opinion. In
performing its analyses, Sandler O'Neill made numerous assumptions with respect
to industry performance, business and economic conditions and various other
matters, many of which cannot be predicted and are beyond the control of
Bayonne, Richmond County and Sandler O'Neill. Any estimates contained in
Sandler O'Neill's analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than
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such estimates. Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Because such estimates are inherently subject
to uncertainty, neither Bayonne, Richmond County nor Sandler O'Neill assumes
responsibility for their accuracy.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Richmond County Common
Stock on July 17, 1998 of $18.13 and the Bayonne Exchange Ratio of 1.05, Sandler
O'Neill calculated an implied transaction value per share of Bayonne Common
Stock of $19.03. Based upon such implied transaction value and Bayonne's June
30, 1998 financial information, Sandler O'Neill calculated the price to tangible
book value and price to last twelve months' normalized earnings. This analysis
yielded a price to tangible book value multiple of 1.81x and a price to last
twelve months' earnings multiple of 27.6x.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Bayonne Common Stock and Richmond County
Common Stock, and the relationship between the movements in the prices of
Bayonne Common Stock and Richmond County Common Stock, respectively, to
movements in certain stock indices, including the Standard & Poor's 500 Index
(the "S&P Index"), the NASDAQ Bank Index (the "Bank Index") and selected
composite peer groups of publicly traded savings institutions identified as the
Regional Group and Peer Group, respectively, below. During the period August
22, 1997 through July 15, 1998, Bayonne Common Stock outperformed each of the
indices to which it was compared. During the period February 18, 1998 through
July 15, 1998 Richmond County Common Stock slightly underperformed the S&P Index
and outperformed each of the other indices to which it was compared.
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
Bayonne and two different groups of savings institutions. The first group
consisted of Bayonne and the following sixteen publicly traded regional savings
institutions (the "Regional Group"): Ambanc Holding Co. Inc., Carver Bancorp
Inc., ESB Financial Corporation, Fidelity Bancorp Inc., First Bell Bancorp Inc.,
Flushing Financial Corporation, FMS Financial Corporation, GA Financial Inc.,
Lakeview Financial Corp., Northeast PA Financial Corporation, Parkvale Financial
Corporation, Peoples Bancorp Inc., Progress Financial Corporation, Raritan
Bancorp Inc., Statewide Financial Corporation, and TF Financial Corporation.
Sandler O'Neill also compared Bayonne to a group of fourteen publicly traded
savings institutions which had a return on average equity (based on last twelve
months' earnings) of greater than 14.0% and a price to tangible book value of
greater than 170% (the "Highly Valued Group"). The Highly Valued Group included
the following institutions: American Bank of Connecticut, CFSB Bancorp Inc.,
Coastal Financial Corporation, FMS Financial Corp., Highland Bancorp Inc., Home
Federal Bancorp, Lakeview Financial Corp., MECH Financial Inc., Metropolitan
Financial Corp., MetroWest Bank, People's Bancshares Inc., First Mutual Savings
Bank, Progress Financial Corporation, and PVF Capital Corporation. The analysis
compared publicly available financial information for Bayonne and the median
data for each of the Regional Group and the Highly Valued Group as of and for
each of the years ended December 31, 1993 through December 31, 1997 and as of
and for the twelve months ended March 31, 1998.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Richmond County and two different groups of savings institutions. The first
group consisted of Richmond County and the following thirteen publicly traded
savings institutions (the "Peer Group"): Dime Community Bancshares Inc., ESB
Financial Corp., First Source Bancorp Inc., Flushing Financial Corp., Haven
Bancorp Inc., JSB Financial Inc., Ocwen Financial Corp., Parkvale Financial
Corp., PennFed Financial Services Inc., Peoples Bancorp Inc., Queens County
Bancorp Inc., WSFS Financial Corp., and York Financial Corp. Sandler O'Neill
also
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compared Richmond County to a group of nine publicly traded savings institutions
which had a return on average equity (based on last twelve months' earnings) of
greater than 14.5% and a price to tangible book value of greater than 200% (the
"Large Thrift Highly Valued Group"). The Large Thrift Highly Valued Group was
comprised of Anchor BanCorp Wisconsin, Andover Bancorp Inc., CFSB Bancorp Inc.,
D&N Financial Corp., First Federal Capital Corp., Metropolitan Financial Corp.,
Parkvale Financial Corp., People's Bancshares Inc., and WSFS Financial Corp. The
analysis compared publicly available financial information for Richmond County
and the median data for each of the Peer Group and the Large Thrift Highly
Valued Group as of and for each of the years ended December 31, 1993 through
December 31, 1997 and as of and for the twelve months ended March 31, 1998.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed 34
transactions announced from January 1, 1998 to July 15, 1998, involving publicly
traded savings institutions nationwide as acquired institutions with transaction
values greater than $15 million ("Nationwide Transactions"), and 11 transactions
announced from January 1, 1998 to July 15, 1998, involving public savings
institutions in the MidAtlantic Region (Maryland, New Jersey, New York, and
Pennsylvania) as acquired institutions with transaction values greater than $15
million ("Regional Transactions"). Sandler O'Neill reviewed the ratios of
transaction values to last four quarters' earnings, transaction value to book
value, transaction value to tangible book value, tangible book premium to core
deposits, transaction value to total deposits and transaction value to total
assets and computed high, low, mean, and median ratios and premiums for the
respective groups of transactions. These multiples were applied to Bayonne's
financial information as of and for the twelve months ended March 31, 1998.
Based upon the median multiples for Nationwide Transactions, Sandler O'Neill
derived an imputed range of values per share of Bayonne Common Stock of $15.05
to $24.91. Based upon the median multiples for Regional Transactions, Sandler
O'Neill derived an imputed range of values per share of Bayonne Common Stock of
$15.00 to $22.26.
No company involved in the transactions included in the above analysis is
identical to Bayonne and no transaction included in the above analysis is
identical to the Merger. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of Bayonne and Richmond County and the companies to which they are
being compared.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Bayonne through the year 2005 under various circumstances,
assuming Bayonne performed in accordance with the earnings forecasts of its
management and certain variations thereof. To approximate the terminal value of
Bayonne Common Stock at December 31, 2005, Sandler O'Neill applied price to
earnings multiples ranging from 12x to 27x and applied multiples of tangible
book value ranging from 100% to 350%. The dividend income streams and terminal
values were then discounted to present values using different discount rates
(ranging from 9% to 15%) chosen to reflect different assumptions regarding
required rates of return of holders or prospective buyers of Bayonne Common
Stock. This analysis, assuming the current dividend payout ratio and
management's earnings forecasts, indicated an imputed range of values per share
of Bayonne Common Stock between $6.77 and $18.62 when applying the price to
earnings multiples, and an imputed range of values per share of Bayonne Common
Stock of between $7.67 and $32.15 when applying multiples of tangible book
value. In connection with its analysis, Sandler O'Neill used sensitivity
analyses to consider the effects changes in the underlying assumptions
(including variations with respect to the growth rate of assets, net interest
spread, non-interest income, non-interest expenses and dividend payout ratio)
would have on the resulting present value and discussed these effects with the
Bayonne Board. Sandler O'Neill noted that the discounted dividend stream and
terminal value analysis is a widely used valuation methodology, but the results
of such methodology are highly dependent upon the numerous assumptions that must
be made, and the results thereof are not necessarily indicative of actual values
or actual future results.
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PRO FORMA MERGER ANALYSIS. Sandler O'Neill analyzed certain potential pro
forma effects of the Bayonne Merger through June 30, 2005, based upon the
Bayonne Exchange Ratio of 1.05, Bayonne's and Richmond County's current and
projected income statements and balance sheets, and assumptions regarding the
economic environment, accounting and tax treatment of the Bayonne Merger,
charges associated with the Bayonne Merger, operating efficiencies and other
adjustments discussed with senior managements of Bayonne and Richmond County.
Sandler O'Neill updated its analysis following the amendment and
restatement of the Bayonne Merger Agreement to reflect the fact that the Bayonne
Merger will be accounted for as a purchase transaction, and to include a
projected repurchase of 10% of the pro forma number of shares of Richmond County
Common Stock outstanding after giving effect to the Bayonne Merger. This
analysis indicated that the Bayonne Merger would be accretive to Richmond
County's earnings per share for all periods analyzed, and slightly dilutive to
tangible book value per share of Richmond County Common Stock in the first full
fiscal year following the Bayonne Merger and accretive for all subsequent
periods analyzed. This analysis also indicated that, from a Bayonne
shareholder's perspective, as compared to the projected stand-alone performance
of Bayonne, the Merger would be accretive to Bayonne's earnings per share and
accretive to tangible book value for all periods analyzed.
CONTRIBUTION ANALYSIS. Sandler O'Neill reviewed the relative contributions
to, among other things, total assets, total net loans, total deposits, total
borrowings, total equity, normalized last quarter annualized net income, and
market capitalization to be made by Bayonne and Richmond County to the combined
institution based on data at and for the twelve months ended March 31, 1998.
This analysis indicated that Bayonne's implied contribution was 30.6% of total
assets, 29.6% of total net loans, 31.3% of total deposits, 36.6% of total
borrowings, 23.4% of total equity, 27.1% of normalized latest quarter annualized
net income and 24.2% of market capitalization. On a fully diluted basis, based
upon the Bayonne Exchange Ratio of 1.05, holders of Bayonne Common Stock would
own approximately 25.9% of the outstanding shares of the combined company.
In connection with rendering its July 17, 1998 opinion, Sandler O'Neill
reviewed, among other things:
(1) the Bayonne Merger Agreement and exhibits thereto;
(2) the Bayonne Stock Option Agreement;
(3) certain publicly available financial statements of Bayonne and other
historical financial information provided by Bayonne that Sandler
O'Neill deemed relevant;
(4) certain publicly available financial statements of Richmond County and
other historical financial information provided by Richmond County
that Sandler O'Neill deemed relevant;
(5) certain financial analyses and forecasts of Bayonne prepared by and
reviewed with management of Bayonne and the views of senior management
of Bayonne regarding Bayonne's past and current business, operations,
results thereof, financial condition and future prospects;
(6) certain financial analyses and forecasts of Richmond County prepared
by and reviewed with management of Richmond County and the views of
senior management of Richmond County regarding Richmond County's past
and current business, operations, results thereof, financial condition
and future prospects;
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(7) the pro forma impact of the Bayonne Merger;
(8) the publicly reported historical price and trading activity for
Bayonne and Richmond County common stock, including a comparison of
certain financial and stock market information for Bayonne and
Richmond County with similar publicly available information for
certain other companies the securities of which are publicly traded;
(9) the financial terms of recent business combinations in the savings
institution industry, to the extent publicly available;
(10) the current market environment generally and the banking environment
in particular; and
(11) such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Sandler O'Neill
considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its July 17, 1998 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions upon which such analyses were
based and the factors considered in connection therewith. In performing such
procedures, Sandler O'Neill considered the impact on its analyses arising out of
the accounting for the Bayonne Merger through the fact that the Bayonne Merger
will be accounted for as a purchase transaction, and not as a pooling of
interests.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all the
financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of Bayonne or Richmond County or any of their respective
subsidiaries, or the collectibility of any such assets, nor was it furnished
with any such evaluations or appraisals. Sandler O'Neill is not an expert in
the evaluation of allowances for loan losses and it has not made an independent
evaluation of the adequacy of the allowance for loan losses of Bayonne or
Richmond County, nor has it reviewed any individual credit files relating to
Bayonne or Richmond County. With Bayonne's consent, Sandler O'Neill has assumed
that the respective aggregate allowances for loan losses for both Bayonne and
Richmond County are adequate to cover such losses and will be adequate on a pro
forma basis for the combined entity. In addition, Sandler O'Neill has not
conducted any physical inspection of the properties or facilities of Bayonne or
Richmond County. With respect to all financial information and projections
reviewed with each company's management, Sandler O'Neill assumed that they had
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of Bayonne and Richmond County and that such performances
will be achieved. Sandler O'Neill expressed no opinion as to such financial
projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the Merger
Agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the Merger
Agreement are not waived. Sandler O'Neill also assumed, with Bayonne's consent,
that there has been no material change in Bayonne's and Richmond County's
assets, financial condition, results of operations, business or prospects since
the date of the last publicly filed financial statements available to them, that
Bayonne and Richmond County will remain as going
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concerns for all periods relevant to its analyses, and that the Bayonne Merger
will qualify as a tax-free reorganization for federal income tax purposes.
Under the Sandler O'Neill Agreement, Bayonne has agreed to pay Sandler
O'Neill a transaction fee in connection with the Bayonne Merger, a substantial
portion of which is contingent upon the consummation of the Bayonne Merger.
Under the terms of the Sandler O'Neill Agreement, Bayonne will pay Sandler
O'Neill a transaction fee equal to 2% of the aggregate purchase price up to $5.0
million, 1.5% of the aggregate purchase price in excess of $5.0 million but less
than $15 million, plus 1.0% of the aggregate purchase price in excess of $15
million. Based on the closing price of Bayonne Common Stock on ___________ (the
last practicable date prior to the printing of this Joint Proxy
Statement/Prospectus), Bayonne would pay Sandler O'Neill a transaction fee of
approximately $________, of which approximately $________ has been paid and the
balance will be paid when the Bayonne Merger is consummated. Sandler O'Neill
has also received a fee of $50,000 for rendering its fairness opinion. Bayonne
has also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket
expenses incurred in connection with its engagement and to indemnify Sandler
O'Neill and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other financial services
to Bayonne and has receive compensation for such services. Sandler O'Neill has
in the past provided and currently provides certain financial advisory services
to Richmond County and has received, and will receive, compensation for such
services. In addition, Sandler O'Neill may in the future provide investment
banking services to Richmond County and will receive compensation for such
services. In the ordinary course of its business, Sandler O'Neill may purchase
securities from and sell securities to Bayonne and Richmond County and may
actively trade the equity securities of Bayonne and Richmond County and their
respective affiliates for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
EXCHANGE OF BAYONNE SHARES
At the Bayonne Effective Time, each issued and outstanding share of Bayonne
Common Stock, except for Excluded Shares, as defined on the next page,
will be converted into and exchangeable for 1.05 shares of Richmond County
Common Stock. The Bayonne Exchange Ratio may be increased by Richmond County in
the event that Bayonne exercises its rights under the Bayonne Merger Agreement
to terminate the Bayonne Merger Agreement due to the price of the Richmond
County Common Stock declining below certain levels. See "-- Price-Based
Termination." However, Richmond County is under no obligation to increase the
Bayonne Exchange Ratio, and there can be no assurance that Richmond County would
elect to increase the Bayonne Exchange Ratio if Bayonne were to exercise such
termination rights. Any such decision would be made by the Richmond County Board
in light of all relevant facts and circumstances existing at such time,
including, without limitation, the advice of its financial advisor and legal
counsel. If Richmond County elects to increase the Bayonne Exchange Ratio as set
forth in the Bayonne Merger Agreement, it must give Bayonne prompt notice of
that election in which case no termination of the Bayonne Merger Agreement would
occur.
Although Richmond County has the right in limited circumstances described
above to increase the Bayonne Exchange Ratio, under no circumstances may the
Bayonne Exchange Ratio be decreased. The Bayonne Exchange Ratio was arrived at
through arm's-length negotiations between Richmond County and Bayonne. The
Bayonne Merger Agreement provides that, if Richmond County effects a stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares of the Richmond County Common Stock, an appropriate
adjustment to the Bayonne Exchange Ratio will be made.
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The market price of Richmond County Common Stock will fluctuate between the
date of this document and the date on which the Bayonne Merger is consummated
and thereafter. Because the number of shares of Richmond County Common Stock to
be received by Bayonne's stockholders in the Bayonne Merger is fixed (subject to
possible increase in the limited circumstances described above) and because the
market price of the Richmond County Common Stock will fluctuate, the value of
the shares of Richmond County Common Stock that Bayonne stockholders would
receive in the merger may increase or decrease prior to and after the merger.
For further information concerning the market prices of Richmond County Common
Stock and Bayonne Common Stock, see "MARKET PRICES AND DIVIDEND INFORMATION." No
assurance can be given concerning the market price of Richmond County Common
Stock before or after the Bayonne Effective Time.
No fractional shares of Richmond County Common Stock will be issued in
connection with the Bayonne Merger. Instead, Richmond County will make a cash
payment, rounded to the nearest cent, to each Bayonne stockholder who otherwise
would be entitled to receive a fractional share equal to the product of (1) the
fractional portion which a Bayonne stockholder would otherwise receive and (2)
the average of the daily closing sales prices of a share of Richmond County
Common Stock as reported on the Nasdaq National Market for the 15 consecutive
trading days immediately preceding the Valuation Date. The "Valuation Date"
means the day on which the last required regulatory approval for the Bayonne
Merger is obtained.
Upon consummation of the Bayonne Merger, Excluded Shares will be canceled,
retired and no payment will be made with respect thereto. "Excluded Shares"
means:
(1) shares, the holder of which, pursuant to any applicable law providing
for dissenters' or appraisal rights is entitled to receive payment in
accordance with the provisions of any such law, such holder to have
only the rights provided in any such law (the "Dissenters' Shares");
(2) shares held directly or indirectly by Richmond County (other than
shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted);
(3) shares held by Bayonne as treasury stock; and
(4) unallocated shares held in the Bayonne 1995 RRP.
In addition, at the Bayonne Effective Time, each outstanding and
unexercised option to purchase shares of Bayonne Common Stock (other than the
Bayonne Merger Stock Option, as defined on page __), a "Bayonne Option," shall
be converted into an option to purchase shares of Richmond County Common Stock.
After the Bayonne Effective Time, each Bayonne Option will be deemed to
constitute an option to acquire, Richmond County Common Stock. The number of
shares of Richmond County Common Stock to be received is equal to the product,
rounded to the nearest share, of:
the number of shares of Bayonne Common Stock subject to
the Bayonne Option and the Bayonne Exchange Ratio, at a
price per share equal to the exercise price per share
of Bayonne Common Stock otherwise purchasable pursuant
to such Bayonne Option, divided by the Bayonne Exchange
Ratio, rounded up to the nearest cent.
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PROCEDURES FOR EXCHANGE OF CERTIFICATES
RICHMOND COUNTY. Shares of Richmond County capital stock (including
Richmond County Common Stock) issued and outstanding immediately prior to the
Bayonne Effective Time will remain issued and outstanding and be unaffected by
the Bayonne Merger. Holders of such stock will not be required to exchange the
certificates representing such stock or take any other action by reason of the
consummation of the Bayonne Merger.
BAYONNE. Within five business days after the Bayonne Effective Time, a bank
or trust company selected by Richmond County and reasonably satisfactory to
Bayonne, (the "Exchange Agent"), will mail to each former holder of record of
Bayonne Common Stock a form of letter of transmittal. Included with this letter
will be instructions on how to exchange certificates representing shares of
Bayonne Common Stock for certificates representing shares of Richmond County
Common Stock and cash for fractional shares.
HOLDERS OF BAYONNE COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE AGENT,
AND SHOULD NOT RETURN SUCH STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After you mail in these materials to the Exchange Agent, certificates
representing the number of shares of Richmond County Common Stock to which you
are entitled, and, where applicable, a check for the amount representing any
fractional share determined in the manner described below, without interest,
will be mailed back to you. The Bayonne certificates so surrendered will be
canceled.
No dividend or other distribution declared after the Bayonne Effective Time
with respect to Richmond County Common Stock will be paid to the holder of any
unsurrendered Bayonne certificate until the holder surrenders such certificate.
Only then will the holder will be entitled to receive all previously withheld
dividends and distributions, without interest.
After the Bayonne Effective Time, there will be no transfers on the stock
transfer books of Bayonne of shares of Bayonne Common Stock issued and
outstanding immediately prior to the Bayonne Effective Time. If certificates
representing shares of Bayonne Common Stock are presented for transfer after the
Bayonne Effective Time, they will be canceled and exchanged for certificates
representing shares of Richmond County Common Stock.
Neither the Exchange Agent, Richmond County nor Bayonne, or any other
person, will be liable to any former holder of Bayonne Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
If a certificate for Bayonne Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Bayonne Merger Agreement only upon receipt of appropriate
evidence as to such loss, appropriate evidence as to the ownership of such
certificate, and appropriate and customary indemnification.
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INTERESTS OF DIRECTORS AND OFFICERS IN THE BAYONNE MERGER THAT ARE DIFFERENT
FROM YOUR INTERESTS
Some members of Bayonne's management and the Bayonne Board may be deemed to
have interests in the Bayonne Merger that are in addition to or different from
the interests of stockholders. The Bayonne Board was aware of these interests
and considered them, among other matters, in approving the Bayonne Merger
Agreement and the transactions contemplated thereby.
EXISTING EMPLOYMENT, CHANGE IN CONTROL AND CONSULTING AGREEMENTS. As a
consequence of the Bayonne Merger, Mr. Michael A. Nilan, President of Bayonne,
will receive a payment of approximately $150,000 in consideration of the
termination of his employment and his employment agreement with Bayonne.
Following the Bayonne Merger, Mr. Michael A. Nilan will be employed by Richmond
County Savings under an agreement described on the next page. In addition, other
senior officers of Bayonne, including Eugene Malinowski, Bayonne's Chief
Financial Officer, will receive severance payments totalling, in the aggregate,
approximately $1.3 million if their employment in connection with or following
the consummation of the Bayonne Merger. These officers will also be entitled to
continued life, health and disability insurance coverage for 36-months
following their termination of employment. Mr. Patrick F.X. Nilan's consulting
agreement with Bayonne will be terminated after the Bayonne Merger, in return
for which he will receive $100,000.
VESTING OF RESTRICTED STOCK. Pursuant to the Bayonne 1995 RRP, grants of
restricted stock were made to directors and officers of Bayonne, with vesting of
such shares to occur over a period of years. Pursuant to the terms of the
Bayonne 1995 RRP, all unvested restricted shares of Bayonne Common Stock will
become vested upon a change in control of Bayonne. The Bayonne Merger will
constitute a change in control. Officers and directors of Bayonne currently hold
49,684 shares of unvested restricted stock, which will be converted into shares
of Richmond County Common Stock at the Bayonne Exchange Ratio. The vesting of
shares of restricted stock granted under the Bayonne Incentive Plan will not be
accelerated by the Bayonne Merger. However, the Bayonne Incentive Plan and
outstanding restricted awards thereunder will be assumed by Richmond
County.
ESTABLISHMENT OF DIVISIONAL BOARD. Richmond County will establish a
divisional board to advise Richmond County with respect to deposit and lending
activities in Bayonne's market area and to maintain and develop customer
relationships. Richmond County will appoint all of the members of the Bayonne
Board, as of the date of the Bayonne Merger Agreement, who wish to serve to the
divisional board. The divisional board will be maintained until April 30, 2003
or later, the discretion of the Richmond County Board. Each member of the
divisional board will receive an annual retainer of $12,000 and a $1,000
attendance fee for each meeting attended.
APPOINTMENT TO RICHMOND COUNTY BOARD OF DIRECTORS. Following the Bayonne
Effective Time, Richmond County will increase the Richmond County Board by one
member and appoint Patrick F.X. Nilan to fill the newly created vacancy. Mr.
Patrick F.X. Nilan's term will expire in 2000. For his services as a member of
the Richmond County Board, Mr. Patrick F.X. Nilan will receive the customary
Richmond County Board fees and retainers. Mr. Patrick F.X. Nilan will not
receive fees for service on the divisional board during his term on the Richmond
County Board.
NEW EMPLOYMENT AGREEMENTS. Following the Bayonne Merger, Mr. Michael A.
Nilan, the President of Bayonne, will enter into an employment agreement with
Richmond County Savings. Pursuant to this agreement, Mr. Nilan will serve as a
senior officer of Richmond County Savings for a period of three years commencing
on the Bayonne Effective
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Date. (The "Bayonne Effective Date" is the date of filing, of such later date as
specified in, the Certificate of Merger.) His initial base salary under the
agreement will be $150,000 and he will also receive a bonus of $150,000 upon his
execution of the agreement. In addition, Mr. Nilan will receive payments for his
agreement not to compete with Richmond County during the term of his agreement
and for the loss of benefits he would have received under Bayonne's retirement
programs that will be terminated in connection with the Bayonne Merger.
BAYONNE STOCK OPTIONS. At the Bayonne Effective Time, Richmond County will
assume each outstanding option to purchase shares of Bayonne Common Stock under
the Bayonne 1995 Stock Option Plan or the Bayonne Incentive Plan. These options
will be converted into options to purchase Richmond County Common Stock. Each
option will be exercisable for that number of shares of Richmond County Common
Stock equal to the number of shares of Bayonne Common Stock for which such
option was exercisable multiplied by 1.05. The exercise price of such Bayonne
option will be equal to the exercise price of such option divided by 1.05. As of
September 30, 1998, the directors and executive officers of Bayonne held options
to purchase a total of 460,783 shares of Bayonne Common Stock. The options will
continue to be exercisable in accordance with the terms of the plan under which
they were granted and the individual agreements relating to the options.
INDEMNIFICATION. Richmond County has also agreed to indemnify and hold
harmless each present and former director, officer and employee of Bayonne and
its subsidiaries and each officer or employee of Bayonne and its subsidiaries
that is serving or has served as a director or trustee of another entity
expressly at Bayonne's request or direction. These people will be indemnified
against any costs, or expenses , judgments, fines, losses, claims, or
liabilities (collectively, "Costs") incur in connection with any claim, suit,
proceeding or investigation arising out of matters existing or occurring at or
prior to the Bayonne Effective Time. Richmond County also agreed to advance
these persons any such costs they incur to the fullest extent they would have
been indemnified by Bayonne and its subsidiaries and as permitted under the
Delaware General Corporation Law ("DGCL"). The indemnification with which
Richmond County will furnish Bayonne's officers, directors and employees will
last from the Bayonne Effective Date until the sixth anniversary thereof.
Moreover, Richmond County will maintain Bayonne's existing directors and
officers' insurance policy. In the alternative, Richmond County will provide
a policy providing comparable coverage and amounts on terms no less favorable to
the persons currently covered by Bayonne's existing policy. This coverage will
be maintained for three years after the Bayonne Effective Date.
MANAGEMENT AND OPERATIONS FOLLOWING THE BAYONNE MERGER
Following the Bayonne Effective Time, Richmond County will increase the
Richmond County Board by one member and will appoint Mr. Patrick F.X. Nilan to
fill the vacancy created by the increase. Mr. Patrick F.X. Nilan's term as a
member of the Richmond County Board will expire in the year 2000. For his
services as a member of the Richmond County Board, Mr. Patrick F.X. Nilan will
be paid the customary Richmond County Board fee. In addition, Richmond County
will establish a
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divisional board to advise Richmond County with respect to deposit and lending
activities in Bayonne's market area and to maintain and develop customer
relationships.
Also following the Bayonne Merger, the parties intend, subject to
regulatory approval, to merge Richmond County Savings and First Savings, with
the surviving bank named Richmond County Savings Bank, pursuant to the Bayonne
Bank Merger, and to consolidate their operations. A merger integration
committee, consisting of senior management members of Richmond County and
Bayonne, is in the process of establishing a definitive plan, including a
timetable, to achieve the cost reductions. Richmond County expects to achieve
significant consolidation efficiencies following the consummation of the Bayonne
Merger, although there can be no assurance that the anticipated efficiencies
will be achieved. The efficiencies are expected to be achieved primarily through
the elimination of duplicative compensation costs and computer system costs.
EMPLOYEE MATTERS
Each person who is employed by First Savings immediately prior to the
Bayonne Effective Time and whose employment is not specifically terminated (a
"Bayonne Continuing Employee") will, at the Bayonne Effective Time, become an
employee of Richmond County or Richmond County Savings, respectively.
However:
(1) In no event shall any Bayonne Continuing Employees be or act as
officers of Richmond County or Richmond County Savings, unless elected
or appointed to such position in accordance with the bylaws of
Richmond County or Richmond County Savings.
(2) With the exception of Mr. Michael A. Nilan, all of Bayonne's
Continuing Employees who remain following the Bayonne Effective Date
shall be employed at the will of Richmond County or Richmond County
Savings.
(3) With the exception of Mr. Michael A. Nilan, no employee of Bayonne
will become a contractual employee of Richmond County or Richmond
County Savings unless such contract is in writing and executed by the
President and Chief Executive Officer of Richmond County or Richmond
County Savings.
(4) As of the Bayonne Effective Time, each Bayonne Continuing Employee who
is a participant in the Financial Institutions Thrift Plan (the
"Bayonne 401(k) Plan") shall become fully vested in his or her account
balance in the Bayonne 401(k) Plan. The Bayonne 401(k) Plan will,
at the election of Richmond County, either be merged into the Richmond
County Savings Bank 401(k) Savings Plan in RSI Retirement Trust (the
"Richmond County Savings 401(k) Plan") following, or terminated
immediately prior to, on, or after the Bayonne Effective Time. This
determination will be made by Richmond County Savings. As of the date
of the merger of the Bayonne 401(k) Plan into the Richmond County
Savings 401(k) Plan, if applicable, or the termination of the Bayonne
401(k) Plan (or the Bayonne Effective Time, if subsequent to such
termination), if applicable, Bayonne Continuing Employees who are then
participating in the Bayonne 401(k) Plan shall become participants in
the Richmond County Savings 401(k) Plan.
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(5) Richmond County will honor existing employment agreements, including
the change in control provisions of such agreements between Bayonne
and First Savings and certain employees, stock option plans and
restricted stock plans, and other benefit plans (collectively,
"Bayonne Employment Agreements" or "Bayonne Employee Plans"). Richmond
County will also honor the payment of benefits by Bayonne as of the
Bayonne Effective Time or earlier as agreed to by Richmond County and
Bayonne under such agreements and plans in conformance with Bayonne's
prior disclosure to Richmond County. To the extent previously
disclosed to, and agreed to by, Richmond County, payments under the
Bayonne Employment Agreements may be made by Bayonne immediately prior
to the Bayonne Effective Time.
(6) Except as otherwise provided in paragraphs (4) and (5) above,
appropriate steps shall be taken to terminate all Bayonne Employee
Plans as of the Bayonne Effective Time or as promptly as practical
thereafter. Except as provided in paragraph (4), immediately following
the Bayonne Effective Time, each Bayonne Continuing Employee shall
will be eligible to participate in Richmond County Employee Plans (as
defined in the Bayonne Merger Agreement), on the same basis as any
newly-hired employee of Richmond County or Richmond County Savings.
However, that with respect to each Richmond County Employee Plan,
other than the Richmond County ESOP and the Richmond County Savings
401(k) Plan, for purposes of determining eligibility to participate,
vesting, and entitlement to benefits, service with Bayonne or First
Savings will be treated as service with Richmond County or Richmond
County Savings. ; Further, that such service shall not be recognized
to the extent such recognition would result in a duplication of
benefits. Such service will also apply for purposes of satisfying any
waiting periods, evidence of insurability requirements, or the
application of any pre-existing condition limitation with respect to
any Richmond County or Richmond County Savings welfare benefit plan.
For purposes of determining eligibility to participate, vesting, and
entitlement to benefits (including accrual of benefits) under the
Richmond County ESOP or Richmond County Savings 401(k) Plan, Bayonne
Continuing Employees will be treated as newly-hired employees of
Richmond County or Richmond County Savings as of the Bayonne Effective
Date and credit for service will begin accruing as of that date.
CONDITIONS TO THE BAYONNE MERGER
The respective obligations of Richmond County and Bayonne to effect the
Bayonne Merger are subject to the satisfaction of the following conditions at or
prior to the Bayonne Effective Time:
(1) the Bayonne Merger Agreement shall have been approved by the requisite
vote of each of Richmond County's and Bayonne's stockholders;
(2) the requisite regulatory approvals, consents and waivers shall have
been obtained and shall remain in full force and effect, and all
statutory waiting periods shall have expired; and
(3) all other consents, waivers and approvals of any third parties which
are necessary to permit the consummation of the Bayonne Merger and any
other transactions contemplated by the Bayonne Merger Agreement shall
have been obtained or made except for those of which failure to obtain
would not have a Material Adverse Effect (as
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defined below) on Richmond County and its subsidiaries taken as a
whole or on Bayonne and its subsidiaries taken as a whole.
(4) No such approval or consent shall have imposed any condition or
requirement that would so materially and adversely impact the economic
or business benefits to Richmond County or Bayonne of the Bayonne
Merger transactions that had such condition or requirement been known,
such party would not, in its reasonable judgment, have entered into
the Bayonne Merger Agreement;
(5) neither Richmond County nor Bayonne shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the Bayonne Merger, the
Bayonne Bank Merger or any other transactions contemplated by the
Bayonne Merger Agreement;
(6) no statute, rule or regulation shall have been enacted, by any
governmental authority which prohibits, restricts or makes illegal
consummation of the Bayonne Merger, the Bayonne Bank Merger or any
other transactions contemplated by the Bayonne Merger Agreement;
(7) the Registration Statement shall have been declared effective by the
SEC and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement;
(8) all required approvals by state securities or "blue sky" authorities
with respect to the transactions contemplated by the Bayonne Merger
Agreement shall have been obtained; and
(9) Richmond County shall have caused the shares of Richmond County Common
Stock to be issued by Richmond County in exchange for the shares of
Bayonne Common Stock to be listed on the market on which Richmond
County stock to be trading.
The obligations of Richmond County to effect the Bayonne Merger are further
subject to the satisfaction, or waiver by Richmond County, of the following
conditions:
(1) each of the obligations of Bayonne and First Savings, respectively,
required to be performed by it at or prior to the Bayonne Effective
Time shall have been duly performed and complied with in all material
respects;
(2) the representations and warranties of Bayonne and First Savings
contained in the Bayonne Merger Agreement shall be true and correct
(subject to prior disclosure of any necessary qualification and
subject to the Material Adverse Effect threshold defined on page ___)
as of July 19, 1998 and as of the Bayonne Effective Time as though
made at and as of the Bayonne Effective Time. Richmond County shall
have received a certificate to the foregoing effect signed by the
chief executive officer and the chief financial or principal
accounting officer of Bayonne;
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(3) all action required to be taken by Bayonne and
First Savings to authorize performance of the terms of the Bayonne
Merger Agreement and the consummation by Bayonne and First Savings of
the transactions contemplated thereby shall have been duly and validly
taken by the board of directors and stockholders of Bayonne or First
Savings or Richmond County shall have received certified copies of the
resolutions evidencing such authorization;
(4) Bayonne shall have obtained the consent or approval of each person
(except for those the absence of which would not have a Material
Adverse Effect on Bayonne, Richmond County or their respective
subsidiaries) whose consent or approval shall be required in order to
permit the succession by the surviving corporation pursuant to the
Bayonne Merger to any obligation, right or interest of Bayonne or its
subsidiaries under any license, agreement, or instrument to which
Bayonne or its subsidiaries is a party or is otherwise bound. This
does not apply to consents or approvals for which the failure to
obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Richmond County (after giving effect to the
consummation of the transactions contemplated by the Bayonne Merger
Agreement) or upon the consummation of the transactions contemplated
by the Bayonne Merger Agreement;
(5) Richmond County shall have received certificates (such certificates to
be dated as of a day as close as practicable to the closing date of
the Bayonne Merger) from appropriate authorities as to the corporate
existence and good standing of Bayonne and its subsidiaries;
(6) Richmond County shall have received an opinion of Muldoon, Murphy &
Faucette, counsel to Richmond County, dated as of the Bayonne
Effective Date, substantially to the effect that the Bayonne Merger
will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code (the
"Code") and that accordingly:
(a) no gain or loss will be recognized by Richmond County, Richmond
County Savings, Bayonne or First Savings as a result of the
Bayonne Merger;
(b) except to the extent of any cash received in lieu of a fractional
share interest in Richmond County Common Stock, no gain or loss
will be recognized by the stockholders of Bayonne who exchange
their Bayonne Common Stock for Richmond County Common Stock
pursuant to the Bayonne Merger;
(c) the tax basis of Richmond County Common Stock received by
stockholders who exchange their Bayonne Common Stock for Richmond
County Common Stock in the Bayonne Merger will be the same as the
tax basis of Bayonne Common Stock surrendered pursuant to the
Bayonne Merger. This tax basis will be reduced by any amount
allocable to a fractional share interest for which cash is
received; and
(d) the holding period of Richmond County Common Stock received by
each stockholder in the Bayonne Merger will include the holding
period of Bayonne
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Common Stock exchanged therefor. However, the stockholder must
have held such Bayonne Common Stock as a capital asset on the
Bayonne Effective Date.
A "Material Adverse Effect," is either (1) an effect which is material and
adverse to the business, financial condition or results of operations of such
party and its subsidiaries taken as whole. However, any such effect resulting
from any (a) changes in laws, rules or regulations or generally accepted
accounting principles ("GAAP") or interpretations thereof that apply to Richmond
County and Richmond County Savings and Bayonne and First Savings, or (b) changes
in the general level of market interest rates shall not be considered in
determining if a Material Adverse Effect has occurred; or (2) the failure of
certain representations and warranties required by the Bayonne Merger Agreement
to be true and correct or true and correct in all material respects.
The obligations of Bayonne to effect the Bayonne Merger are further subject
to the satisfaction, or waiver by Bayonne, of the following conditions:
(1) each of the obligations of Richmond County and Richmond County
Savings, respectively, required to be performed by it at or prior to
the Bayonne Effective Time pursuant to the terms of the Bayonne Merger
Agreement shall have been duly performed and complied with in all
material respects;
(2) the representations and warranties of Richmond County and Richmond
County Savings contained in the Bayonne Merger Agreement shall be true
and correct (subject to Richmond County's and Richmond County Savings'
prior disclosure of any necessary qualification of such
representations and warranties and subject to the Material Adverse
Effect threshold previously defined) as of July 19, 1998 and as of the
Bayonne Effective Time as though made at and as of the Bayonne
Effective Time (except as to any representation or warranty which
specifically relates to an earlier date);
(3) and Bayonne shall have received a certificate to the foregoing effect
signed by the chief executive officer and the chief financial or
principal accounting officer of Richmond County;
(4) all action required to be taken by, or on the part of, Richmond County
and Richmond County Savings to authorize the execution, delivery and
performance of the Bayonne Merger Agreement and the consummation by
Richmond County and Richmond County Savings of the transactions
contemplated hereby shall have been duly and validly taken by the
board of directors and stockholders of Richmond County and Richmond
County Savings, as the case may be, and Bayonne shall have received
certified copies of the resolutions evidencing such authorization;
(5) Richmond County shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with
the transactions contemplated hereby under any license, agreement, or
instrument to which Richmond County or its subsidiaries is a party or
is otherwise bound, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Richmond County (after giving effect
to the transactions contemplated by the Bayonne Merger Agreement) or
upon the consummation of the transactions contemplated by the Bayonne
Merger Agreement;
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(6) Bayonne shall have received certificates (such certificates to be
dated as of a day as close as practicable to the closing date of the
Bayonne Merger) from appropriate authorities as to the corporate
existence and good standing of Richmond County and its subsidiaries;
(7) Bayonne shall have received from its counsel McCarter & English, LLP,
dated as of the Bayonne Effective Date, substantially to the effect
that on the basis of the facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts
existing as the Bayonne Effective Time, the Bayonne Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that accordingly:
(a) no gain or loss will be recognized by Richmond County, Richmond
County Savings, Bayonne, or First Savings as a result of the
Bayonne Merger;
(b) except to the extent of any cash received in lieu of a fractional
share interest in Richmond County Common Stock, no gain or loss
will be recognized by the stockholders of Bayonne who exchange
their Bayonne Common Stock for Richmond County Common Stock
pursuant to the Bayonne Merger;
(c) the tax basis of Richmond County Common Stock received by
stockholders who exchange their Bayonne Common Stock for Richmond
County Common Stock in the Bayonne Merger will be the same as the
tax basis of Bayonne Common Stock surrendered pursuant to the
Bayonne Merger, reduced by any amount allocable to a fractional
share interest for which cash is received and increased by any
gain recognized on the exchange;
(d) the holding period of Richmond County Common Stock received by
each stockholder in the Bayonne Merger will include the holding
period of Bayonne Common Stock exchanged therefor, provided that
such stockholder held such Bayonne Common Stock as a capital
asset on the Bayonne Effective Date; and
(8) Richmond County shall have provided to the Exchange Agent (a)
certificates representing at least the aggregate number of shares of
Richmond County Common Stock to be issued to the stockholders of
Bayonne pursuant to the terms of the Bayonne Merger Agreement, and (b)
sufficient cash to pay Bayonne stockholders their fractional share
interest as provided in the Bayonne Merger Agreement.
No assurance can be provided as to when, or whether, the regulatory
consents and approvals necessary to consummate the Bayonne Merger will be
obtained or whether all of the other conditions precedent to the Bayonne Merger
will be satisfied or waived by the party permitted to do so. See "-- Regulatory
Approvals Needed to Complete the Bayonne Merger" below. If the Bayonne Merger is
not effected on or before April 30, 1999 (provided that if, as of such date, all
necessary regulatory or governmental approvals, consents or waivers required to
consummate the Bayonne Merger shall not have been obtained but all other
conditions have been fulfilled, then on or before July 31, 1999), the Bayonne
Merger Agreement may be terminated by a vote of a majority of the board of
directors of either Richmond County or Bayonne unless the failure to effect the
Bayonne Merger by such date is due to the breach of the Bayonne Merger Agreement
by the party seeking to terminate the Bayonne Merger Agreement.
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REGULATORY APPROVALS NEEDED TO COMPLETE THE BAYONNE MERGER
Consummation of the Bayonne Merger and the Bayonne Bank Merger are subject
to a number of regulatory approvals and consents. The Bayonne Bank Merger is
subject to the prior approval of the FDIC under the Bank Merger Act, 12 U.S.C.
(S)1828(c). In reviewing applications under the Bank Merger Act, the FDIC must
consider, among other factors, the financial and managerial resources and future
prospects of the existing and resulting institutions, and the convenience and
needs of the communities to be served. In addition, the FDIC may not approve a
transaction if it will result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States, or if its effect in any section of
the country may be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner be a restraint of trade, unless the
FDIC finds that the anti-competitive effects of the transaction are clearly
outweighed by the public interests and the probable effect of the transaction on
meeting the convenience and needs of the communities to be served. In addition,
as discussed below, a waiting period of up to 30 days must be satisfied prior to
consummation of the Bayonne Bank Merger after FDIC approval. Richmond County
filed an application with the FDIC on December 7, 1998.
Further, pursuant to Section 601 of the New York State Banking Law (the
"NYBL"), the Bayonne Bank Merger is subject to the prior approval of the
Superintendent of Banks of New York State (the "Superintendent"). Richmond
County filed an application for approval of the Bayonne Bank Merger with the
Superintendent on December 7, 1998. In determining whether to approve the
application for the merger of Bayonne with and into Richmond County, the
Superintendent will consider, among other factors, whether the Bayonne Bank
Merger would be consistent with adequate or sound banking and would not result
in concentration of assets beyond limits consistent with effective competition,
and whether the Bayonne Bank Merger would result in such a lessening of
competition as to be injurious to the interest of the public or tend toward
monopoly. The Superintendent will also consider the public interest and the
needs and convenience thereof. Further, it is the policy of the State of New
York to ensure the safe and sound conduct of banking organizations, to conserve
assets of banking organizations, to prevent hoarding of money, to eliminate
unsound and destructive competition among banking organizations, and to maintain
public confidence in the business of banking and protect the public interest and
the interests of depositors, creditors, and stockholders. Such factors will be
considered by the Superintendent in connection with Richmond County's
application.
A savings and loan holding company is prohibited under the Home Owners'
Loan Act, as amended ("HOLA") from acquiring, directly or indirectly, another
savings and loan holding company or a savings association without the prior
written approval of the Office of Thrift Supervision ("OTS"). Accordingly,
Richmond County has filed an application with the OTS for approval of the
Bayonne Merger. In evaluating applications by holding companies to acquire
savings institutions, the OTS must consider the financial and managerial
resources and future prospects of the company and institution involved, the
effect of the acquisition on the risk to the insurance funds, the convenience
and needs of the community and competitive factors. Like the FDIC, the OTS may
not approve any proposed acquisition if it will result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the savings and loan business in any part of the United States, or if
its effect in any part of the United States may be to substantially lessen
competition or to tend to create a monopoly or if it would in any other manner
be a restraint of trade, unless the OTS finds that the anti-competitive effects
of the transaction are clearly outweighed by the public interests and the
probable effect of the transaction on meeting the convenience and needs of the
communities to be served.
In order to consummate the Bayonne Bank Merger, First Savings will merge
with a Federal interim savings bank, which will then merge into Richmond County
Savings. The merger of First Savings into the Federal interim savings bank is
subject to the approval of the OTS and the Commissioner of the New Jersey
Department of Banking and Insurance (the "Commissioner"). First
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Savings will file applications with the OTS and the Commissioner to merge with
the Federal interim savings bank.
Under the CRA, the FDIC and OTS must take into account the record of
performance of Richmond County Savings and First Savings in meeting the credit
needs of the entire community, including low- and moderate-income neighborhoods,
served by each institution. As part of the review process, the banking agencies
frequently receive comments and protests from community groups and others. See
"CERTAIN BANKING REGULATORY CONSIDERATIONS -- Community Reinvestment Act."
In addition, under federal law, prior to consummation of a merger, a period
of 30 days must expire following approval by the FDIC and OTS within which
period the United States Department of Justice ("Department of Justice") may
file objections to the Bayonne Merger under the federal antitrust laws. The
post-approval waiting period may be reduced by the FDIC or OTS to 15 days, with
the concurrence of the Department of Justice. The Department of Justice could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the Bayonne Merger unless
divestiture of an acceptable number of branches to a competitively suitable
purchaser could be made. While Richmond County believes that the likelihood of
such action by the Department of Justice is remote in this case, there can be no
assurance that the Department of Justice will not initiate such proceeding, or
that the Attorney General of the State of New York will not challenge the
Bayonne Merger, or if such proceeding is instituted or challenge is made, as to
the result thereof.
The Bayonne Merger and Bayonne Bank Merger cannot proceed in the absence of
the requisite regulatory approvals. See "-- Conditions to the Bayonne Merger"
and "-- Waiver and Amendment; Termination." There can be no assurance that such
regulatory approvals will be obtained, and if obtained, there can be no
assurance as to the date of any such approval. There can also be no assurance
that any such approvals will not contain a condition or requirement which causes
such approvals to fail to satisfy the condition set forth in the Bayonne Merger
Agreement and described below under "-- Conditions to the Bayonne Merger." There
can likewise be no assurance that the Department of Justice or the Attorney
General of the State of New York will not challenge the Bayonne Merger or, if
such a challenge is made, as to the result thereof.
Richmond County is not aware of any other regulatory approvals that would
be required for consummation of the Bayonne Merger, except as described above.
Should any other approvals be required, it is presently contemplated that such
approvals would be sought. There can be no assurance that any other approvals,
if required, will be obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which do not include review of the Bayonne
Merger from the standpoint of the adequacy of the consideration to be received
by Bayonne stockholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the Bayonne Merger.
CONDUCT OF BUSINESS PENDING THE BAYONNE MERGER
Pursuant to the Bayonne Merger Agreement, Richmond County has agreed that,
during the period from the date of the Bayonne Merger Agreement to the Bayonne
Effective Time (except as expressly provided for in the Bayonne Merger Agreement
and except to the extent required by law or regulation or by regulatory
authorities), Richmond County and its subsidiaries will use commercially
reasonable efforts to:
(1) conduct their business in the regular, ordinary and usual course
consistent with past practice;
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(2) maintain and preserve intact their business organization, properties,
leases, employees and advantageous business relationships and retain
the services of their officers and key employees;
(3) take no action which would materially adversely affect or delay the
ability of Richmond County or Bayonne to perform their respective
covenants and agreements on a timely basis under the Bayonne Merger
Agreement;
(4) take no action which would adversely affect, delay, or materially
condition the ability of Richmond County, Richmond County Savings,
Bayonne or First Savings to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transactions
contemplated by the Bayonne Merger Agreement; and
(5) take no action that results in or is reasonably likely to have a
Materially Adverse Effect on Richmond County.
Pursuant to the Bayonne Merger Agreement, Bayonne has agreed that, during
the period from July 19, 1998 to the Bayonne Effective Time (except as expressly
provided in the Bayonne Merger Agreement and except to the extent required by
law or regulation or by regulatory authorities), Bayonne and its subsidiaries
will use commercially reasonable efforts to:
(1) conduct their business in the regular, ordinary and usual course
consistent with past practice;
(2) maintain and preserve intact their business organization, properties,
leases, employees and advantageous business relationships and retain
the services of their officers and key employees;
(3) take no action that would materially adversely affect or delay the
ability of Richmond County or Bayonne to perform their respective
covenants and agreements on a timely basis under the Bayonne Merger
Agreement;
(4) take no action which would adversely effect or delay the ability of
Richmond County, Richmond County Savings, Bayonne or First Savings to
obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated by
the Bayonne Merger Agreement; and
(5) take no action that results in or is reasonably likely to have a
Material Adverse Effect on Bayonne or First Savings.
In addition, pursuant to the Bayonne Merger Agreement, during the period
from the date of the Bayonne Merger Agreement to the Bayonne Effective Time
(except as otherwise provided in the Bayonne Merger Agreement or as required by
law or regulation or by regulatory authorities), Bayonne has agreed that neither
it nor any of its subsidiaries shall, without the prior consent of Richmond
County, which consent shall not be unreasonably withheld, take certain actions,
including the following:
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(1) unless required by applicable law or regulation or regulatory
directive, change any provisions of the certificate of incorporation
or bylaws of Bayonne or the similar governing documents of its
subsidiaries;
(2) issue any shares of capital stock or change the terms of any
outstanding stock options or warrants or issue, grant or sell any
option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or
issued capital stock of Bayonne except pursuant to the exercise of
stock options or warrants outstanding as of the date of the Bayonne
Merger Agreement;
(3) other than regular quarterly dividends, make, declare or pay any cash
or stock dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock. As promptly as
practicable following the date of the Bayonne Merger Agreement, the
Bayonne Board shall cause its regular quarterly dividend record dates
and payment dates to be the same as Richmond County's regular
quarterly dividend record dates and payments dates for Richmond County
Common Stock, and Bayonne shall not thereafter change its regular
dividend payment dates and record dates. Nothing in the Bayonne Merger
Agreement shall be construed to permit holders of shares of Bayonne
Common Stock to receive two dividends from either Bayonne or from
Bayonne and Richmond County in any one quarter. Subject to applicable
regulatory restrictions, if any, Bayonne may pay a cash dividend that
is, in the aggregate, sufficient to fund any dividend by Bayonne
permitted under the terms of the Bayonne Merger Agreement;
(4) other than in the ordinary course of business consistent with past
practice, (a) sell, transfer, mortgage, encumber or otherwise dispose
of any of its material properties, leases or assets to any individual,
corporation or other entity other than a direct or indirect wholly
owned subsidiary of Bayonne or (b) cancel, release or assign any
indebtedness of any such individual, corporation or other entity;
(5) except to the extent required by law or as specifically provided for
elsewhere in the Bayonne Merger Agreement, increase in any manner the
compensation or fringe benefits of any of its employees or directors,
other than general increases in compensation for non-officer employees
in the ordinary course of business consistent with past practice. Any
such increase must not cause the annualized compensation of any of
Bayonne's non-officer employees to exceed by more than 5% the total
annual compensation expenses of Bayonne with respect to such person
for the twelve month period ended March 31, 1998. Additionally, such
increase must not cause the annual rate of base salary of any of
Bayonne's non-executive officer employees to increase by more than 5%
over such person's base salary at March 31, 1998. Further, Bayonne
cannot pay, unless approved in advance by Richmond County, any
reasonable "stay in place" pay where necessary or appropriate to
retain key employees, pay any pension or retirement allowance not
required by any existing plan or agreement to any such employees or
directors, or become a party to, amend or commit itself to fund or
otherwise establish any trust or account related to any Bayonne
Employee Plan with or for the benefit of any employee or director. ;
Bayonne must not voluntarily accelerate the vesting of any stock
options or other compensation or benefit, make any discretionary
continuation to any Bayonne Employee Plan, hire any employee with an
annual total compensation payment in excess of $35,000, or enter into
any employment contract;, or terminate or materially increase the
costs to Bayonne or any subsidiary of any employee plan;
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(6) except as contemplated by the Bayonne Merger Agreement, change its
method of accounting as in effect at March 31, 1998, except as
required by changes in GAAP as concurred in by Bayonne's independent
auditors;
(7) settle any claim, action or proceeding involving any liability of
Bayonne or any of its subsidiaries for money damages in excess of
$50,000 or impose material restrictions upon the operations of Bayonne
or any of its subsidiaries;
(8) acquire or agree to acquire, any business or any corporation
organization or division thereof, or otherwise acquire or agree to
acquire any assets, which are material, individually or in the
aggregate, to Bayonne, except in satisfaction of debts previously
contracted;
(9) except pursuant to commitments existing at July 19, 1998 which have
previously been disclosed to Richmond County, make any real estate
loans secured by undeveloped land or real estate located outside the
State of New Jersey (other than real estate secured by one-to-four
family homes) or make any construction loan (other than construction
loans secured by one-to-four family homes) outside the State of New
Jersey;
(10) establish or commit to the establishment of any new branch or other
office facilities other than those for which all regulatory approvals
have been obtained except as previously disclosed to Richmond County;
(11) other than in the ordinary course of business consistent with past
practice in individual amounts not to exceed $50,000 and other than
investments for Bayonne's portfolio made in accordance with the
Bayonne Merger Agreement, make any investment either by purchase of
stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual,
corporation or other entity;
(12) make any investment in any debt security, including mortgage-backed
and mortgage-related securities, other than US government and US
government agency securities with final maturities not greater than
five years, mortgage-backed or mortgage related securities which would
not be considered "high risk" securities pursuant to Thrift Bulletin
Number 52 issued by the OTS or securities of the Federal Home Loan
Bank ("FHLB"), in each case that are purchased in the ordinary course
of business consistent with past practice;
(13) enter into or terminate any contract or agreement, or make any change
in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods
or services with a market value of less than, $20,000 per annum and
other than contracts or agreements specifically described in the
Bayonne Merger Agreement;
(14) make, renegotiate, renew, increase, extend or purchase any loan, lease
(credit equivalent), advance, credit enhancement or other extension of
credit, or make any commitment in respect of any of the foregoing,
except (a) in conformity with existing lending practices in amounts
not to exceed $500,000 to any individual borrower or (b) loans or
advances as to which Bayonne has a binding obligation to make such
loan or advances as of July 19, 1998 and a description of which has
been provided by Bayonne to Richmond County;
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(15) incur any additional borrowings beyond those disclosed to Richmond
County other than short-term (six months or less) FHLB borrowings and
reverse repurchase agreements consistent with past practice, or pledge
any of its assets to secure any borrowings other than as required
pursuant to the terms of borrowings of Bayonne or any of its
subsidiaries in effect as of July 19, 1998 or in connection with
borrowings or reverse repurchase agreements permitted under the
Bayonne Merger Agreement, provided, however, that deposits are not
deemed to be borrowings within the meaning of this paragraph;
(16) make any capital expenditures in excess of $20,000 per expenditure
from July 19, 1998 until the Bayonne Effective Date other than
pursuant to binding commitments existing on July 19, 1998 previously
disclosed to Richmond County, other than expenditures necessary to
maintain existing assets in good repair or to make payment of
necessary taxes;
(17) organize, capitalize, lend to or otherwise invest in any subsidiary
(other than securities of the FHLB that are purchased in the ordinary
course of business consistent with past practice);
(18) elect to any senior executive office any person who is not a member of
the senior executive officer team of Bayonne as of July 19, 1998, or
elect to the Bayonne Board any person who is not a member of the
Bayonne Board as of July 19, 1998; and
(19) agree or make any commitment to take any action that is described
above.
At Richmond County's request, Bayonne will cause First Savings to modify
and change its loan, litigation or real estate valuation policies and practices
(including loan classifications and levels of reserves) and investment and
asset/liability management policies and practices. This will occur after the
date on which all required regulatory approvals and stockholder approvals are
received, and after receipt of written confirmation from Richmond County that it
is not aware of any fact or circumstance that would prevent completion of the
Bayonne Merger, and no earlier than 30 days prior to the Bayonne Effective Time
so as to be consistent on a mutually satisfactory basis with those of Richmond
County Savings. These policies and procedures must not be prohibited by GAAP or
any applicable laws or regulations.
REPRESENTATIONS AND WARRANTIES
Both Richmond County and Bayonne have made customary representations and
warranties relating to, among other things, the parties' respective
organization, authority relative to the Bayonne Merger Agreement,
capitalization, subsidiaries, required consents and approvals, taxes, employee
benefit plans, material contracts, litigation, compliance with applicable laws,
environmental matters, reliability of financial statements and the absence of
material adverse changes in the parties' businesses, financial condition or
results of operations. For detailed information on such representations and
warranties, see the Bayonne Merger Agreement attached hereto as ANNEX A.
Pursuant to the Bayonne Merger Agreement, it is a condition to each party's
obligation to consummate the Bayonne Merger that the representations and
warranties of the other party contained in the Bayonne Merger Agreement be true
and correct in all material respects as of the date of the Bayonne Merger
Agreement and as of the Bayonne Effective Time. However, that such
representations and warranties will be deemed to be true and correct in all
material respects unless the failure to be true and correct, individually or in
the aggregate, represents a material adverse change from the business, financial
condition or results of operations of the party making such representations
and
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warranties and its subsidiaries, taken as a whole, as represented in the Bayonne
Merger Agreement. See "-- Conditions to the Bayonne Merger."
ACQUISITION PROPOSALS
Bayonne has agreed not to, directly or indirectly, initiate, solicit or
knowingly encourage, or facilitate, any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal (as defined below in this paragraph), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries. Further, Bayonne will not obtain an Acquisition Proposal or
agree to or endorse any Acquisition Proposal, or authorize or permit any of its
officers, directors or employees or any of its subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative retained
by any of its subsidiaries to take any such action. Bayonne shall notify
Richmond County orally (within one business day) and in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries and
proposals which it or any of its subsidiaries may receive relating to any of
such matters and, if such inquiry or proposal is in writing, Bayonne shall
deliver to Richmond County a copy of such inquiry or proposal promptly. However,
the Bayonne Board may:
(1) furnish information to, or enter into discussions or negotiations with
any person or entity that makes an unsolicited written, bona fide
proposal to acquire Bayonne pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other
similar transaction, if, and only to the extent that:
(a) the Bayonne Board receives a written opinion from its independent
financial advisor that such proposal may be superior to the
Bayonne Merger from a financial point-of-view to Bayonne's
stockholders:
(b) the Bayonne Board, after consultation with independent legal
counsel, determines in good faith that such action is necessary
for the Bayonne Board to comply with its fiduciary duties to
stockholders under applicable law (such proposal that satisfies
(a) and (b) being referred to herein as a "Superior Proposal");
and
(c) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, Bayonne
(i) provides reasonable notice to Richmond County to the effect
that it is furnishing information to, or entering into
discussions or negotiations with another party; and
(ii) receives from such person or entity an executed
confidentiality agreement in reasonably customary form;
(2) comply with Rule 14e-2 promulgated under the Exchange Act with regard
to a tender or exchange offer; or
(3) withdraw or modify its recommendation and enter into a Superior
Proposal if there exists a Superior Proposal and the Bayonne Board,
after consultation with independent legal counsel, determines in good
faith that such action is necessary for the Bayonne Board to comply
with its fiduciary duties to stockholders under applicable law.
"Acquisition
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Proposal" means any of the following (other than the transactions
contemplated under the Bayonne Merger Agreement) involving Bayonne or
any of its subsidiaries:
(a) any merger, consolidation, share exchange, business combination,
or other similar transaction;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 15% or more of the assets of Bayonne or First
Savings, taken as a whole, in a single transaction or series of
transactions;
(c) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of Bayonne or the filing of a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), in connection therewith; or
(d) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the
foregoing.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Bayonne Effective Time, any provision of the Bayonne Merger
Agreement may be: (1) waived in writing by the party benefitted by the
provision; or (2) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties to the Bayonne
Merger Agreement. However, after the vote by the stockholders of Bayonne or
Richmond County, no amendment or modification may be made that would reduce the
Bayonne Merger Consideration or contravene any provision of the DGCL or the
federal banking laws, rules and regulations.
The Bayonne Merger Agreement may be terminated at any time prior to the
Bayonne Effective Time, either before or after approval of the matters presented
in connection with the Bayonne Merger by the stockholders of both Richmond
County and Bayonne, as follows:
(1) by the mutual consent of Richmond County and Bayonne if the boards of
directors of each so determines by vote of a majority of the members
of their entire respective boards;
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(2) by either Richmond County or Bayonne, if either of their respective
boards of directors so determines by vote of a majority of the members
of their entire respective boards if the stockholders of Richmond
County or Bayonne do not approve the Bayonne Merger Agreement;
However, Richmond County or Bayonne will only be entitled to terminate
the Bayonne Merger Agreement if it has complied in all material
respects with its obligations to solicit the support of its respective
stockholders for the Bayonne Merger and has complied, in all material
respects, with its representations and warranties made in the Bayonne
Merger Agreement;
(3) by either Richmond County or Bayonne, if either (a) any approval,
consent or waiver of a governmental agency required to permit
consummation of the transactions contemplated by the Bayonne Merger
Agreement shall have been denied or (b) any governmental authority of
competent jurisdiction shall have issued a final, unappealable order
enjoining or otherwise prohibiting consummation of the transactions
contemplated by the Bayonne Merger Agreement;
(4) by either Richmond County or Bayonne, if its board of directors so
determines by vote of a majority of the members of its entire board,
in the event that the Bayonne Merger is not consummated by April 30,
1999 ("Initial Termination Date"). However, if, as of such date, all
necessary regulatory or governmental approvals, consents or waivers
required to consummate the transactions contemplated hereby shall not
have been obtained but all other conditions to the consummation of the
Bayonne Merger (other than the delivery of executed documents at the
closing) shall be fulfilled, the Initial Termination Date shall be
extended to July 31, 1999, unless the failure to so consummate by such
time is due to the breach of any representation, warranty or covenant
contained in the Bayonne Merger Agreement by the party seeking to
terminate;
(5) by Richmond County, if the Bayonne Board does not publicly recommend
in the Joint Proxy Statement/Prospectus that Bayonne's stockholders
approve and adopt the Bayonne Merger Agreement or if, after
recommending in the Joint Proxy Statement/Prospectus that stockholders
approve and adopt the Bayonne Merger Agreement, the Bayonne Board
shall have withdrawn, modified or amended such recommendation in any
respect materially adverse to Richmond County;
(6) by Richmond County or Bayonne by written notice to the other party in
the event that there has occurred since July 19, 1998 an event,
condition, change or occurrence which, individually or in the
aggregate, has had or could reasonably be expected to result in a
Material Adverse Effect on Richmond County or Bayonne as the case may
be. Each party shall have given the other 30 calendar days prior
written notice of such termination, and such party shall not have
remedied such event, condition, change or occurrence by the end of
such 30-day period;
(7) Richmond County or Bayonne (provided that the party seeking
termination is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Bayonne Merger
Agreement) in the event of;
(a) a failure to perform or comply by the other party with any
covenant or agreement of such other party contained in the
Bayonne Merger Agreement, which failure or non-compliance is
material in the context of the transactions contemplated by the
Bayonne Merger Agreement, or
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(b) subject to the Material Adverse Effect threshold, any
inaccuracies, omissions or breach in the representations,
warranties, covenants or agreements of the other party contained
in the Bayonne Merger Agreement, the circumstances as to which
either individually or in the aggregate have, or reasonably could
be expected to have, a Material Adverse Effect on such other
party; in either case which has not been or cannot be cured
within 30 calendar days after written notice thereof is given by
the party seeking to terminate to such other party;
(8) by Bayonne, if the Richmond County Board does not publicly recommend
in the Joint Proxy Statement/Prospectus that Richmond County's
stockholders approve and adopt the Bayonne Merger Agreement or if,
after recommending in the Joint Proxy Statement/Prospectus that
stockholders approve and adopt the Bayonne Merger Agreement, the
Richmond County Board shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Bayonne;
(9) by Bayonne, if the Bayonne Board reasonably determines that a proposal
made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or
similar transaction, for consideration consisting of cash and/or
securities, more than 65% of the combined voting power of the shares
of Bayonne Common Stock then outstanding or all or substantially all
of the assets of Bayonne constitutes a Superior Proposal and that such
proposal must be accepted. However, that prior to any such
termination, Bayonne shall use its reasonable efforts to negotiate in
good faith with Richmond County to make such adjustments in the terms
and conditions of this agreement that would enable Bayonne to proceed
with the transactions contemplated herein; or
(10) by Bayonne as discussed below under "-- Price-Based Termination."
PRICE-BASED TERMINATION
The Bayonne Merger Agreement provides that if the "Richmond County Market
Value" on the Valuation Date (see the definitions in the following paragraph for
the meanings for the capitalized terms in this paragraph which previously have
not been defined) is less than $15.41 (as adjusted to account for a stock
dividend, reclassification, split-up, combination, exchange of shares or other
similar transaction between July 19, 1998 and the Valuation Date), and the
"Richmond County Ratio" is less than the "Index Ratio," then Bayonne, during the
five-day period commencing on the Valuation Date, may terminate the Bayonne
Merger Agreement. However, no such termination will occur and the Bayonne Merger
Agreement will remain in effect if Richmond County agrees to increase the
Bayonne Exchange Ratio to equal the lesser of (a) a number equal to a fraction,
the numerator of which is 1.05 multiplied by the "Initial Richmond County Market
Value" multiplied by .85 and the denominator of which is the Richmond County
Market Value, and (b) a number equal to a fraction, the numerator of which is
the Index Ratio multiplied by 1.05 and the denominator of which is the Richmond
County Ratio.
The "Richmond County Market Value" means the average of the daily closing
sales prices of a share of Richmond County Common Stock, as reported on the
Nasdaq National Market for the 15 consecutive trading days immediately preceding
the Valuation Date. The "Richmond County Ratio" means the number obtained by
dividing the Richmond County Market Value on the Valuation Date by the "Initial
Richmond County Market Value." The "Initial Richmond County Market Value" means
the closing sales price of a share of Richmond County Common Stock, as reported
on the Nasdaq National Market, on July 17, 1998, the trading day immediately
preceding the public announcement of the Bayonne Merger Agreement (i.e.,
$18.125). The "Index Ratio" means the number obtained by dividing
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the "Final Index Price" by the "Initial Index Price" and then subtracting 0.15.
The "Final Index Price" means the sum of the average of the daily closing sales
prices of a share of common stock of each of 14 financial institution holding
companies identified in the Bayonne Merger Agreement which continue to be
publicly traded and as to which there shall be not have been a publicly
announced acquisition transaction (the "Index Group"), multiplied by their
respective weighted percentages, as set forth in the Bayonne Merger Agreement,
for the 15 trading days ending on the Valuation Date. The "Initial Index Price"
means the sum of the per share closing prices of the common stock of each
company comprising the Index Group on July 17, 1998, multiplied by their
respective weighted percentages.
NASDAQ NATIONAL MARKET LISTING
The Richmond County Common Stock is listed on the Nasdaq National Market.
Richmond County has agreed to use reasonable efforts to cause the shares of
Richmond County Common Stock to be issued in the Bayonne Merger to be approved
for quotation on the Nasdaq National Market, subject to official notice of
issuance, prior to or at the Bayonne Effective Time. The obligations of the
parties to consummate the Bayonne Merger are subject to approval for quotation
on the Nasdaq National Market of such shares. See "-- Conditions to the Bayonne
Merger" above.
ANTICIPATED ACCOUNTING TREATMENT
Under the Bayonne Merger Agreement, as amended and restated, the Bayonne
Merger will be accounted for under the purchase method of accounting in
accordance with GAAP. Under this method of accounting, Richmond County and
Bayonne will be treated as one company as of the date of the combination,
Richmond County will record the fair market value of Bayonne's assets (both
tangible and identifiable intangible assets) less liabilities on its financial
statements. Any difference between purchase price and the fair value of the
identifiable net assets is recorded as goodwill. The income statements
incorporate the recorded income of Bayonne's operations beginning from the
Bayonne Effective Date.
The unaudited pro forma condensed combined financial information contained
in this Joint Proxy Statement/Prospectus has been prepared using the purchase
accounting method to account for the Bayonne Merger. See "UNAUDITED PRO FORMA
CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS."
FEDERAL INCOME TAX CONSEQUENCES OF THE BAYONNE MERGER
The following is a discussion of the material federal income tax
consequences of the Bayonne Merger to Richmond County, Bayonne and holders of
Bayonne Common Stock. The discussion is based upon the Code, Treasury
regulations, Internal Revenue Service (the "Service") rulings, and judicial and
administrative decisions in effect as of the date hereof, all of which are
subject to change at any time, possibly with retroactive effect. This discussion
assumes that Bayonne Common Stock is held as a "capital asset" within the
meaning of Section 1221 of the Code (i.e., property generally held for
investment). In addition, this discussion does not address all of the tax
consequences that may be relevant to a holder of Bayonne Common Stock in light
of his or her particular circumstances or to holders subject to special rules,
such as foreign persons, financial institutions, tax-exempt organizations,
dealers in securities or foreign currencies or insurance companies. The opinions
of counsel referred to in this section will be based on facts existing at the
Bayonne Effective Time, and in rendering such opinions, such counsel will
require and rely upon representations contained in certificates of officers of
Richmond County, Bayonne and others.
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HOLDERS OF BAYONNE COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE BAYONNE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
It is a condition to the obligation of Richmond County and Bayonne to
consummate the Bayonne Merger that Richmond County and Bayonne each shall have
received an opinion of their respective counsel, dated as of the Bayonne
Effective Time, in form and substance customary in transactions of the type
contemplated by the Bayonne Merger Agreement and reasonably satisfactory to
Richmond County and Bayonne, respectively, to the effect that the Bayonne Merger
will be treated as a reorganization within the meaning of Section 368(a) of the
Code and that, accordingly, for federal income tax purposes:
(1) no gain or loss will be recognized by Richmond County, Richmond County
Savings, Bayonne or First Savings as a result of the Bayonne Merger;
(2) no gain or loss will be recognized by the stockholders of Bayonne who
exchange all of their Bayonne Common Stock solely for Richmond County
Common Stock pursuant to the Bayonne Merger (except with respect to
cash received in lieu of a fractional share interest in Richmond
County Common Stock);
(3) the tax basis of Richmond County Common Stock received by stockholders
who exchange their Bayonne Common Stock for Richmond County Common
Stock in the Bayonne Merger will be the same as the tax basis of
Bayonne Common Stock surrendered pursuant to the Bayonne Merger,
reduced by any amount allocable to a fractional share interest for
which cash is received; and increased by any gain recognized on the
exchange; and
(4) the holding period of Richmond County Common Stock received by each
stockholder in the Bayonne Merger will include the holding period of
Bayonne Common Stock exchanged therefor, provided that such
stockholder held such Bayonne Common Stock as a capital asset on the
Bayonne Effective Date.
RESALES OF RICHMOND COUNTY COMMON STOCK
The shares of Richmond County Common Stock to be issued in the Bayonne
Merger will be registered under the Securities Act and will be freely
transferable under the Securities Act except for shares issued to any Bayonne
stockholder who may be deemed to be an "affiliate" of Bayonne for purposes of
Rule 145 under the Securities Act. Affiliates of Bayonne may not sell their
shares of Richmond County Common Stock acquired in connection with the Bayonne
Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 or another
applicable exemption from the registration requirements of the Securities Act.
This Joint Proxy Statement/Prospectus does not cover any resales of Richmond
County Common Stock received in the Bayonne Merger by persons who may be deemed
to be affiliates of Bayonne. Persons who may be deemed to be affiliates of
Bayonne generally include individuals or entities that control, are controlled
by or are under common control with Bayonne, and may include certain officers
and directors as well as principal stockholders of Bayonne.
For purposes of Rule 145, Bayonne has obtained from each person who is an
affiliate of Bayonne and has delivered to Richmond County, a written agreement
intended to ensure compliance with the Securities Act.
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NO APPRAISAL RIGHTS
Pursuant to Section 262(b) of the DGCL, the stockholders of a constituent
corporation in a merger generally are not entitled to appraisal rights if the
shares of stock they own are, as of the record date, either listed on a national
securities exchange or designated as a national market system security on the
Nasdaq National Market, or held of record by more than 2,000 stockholders.
However, stockholders that would otherwise not have appraisal rights pursuant to
the provisions described in the previous sentence are entitled to appraisal
rights if such stockholders are required by the terms of the merger to accept
for their stock anything except:
(1) shares of the corporation surviving the merger;
(2) shares of stock which are either listed on a national securities
exchange, designated as a national market system security on the
Nasdaq National Market or held of record by more than 2,000
stockholders; or
(3) cash in lieu of fractional shares of stock described in (1) and (2)
above or any combination thereof. Bayonne stockholders are not
entitled to appraisal rights generally because the shares of Bayonne
Common Stock are listed on the Nasdaq National Market and such
Stockholders are not entitled to appraisal rights in connection with
the Bayonne Merger because the shares of Richmond County Common Stock
to be issued in the Bayonne Merger are shares of the surviving
corporation in the Bayonne Merger and will be listed on the Nasdaq
National Market at the Bayonne Effective Time, subject to official
notice of issuance. In addition, there are more than 2,000 holders of
record of Richmond County Common Stock.
EXPENSES
All costs and expenses incurred in connection with the Bayonne Merger
Agreement, the Bayonne Merger Stock Option Agreements and the transactions
contemplated thereby shall be paid by the party incurring such expense. However,
Richmond County shall bear the expenses incurred in connection with printing and
mailing this Joint Proxy Statement/Prospectus and filing fees associated with
the requisite registrations and approvals required to consummate the Bayonne
Merger.
BAYONNE EFFECTIVE TIME
The Bayonne Merger will become effective at the Bayonne Effective Time set
forth in the Certificate of Merger that will be filed with the Secretary of
State of the State of Delaware in accordance with applicable law. The
Certificate of Merger will be filed no later than 14 days after satisfaction or
waiver of the latest to occur of certain conditions to the Bayonne Merger as
specified in the Bayonne Merger Agreement, unless another date is agreed to in
writing by Richmond County and Bayonne. See "-- Conditions to the Bayonne
Merger." The closing of the transactions contemplated by the Bayonne Merger
Agreement will take place on the date of such filing. It is expected that a
period of time will elapse between the Richmond County Meeting and the Bayonne
Meeting and the Bayonne Effective Time while the parties seek to obtain the
regulatory approvals required to consummate the Bayonne Merger. There can be no
assurance that such regulatory approvals will be obtained, and if obtained,
there can be no assurance as to the date of any such approval. There can
likewise be no assurance that the Department of Justice or the Attorney General
of the State of New York will not challenge the Bayonne Merger or, if such a
challenge is made, the result thereof. See "-- Regulatory Approvals Needed to
Complete the Bayonne Merger." The Bayonne Merger Agreement may be terminated by
either party if, among other reasons, the Bayonne Merger has not been
consummated on or
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before April 30, 1999 (provided that if, as of such date, all necessary
regulatory or governmental approvals, consents or waivers required to consummate
the Bayonne Merger shall not have been obtained but all other conditions have
been fulfilled, then July 31, 1999). See "--Waiver and Amendment; Termination."
CERTAIN RELATED TRANSACTIONS
BAYONNE MERGER STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the Bayonne Merger
Stock Option Agreement, which is attached hereto as ANNEX B. The following
summary is qualified in its entirety by reference to the Bayonne Merger Stock
Option Agreement. Execution of the Bayonne Merger Stock Option Agreement was a
condition to the parties entering into the Bayonne Merger Agreement.
Concurrently with the execution of the Bayonne Merger Agreement, Richmond
County and Bayonne entered into the Bayonne Merger Stock Option Agreement. The
Bayonne Merger Stock Option Agreement is designed to enhance the likelihood that
the Bayonne Merger will be successfully consummated in accordance with the terms
contemplated by the Bayonne Merger Agreement and Richmond County insisted on
such agreement for that reason. Pursuant to the Bayonne Merger Stock Option
Agreement, Bayonne granted Richmond County the option to purchase up to
1,809,804 authorized but unissued shares (the "Bayonne Merger Stock Option
Shares") of Bayonne Common Stock (representing approximately 19.9% of the issued
and outstanding shares of Bayonne Common Stock on July 19, 1998) at a price of
$15.50 per share, subject to adjustment in certain circumstances (the "Bayonne
Merger Stock Option").
Provided that (1) Richmond County is not in material breach of the
agreements or covenants contained in the Bayonne Merger Agreement or the Bayonne
Merger Stock Option Agreement and (2) no preliminary or permanent injunction or
other order against the delivery of the shares covered by the Bayonne Merger
Stock Option issued by any court of competent jurisdiction in the United States
shall be in effect, Richmond County may exercise the Bayonne Merger Stock
Option, in whole or in part, at any time and from time to time, following the
occurrence of a Purchase Event (as defined in the next paragraph). However, the
Bayonne Merger Stock Option will terminate and be of no further force and effect
upon the earliest to occur of:
(a) the Bayonne Effective Time;
(b) termination of the Bayonne Merger Agreement in accordance with
the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event (as defined below) (an "Issuer
Termination");
(c) 12 months after the termination of the Bayonne Merger Agreement
other than pursuant to an Issuer Termination;
(d) 12 months after the termination of the Bayonne Merger Agreement
by Richmond County in accordance with the terms of the Bayonne
Merger Agreement; and
(e) 12 months after the first occurrence of a Purchase Event. Any
purchase of shares upon exercise of the Bayonne Merger Stock
Option shall be subject to compliance with applicable law.
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A "Purchase Event" means any of the following events:
(1) Without Richmond County's prior written consent, Bayonne shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Richmond County or any
subsidiary of Richmond County) to effect an Acquisition Transaction.
The term "Acquisition Transaction" shall mean:
(a) a merger, consolidation or similar transaction involving Bayonne
or any of its significant subsidiaries;
(b) the disposition by sale, lease, exchange or otherwise, of assets
or deposits of Bayonne or any of its significant subsidiaries
representing in either case 20% or more of the consolidated
assets or deposits of Bayonne and its subsidiaries; or
(c) the issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of
Bayonne or any of its significant subsidiaries other than the
issuance of Bayonne Common Stock upon the exercise of outstanding
options; or
(2) any person (other than Richmond County or any subsidiary of Richmond
County) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of,
15% or more of the voting power of Bayonne or any of its significant
subsidiaries.
A "Preliminary Purchase Event" means any of the following events:
(1) any person (other than Richmond County or any subsidiary of Richmond
County) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Bayonne Common Stock such that, upon
consummation of such offer, such person would own or control 15% or
more of the then outstanding shares of Bayonne Common Stock (a "Tender
Offer" or an "Exchange Offer," respectively); or
(2) the holders of Bayonne Common Stock shall not have approved the
Bayonne Merger Agreement at the Bayonne Meeting, the Bayonne Meeting
shall not have been held or shall have been cancelled prior to
termination of the Bayonne Merger Agreement, or the Bayonne Board
shall have withdrawn or modified in a manner adverse to Richmond
County the recommendation of the Bayonne Board with respect to the
Bayonne Merger Agreement. In each of the foregoing cases, after it
shall have been publicly announced that any person (other than
Richmond County or any subsidiary of Richmond County) shall have (a)
made or disclosed an intention to make a proposal to engage in an
Acquisition Transaction, or (b) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer; or
(3) any person, other than Richmond County or any subsidiary of Richmond
County, shall have made a bona fide proposal to Bayonne or its
stockholders by public announcement,
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or written communication that is or becomes the subject of public
disclosure, to engage in an Acquisition Transaction; or
(4) after a bone fide proposal is made by a third party to Bayonne or its
stockholders to engage in an Acquisition Transaction, Bayonne shall
have breached any covenant or obligation contained in the Bayonne
Merger Agreement and such breach would entitle Richmond County to
terminate the Bayonne Merger Agreement under the terms thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Bayonne Merger and the Bayonne Bank Merger pursuant to the terms of
the Bayonne Merger Agreement); or
(5) any person other than Richmond County or any subsidiary of Richmond
County, other than in connection with a transaction to which Richmond
County has given its prior written consent, shall have filed an
application or notice with the OTS, or other federal or state bank
regulatory authority, for approval to engage in an Acquisition
Transaction.
Bayonne shall notify Richmond County promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event of which it has knowledge,
it being understood that the giving of such notice by Bayonne shall not be a
condition to the right of Richmond County to exercise the Bayonne Merger Stock
Option.
EFFECT OF THE BAYONNE MERGER STOCK OPTION AGREEMENTS. The Bayonne Merger
Stock Option Agreement is intended to increase the likelihood that the Bayonne
Merger will be consummated in accordance with the terms of the Bayonne Merger
Agreement. Consequently, certain aspects of the Bayonne Merger Stock Option
Agreement may have the effect of discouraging persons who might now or prior to
the Bayonne Effective Time be interested in acquiring all of or a significant
interest in Bayonne from considering or proposing such an acquisition. The
acquisition of Bayonne or an interest therein, or an agreement to acquire all or
part of Bayonne, could cause the Bayonne Merger Stock Option to become
exercisable. The existence of the Bayonne Merger Stock Option Agreement could
significantly increase the cost to a potential acquiror of acquiring Bayonne
compared to its cost had the Bayonne Merger Stock Option Agreement not been
entered into. Such increased cost might discourage a potential acquiror from
considering or proposing an acquisition. Moreover, following consultation with
Bayonne's independent accountant, Bayonne's management believes that the
exercise of the Bayonne Merger Stock Option is likely to prohibit any acquiror
from accounting for an acquisition of Bayonne using the pooling-of-interests
accounting method for a period of two years following such exercise.
Accordingly, the existence of the Bayonne Merger Stock Option Agreement may
deter significantly, or completely preclude, an acquisition of Bayonne by
certain other banking organizations. The Bayonne Board took this factor into
account before approving the Bayonne Merger Stock Option Agreement. See "THE
BAYONNE MERGER -- Our Recommendation of the Bayonne Board; Bayonne's Reasons for
the Merger."
BAYONNE BANK MERGER AGREEMENT
In connection with the Bayonne Merger, Richmond County Savings and First
Savings have entered into the Bayonne Bank Merger Agreement (the "Bayonne Bank
Merger Agreement") pursuant to which First Savings and Richmond County Savings
will merge, with Richmond County Savings Bank being the surviving bank. The
Bayonne Bank Merger Agreement may be terminated by mutual consent of the parties
at any time and will be terminated automatically in the event the Bayonne Merger
Agreement is terminated. In order to facilitate the Bayonne Bank Merger, First
Savings will merge with a Federal interim savings bank, which will then merge
with and into Richmond County Savings.
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THE IRONBOUND MERGER
In a separate and unrelated transaction (the "Ironbound Merger"), Richmond
County is also acquiring Ironbound Bankcorp, NJ ("Ironbound"). Ironbound is a
bank holding company organized under the laws of the State of New Jersey in
1988. Ironbound's wholly owned subsidiary, Ironbound Bank ("Ironbound Bank"), is
a New Jersey State-chartered commercial bank that operates three commercial
banking offices in the New Jersey Counties of Union and Essex. Ironbound Bank
has operated since 1988. Ironbound's bank deposits are insured by the BIF. At
September 30, 1998, Ironbound had total assets of $115.3 million, deposits of
$102.8 million, and stockholders' equity of $11.5 million. Ironbound's principal
offices are located at 36 Pacific Street at New York Avenue, Newark, New Jersey
07105, and its telephone number is (973) 589-3800. After the Ironbound Merger,
Ironbound will be merged with and into Richmond County, and Ironbound
stockholders will become stockholders of Richmond County. It is intended that
the Ironbound Merger will be completed in the first quarter of 1999. Immediately
following the completion of the Ironbound Merger, Richmond County Savings and
Ironbound Bank will also merge. Richmond County Savings Bank will be the name of
the surviving bank. THE RICHMOND COUNTY BOARD HAS UNANIMOUSLY APPROVED THE
IRONBOUND MERGER. THE IRONBOUND MERGER DOES NOT REQUIRE THE APPROVAL OF THE
RICHMOND COUNTY STOCKHOLDERS.
REGULATION AND SUPERVISION
GENERAL
Richmond County Savings is a New York State-chartered stock savings bank
and its deposit accounts are insured up to applicable limits by the FDIC under
the BIF. Richmond County Savings is subject to extensive regulation by the
Superintendent and the New York Banking Board (the "NYBB" and collectively with
the Superintendent, the "NYBD"), as its chartering agency, and by the FDIC, as
the deposit insurer. Richmond County Savings must file reports with the NYBD and
the FDIC concerning its activities and financial condition, in addition to
obtaining regulatory approvals prior to entering into certain transactions such
as establishing branches and mergers with, or acquisitions of, other depository
institutions. There are periodic examinations by the NYBD and the FDIC to assess
Richmond County's compliance with various regulatory requirements and financial
condition. Certain of the regulatory requirements applicable to Richmond County
and to Richmond County Savings are referred to below or elsewhere herein. This
description of the statutory provisions and regulations applicable to Richmond
County and Richmond County Savings does not purport to be complete, and is
qualified in its entirety by reference to such statutes and regulations.
NEW YORK STATE LAW
Richmond County Savings derives its lending, investment and other authority
primarily from the applicable provisions of NYBL and the regulations of the
NYBD, as limited by FDIC regulations. See "-- Investment Activities." Under
these laws and regulations, savings banks, including Richmond County Savings,
may invest in real estate mortgages, consumer and commercial loans, certain
types of
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debt securities, including certain corporate debt securities and obligations of
federal, state and local governments and agencies, certain types of corporate
equity securities and certain other assets. Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities. Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below. Such
equity securities must meet certain tests of financial performance. A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers. A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
authorized under the NYBL. This authority permits investments not otherwise
authorized of up to 1% of the savings bank's assets in any single investment,
subject to certain restrictions, and to an aggregate limit for all such
investments of up to 5% of assets. Additionally, in lieu of investing in such
securities in accordance with and reliance upon the specific investment
authority set forth in the NYBL, savings banks are authorized to elect to invest
under a "prudent person" standard in a wider range of debt and equity securities
as compared to the types of investments permissible under such specific
investment authority. However, in the event a savings bank elects to utilize the
"prudent person" standard, it will be unable to avail itself of the other
provisions of the NYBL and regulations which set forth specific investment
authority. A New York State-chartered stock savings bank may also exercise trust
powers upon approval of the NYBD.
New York State-chartered savings banks may also invest in subsidiaries
under their service corporation investment power. A savings bank may use this
power to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities that may be authorized by the
NYBB. Investment by a savings bank in the stock, capital notes and debentures of
its service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may not
exceed 10% of the savings bank's assets.
The exercise by an FDIC-insured New York State-chartered savings bank of
the lending and investment powers of a savings bank under the NYBL is limited by
FDIC regulations and other federal law and regulations. In particular, the
applicable provisions of the NYBL and regulations governing the investment
authority and activities of an FDIC insured state-chartered savings bank have
been effectively limited by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant
thereto. See "-- Investment Activities."
With certain limited exceptions, a New York State-chartered savings bank
may not make loans or extend unsecured credit for commercial, corporate or
business purposes (including lease financing) to a single borrower, the
aggregate amount of which would be in excess of 15% of the bank's net worth.
Richmond County Savings currently complies with all applicable loans-to-one-
borrower limitations.
Under the NYBL, a New York State-chartered stock savings bank may declare
and pay dividends out of its net profits, unless there is an impairment of
capital, but approval of the Superintendent is required if the total of all
dividends declared in a calendar year would exceed the total of its net profits
for that year combined with its retained net profits of the preceding two years,
subject to certain adjustments.
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FDIC REGULATIONS
CAPITAL REQUIREMENTS. The FDIC has adopted risk-based capital guidelines to
which Richmond County Savings is subject. The guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations. Richmond County
Savings is required to maintain minimum levels of regulatory capital in relation
to its regulatory risk-weighted assets. The ratio of such regulatory capital to
regulatory risk-weighted assets is referred to as the "risk-based capital
ratio." Risk-based capital ratios are determined by allocating assets and
specified off-balance sheet items to four risk-weighted categories ranging from
0% to 100%, with higher levels of capital being required for the categories
considered as representing greater risk.
These guidelines divide a bank's capital into two tiers. The first tier
("Tier I") includes common equity, retained earnings, certain non-cumulative
perpetual preferred stock (excluding auction rate issues) and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and other
intangible assets (except mortgage servicing rights and purchased credit card
relationships subject to certain limitations). Supplementary ("Tier II") capital
includes, among other items, cumulative perpetual and long-term limited-life
preferred stock, mandatory convertible securities, certain hybrid capital
instruments, term subordinated debt and the allowance for loan and lease losses,
subject to certain limitations, less required deductions. Banks are required to
maintain a total risk-based capital ratio of at least 8%, of which at least 4%
must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (ratio of Tier I capital to adjusted total average balance
of assets as specified in the regulations). These regulations provide for a
minimum Tier I leverage ratio of 3% for banks that meet certain specified
criteria, including that they have the highest examination rating and are not
experiencing or anticipating significant growth. All other banks are required to
maintain a Tier I leverage ratio of 3% plus an additional cushion of at least
100 to 200 basis points. The federal banking agencies, including the FDIC, have
established a uniform minimum Tier I leverage ratio of 4% for all but the
highest rated banks. The FDIC may, however, set higher leverage and risk-based
capital requirements on individual institutions when particular circumstances
warrant. Banks experiencing or anticipating significant growth are expected to
maintain capital ratios, including tangible capital positions, well above the
minimum levels.
The following is a summary of Richmond County Savings' regulatory capital
ratios at September 30, 1998:
Tier I Risk-Based Capital................................ 21.60%
Total Risk-Based Capital................................. 22.49
Leverage Capital......................................... 12.38
The following is a summary of First Savings' regulatory capital ratios at
September 30, 1998:
Tier I Risk-Based Capital................................ 27.30%
Total Risked-Based Capital............................... 28.45
Leverage Capital......................................... 12.24
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REAL ESTATE LENDING STANDARDS. The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (1) are secured by real estate or (2) are made for the purpose of
financing the construction or improvements on real estate. The FDIC regulations
require each institution to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the institution and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real estate loans. Institutions are also permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
DIVIDEND LIMITATIONS. The FDIC has authority to use its enforcement powers
to prohibit a bank from paying dividends if, in its opinion, the payment of
dividends would constitute an unsafe or unsound practice. Federal law prohibits
the payment of dividends by a bank that will result in the bank failing to meet
applicable minimum capital requirements on a pro forma basis. Additionally,
Richmond County Savings, as a subsidiary of a savings and loan holding company,
is required to provide the OTS with 30 days prior written notice before
declaring any dividend. The plan of conversion adopted by Richmond County
Savings' in connection with its conversion to stock form also restricts the
institution's payment of dividends in the event the dividend would impair the
liquidation account established in connection with the Conversion. In addition,
the liquidation account established by First Savings in connection with its
Second-Step Conversion may not be impaired by the payment of dividends. Richmond
County Savings
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is also subject to dividend declaration restrictions imposed by New York State
law. See "-- New York State Law."
INVESTMENT ACTIVITIES
Since the enactment of FDICIA, all insured state-chartered banks, including
savings banks and their subsidiaries, have generally been limited to activities
as principal and equity investments of the type and in the amount authorized for
national banks, notwithstanding state law. FDICIA and the FDIC regulations
thereunder permit certain exceptions to these limitations. For example, certain
state-chartered banks, such as Richmond County Savings, may, with FDIC approval,
continue to exercise state authority to invest in common or preferred stocks
listed on a national securities exchange or the Nasdaq National Market and in
the shares of an investment company registered under the Investment Company Act
of 1940, as amended. Such banks may also continue to sell savings bank life
insurance. In addition, the FDIC is authorized to permit such institutions to
engage in state authorized activities or investments that do not meet this
standard (other than non-subsidiary equity investments) for institutions that
meet all applicable capital requirements if it is determined that such
activities or investments do not pose a significant risk to the BIF. The FDIC
has recently proposed revisions to its regulations governing the procedures for
institutions seeking approval to engage in such activities or investments. These
proposed revisions would, among other things, streamline certain application
procedures for healthy banks and impose certain quantitative and qualitative
restrictions on a bank's dealings with its subsidiaries engaged in activities
not permitted for national bank subsidiaries. All non-subsidiary equity
investments, unless otherwise authorized or approved by the FDIC, must have been
divested by December 19, 1996, pursuant to a FDIC approved divestiture plan
unless such investments were grandfathered by the FDIC. Richmond County Savings
received grandfathering authority from the FDIC in February 1993 to invest in
listed stocks and/or registered shares subject to the maximum permissible
investment of 100% of Tier I capital, as specified by the FDIC's regulations, or
the maximum amount permitted by the NYBL, whichever is less. Such grandfathering
authority is subject to termination upon the FDIC's determination that such
investments pose a safety and soundness risk to Richmond County Savings or in
the event Richmond County Savings converts its charter, other than a mutual to
stock conversion, or undergoes a change in control. As of September 30, 1998,
Richmond County Savings had $47.2 million of securities which were permissible
under such grandfathering authority.
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TRANSACTIONS WITH AFFILIATES
Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act
(the "Federal Reserve Act"). An affiliate of a savings bank is any company or
entity that controls, is controlled by, or is under common control with the
savings bank, other than a nonbanking subsidiary of the bank. In a holding
company context, at a minimum, the parent holding company of a savings bank and
any companies which are controlled by such parent holding company are affiliates
of the savings bank. The Board of Governors of the Federal Reserve System (the
"FRB") has proposed regulations that would treat as an affiliate any subsidiary
of a savings bank that engages in activities not permissible for the parent
savings bank to engage in directly. Generally, Section 23A limits the extent to
which the savings bank or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such savings bank's capital
stock and surplus, and contains an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus. The
term "covered transaction" includes the making of loans or other extensions of
credit to an affiliate; the purchase of assets from an affiliate, the purchase
of, or an investment in, the securities of an affiliate; the acceptance of
securities of an affiliate as collateral for a loan or extension of credit to
any person; or issuance of a guarantee, acceptance, or letter of credit on
behalf of an affiliate. Section 23A also establishes specific collateral
requirements for loans or extensions of credit to, or guarantees, acceptances on
letters of credit issued on behalf of an affiliate. Section 23B requires that
covered transactions and a broad list of other specified transactions be on
terms substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to any director, executive officer and
stockholder who controls, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total unimpaired capital and
unimpaired surplus. Section 22(h) also prohibits loans above amounts prescribed
by the appropriate federal banking agency to directors, executive officers, and
stockholders who control 10% or more of voting securities of a stock savings
bank, and their respective related interests, unless such loan is approved in
advance by a majority of the board of directors of the savings bank. Any
"interested" director may not participate in the voting. The loan amount (which
includes all other outstanding loans to such person) as to which such prior
board of director approval is required, is the greater of $25,000 or
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5% of capital and surplus or any loans over $500,000. Further, pursuant to
Section 22(h), loans to directors, executive officers and principal stockholders
must be made on terms, including interest rates and collateral, substantially
the same as offered in comparable transactions to other persons, must involve no
more than the normal risk of repayment or present other unfavorable features,
and must be made using credit underwriting procedures that are not less
stringent than those applicable in comparable transactions with other persons,
except for extensions of credit made pursuant to a benefit or compensation
program that is widely available to the institution's employees and does not
give preference to insiders over other employees. Section 22(g) of the Federal
Reserve Act places additional limitations on loans to executive officers.
ENFORCEMENT
The FDIC has extensive enforcement authority over insured savings banks,
including Richmond County Savings. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue cease and
desist orders and to remove directors and officers. In general, these
enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.
The FDIC has authority under federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances. The FDIC is
required, with certain exceptions, to appoint a receiver or conservator for an
insured state savings bank if that savings bank was "critically
undercapitalized" on average during the calendar quarter beginning 270 days
after the date on which the savings bank became "critically undercapitalized."
For this purpose, "critically undercapitalized" means having a ratio of tangible
equity to total assets of less than 2%. See "-- Prompt Corrective Regulatory
Action." The FDIC may also appoint a conservator or receiver for an insured
state savings bank on the basis of the institution's financial condition or upon
the occurrence of certain events, including:
(1) insolvency (whereby the assets of the savings bank are less than its
liabilities to depositors and others);
(2) substantial dissipation of assets or earnings through violations of
law or unsafe or unsound practices;
(3) existence of an unsafe or unsound condition to transact business;
(4) likelihood that the savings bank will be unable to meet the demands of
its depositors or to pay its obligations in the normal course of
business; and
(5) insufficient capital, or the incurring or likely incurring of losses
that will deplete substantially all of the institution's capital with
no reasonable prospect of replenishment of capital without federal
assistance.
INSURANCE OF DEPOSIT ACCOUNTS
The FDIC has adopted a risk-based insurance assessment system. The FDIC
assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period, consisting of (1) well capitalized, (2)
adequately capitalized or (3) undercapitalized, and one of three supervisory
subcategories within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and additional information
which the FDIC determines to be relevant to the institution's financial
condition and the risk posed to the deposit insurance funds. An institution's
assessment rate depends on the capital category and supervisory
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category to which it is assigned. Deposits of Richmond County Savings are
presently insured by the BIF. Assessment rates for BIF deposits, exclusive of
assessments for Financing Corporation ("FICO") bonds described below, currently
range from 0 basis points to 27 basis points, and the FDIC has determined to
retain such range of assessment rates for the second half of 1998. The FDIC is
authorized to raise the assessment rates in certain circumstances, including to
maintain or achieve the designated reserve ratio of 1.25%, which requirement the
BIF currently meets. The FDIC has exercised its authority to raise rates in the
past and may raise insurance premiums in the future. If such action is taken by
the FDIC, it could have an adverse effect on the earnings of Richmond County
Savings. In addition, recent legislation requires BIF insured institutions like
Richmond County Savings to assist in the payment of FICO bonds.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC. The
management of Richmond County Savings does not know of any practice, condition
or violation that might lead to termination of deposit insurance.
PAYMENT OF FICO BONDS
Beginning on January 1, 1997, BIF deposits are also assessed for payments
on bonds issued by FICO, which were issued in the late 1980's to recapitalize
the predecessor SAIF. For the third quarter of 1998, the FICO assessment rates,
on an annual basis, are 1.22 basis points for BIF assessable deposits and 6.10
basis points for SAIF assessable deposits. Full pro rata sharing of the FICO
payments by BIF members will occur on the earlier of January 1, 2000 or the date
the BIF and SAIF are merged.
FEDERAL RESERVE SYSTEM
The FRB regulations require depository institutions to maintain non-
interest-earning reserves against their transaction accounts (primarily NOW and
regular checking accounts). The FRB regulations generally require that reserves
be maintained against aggregate transaction accounts as follows: for that
portion of transaction accounts aggregating $47.8 million or less (subject to
adjustment by the FRB) the reserve requirement is 3%; and for accounts greater
than $47.8 million, the reserve requirement is $1.4 million plus 10% (subject to
adjustment by the FRB between 8% and 14%) against that portion of total
transaction accounts in excess of $47.8 million. The first $4.7 million of
otherwise reservable balances (subject to adjustments by the FRB) are exempted
from the reserve requirements. Richmond County Savings is in compliance with the
foregoing requirements. Because required reserves must be maintained in the form
of either vault cash, a non-interest-bearing account at a Federal Reserve Bank
or a pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce Richmond County Savings' interest-earning assets.
COMMUNITY REINVESTMENT ACT
New York State Regulation. Richmond County Savings is also subject to
provisions of the NYBL that impose continuing and affirmative obligations upon
banking institutions organized in New York State to serve the credit needs of
its local community ("NYCRA"), which are substantially similar to those imposed
by the CRA, as amended. Pursuant to the NYCRA, a bank must file copies of all
federal CRA reports with the NYBD. The NYCRA also requires the Superintendent to
consider a bank's NYCRA rating when reviewing a bank's application to engage in
certain transactions, including mergers, asset purchases and the establishment
of branch offices or automated teller machines, and provides that such
assessment may serve as a basis for the denial of any such application. The New
York regulations require a biennial assessment of a bank's compliance with the
NYCRA, utilizing a four-tiered rating
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system, and require the NYBD to make available to the public such rating and a
written summary of the results.
FEDERAL REGULATION. Under the CRA, as implemented by FDIC regulations, a
savings bank has a continuing and affirmative obligation consistent with its
safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the FDIC, in connection with its examination of a
savings institution, to assess the institution's record of meeting the credit
needs of its community and to take such record into account in its evaluation of
certain applications by such institution. The FDIC utilizes a four-tier
descriptive rating system in its CRA evaluations. Public disclosure is made of
such evaluations.
HOLDING COMPANY REGULATION
FEDERAL REGULATION. As a unitary savings and loan holding company, Richmond
County generally is not restricted under existing laws as to the types of
business activities in which it may engage. Upon any non-supervisory acquisition
by Richmond County of another savings association to be held as a separate
subsidiary, the Company would become a multiple savings and loan holding company
and would be subject to extensive limitations on the types of business
activities in which it could engage. The HOLA limits the activities of a
multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act of 1956, as amended (the
"BHC Act"), subject to the prior approval of the OTS, and to other activities
authorized by OTS regulations. Multiple savings and loan holding companies are
prohibited from acquiring or retaining, with certain exceptions, more than 5% of
the voting shares of a non-subsidiary holding company or other company engaged
in activities other than those permitted by the HOLA.
Recently enacted legislation provides that the BIF and the SAIF will merge
on January 1, 1999 if there are no more savings associations as of that date.
Several bills have been introduced in the current Congress that would eliminate
the federal thrift charter and the OTS. The bill that was passed by the House of
Representatives in May 1998 would subject unitary savings and loan holding
companies to the activities restrictions generally applicable to other
depository institution holding companies under the legislation and would not
require state savings banks, such as Richmond County Savings, to change their
charter. A grandfathering provision would allow existing unitary savings and
loan holding companies to continue to engage in activities permitted a unitary
savings and loan holding company under existing law and that grandfather could
be transferred to acquirers. Unless the grandfather date in the bill is changed,
Richmond County would qualify for the grandfather if the legislation is enacted.
Richmond County Savings in unable to predict whether the legislation will be
enacted or, given such uncertainty, determine the extent to which the
legislation, if enacted, would affect its business.
The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings association or holding company thereof or
from acquiring such an institution or company by merger, consolidation or
purchase of its assets, without prior written approval of the OTS. In evaluating
applications by holding companies to acquire savings institutions, the OTS must
consider the financial and managerial resources and future prospects of the
company and institution involved, the effect of the acquisition on the risk to
the insurance funds, the convenience and needs of the community and competitive
factors.
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The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, except (1) interstate supervisory acquisitions by savings
and loan holding companies, and (2) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions. The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.
In order to elect and continue to be regulated as a savings and loan
holding company by the OTS (rather than as a bank holding company by the FRB),
Richmond County Savings must continue to qualify as a Qualified Thrift Lender
("QTL"). In order to qualify as a QTL, Richmond County Savings must maintain
compliance with a Qualified Thrift Lender Test ("QTL Test"). Under the QTL Test,
a savings institution is required to maintain at least 65% of its "portfolio
assets" (total assets less: (i) specified liquid assets up to 20% of total
assets; (ii) intangibles, including goodwill; and (iii) the value of property
used to conduct business) in certain "qualified thrift investments" (primarily
residential mortgages and related investments, including certain mortgage-backed
and related securities) in at least 9 months out of each 12 month period. A
holding company of a savings institution that fails the QTL test must either
convert to a bank holding company and thereby become subject to the regulation
and supervision of the FRB or operate under certain restrictions. As of June 30,
1998, Richmond County Savings maintained in excess of 65% its portfolio assets
in qualified thrift investments. Richmond County Savings also met the QTL test
in each of the prior 12 months and, therefore, met the QTL test. Recent
legislative amendments have broadened the scope of "qualified thrift
investments" that go toward meeting the QTL test to fully include credit card
loans, student loans and small business loans. A savings association may also
satisfy the QTL test by qualifying as a "domestic building and loan association"
as defined in the Code.
NEW YORK STATE HOLDING COMPANY REGULATION. In addition to the federal
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the NYBL. The term
"bank holding company," for the purposes of the NYBL, is defined generally to
include any person, company or trust that directly or indirectly either controls
the election of a majority of the directors or owns, controls or holds with
power to vote more than 10% of the voting stock of a bank holding company or, if
the company is a banking institution, another banking institution, or 10% or
more of the voting stock of each of two or more banking institutions, including
commercial banks and state savings banks and savings and loan associations
organized in stock form. In general, a holding company controlling, directly or
indirectly, only one banking institution will not be deemed to be a bank holding
company for the purposes of the NYBL. Under NYBL, the prior approval of the NYBD
is required before:
(1) any action is taken that causes any company to become a bank holding
company;
(2) any action is taken that causes any banking institution to become or
to be merged or consolidated with a subsidiary of a bank holding
company;
(3) any bank holding company acquires direct or indirect ownership or
control of more than 5% of the voting stock of a banking institution;
(4) any bank holding company or subsidiary thereof acquires all or
substantially all of the assets of a banking institution; or
(5) any action is taken that causes any bank holding company to merge or
consolidate with another bank holding company. Additionally, certain
restrictions apply to New York State bank holding companies regarding
the acquisition of banking institutions which have been chartered five
years or less and are located in smaller communities. Officers,
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directors and employees of New York State bank holding companies are
subject to limitations regarding their affiliation with securities
underwriting or brokerage firms and other bank holding companies and
limitations regarding loans obtained from its subsidiaries.
INTERSTATE BANKING AND BRANCHING
Richmond County, as a savings and loan holding company, is limited under
HOLA with respect to its acquisition of a savings association located in a state
other than New York. In general, a savings and loan holding company may not
acquire an additional savings association subsidiary that is located in a state
other than the home state of its first savings association subsidiary unless
such an interstate acquisition is permitted by the statutes of such other state.
Many states permit such interstate acquisitions if the statutes of the home
state of the acquiring savings and loan holding company satisfy various
reciprocity conditions. New York is one of a number of states that permit
out-of-state bank and savings and loan holding companies to acquire New York
savings banks and savings associations.
In contrast, bank holding companies are generally authorized to acquire
banking subsidiaries in more than one state irrespective of any state law
restrictions on such acquisitions. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Interstate Banking Act"), which was enacted
on September 29, 1994, permits approval under the BHC Act of the acquisition of
a bank located outside of the holding company's home state regardless of whether
the acquisition is permitted under the law of the state of the acquired bank.
The FRB may not approve an acquisition under the BHC Act that would result in
the acquiring holding company controlling more than 10% of the deposits in the
United States or more than 30% of the deposits in any particular state.
In the past, branching across state lines was not generally available to a
state bank such as Richmond County Savings. Out-of-state branches of savings
banks are authorized under the NYBL, but similar authority does not exist
generally under the laws of most other states. The Interstate Banking Act
permitted, beginning June 1, 1997, the responsible federal banking agencies to
approve merger transactions between banks located in different states,
regardless of whether the merger would be prohibited under the law of the two
states. The Interstate Banking Act also permitted a state to "opt in" to the
provisions of the Interstate Banking Act prior to June 1, 1997, and permitted a
state to "opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation, beginning June 1, 1997, before that date. Accordingly,
the Interstate Banking Act, permits a bank, such as Richmond County Savings, to
acquire branches in a state other than New York unless the other state has opted
out of the Interstate Banking Act. The Interstate Banking Act also authorizes de
novo branching into another state if the host state enacts a law expressly
permitting out-of-state banks to establish such branches within its borders.
The Interstate Banking Act may facilitate the further consolidation of the
banking industry. The effect of the Interstate Banking Act on Richmond County
Savings, if any, is likely to occur as banking institutions, state legislators,
and bank regulators respond to the new federal regulatory structure. The states
will have to establish appropriate corporate law, tax and regulatory structures
to adjust to the growth of new interstate banks.
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DESCRIPTION OF RICHMOND COUNTY CAPITAL STOCK
GENERAL
The authorized capital stock of Richmond County consists of 75,000,000
shares of Richmond County Common Stock and 5,000,000 shares of preferred stock,
par value $0.01 per share ("Richmond County Preferred Stock"), issuable in one
or more series with such terms and at such times and for such consideration as
the Richmond County Board determines. As of July 19, 1998, 26,423,550 shares of
Richmond County Common Stock and no shares of Richmond County Preferred Stock
had been issued.
As of September 30, 1998, 3,699,297 shares of Richmond County Common Stock
had been reserved for issuance pursuant to the Richmond County Incentive Plan.
The following description contains a summary of all the material features
of the capital stock of Richmond County but does not purport to be complete and
is subject in all respects to the applicable provisions of the DGCL.
COMMON STOCK
The outstanding shares of Richmond County Common Stock are fully paid and
nonassessable. Except as discussed below, holders of Richmond County Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders and have no preemptive rights. Holders
of Richmond County Common Stock are not entitled to cumulative voting rights
with respect to the election of directors. The Richmond County Common Stock is
neither redeemable nor convertible into other securities, and there are no
sinking fund provisions.
As provided in Richmond County's Certificate of Incorporation, for voting
purposes, holders of Richmond County Common Stock who beneficially own in excess
of 10% of the outstanding shares of Richmond County Common Stock (the "Limit")
are not entitled to any vote in respect of the shares held in excess of the
Limit and are not treated as outstanding for voting purposes. A person or entity
is deemed to beneficially own shares owned by an affiliate of, as well as by
persons acting in concert with, such person or entity. Richmond County's
Certificate of Incorporation authorizes the Richmond County Board (1) to make
all determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (2) to demand
that any person who is reasonably believed to beneficially own stock in excess
of the Limit to supply information to Richmond County to enable the Richmond
County Board to implement and apply the Limit.
Subject to the preferences applicable to any shares of Richmond County
Preferred Stock outstanding at the time, holders of Richmond County Common Stock
are entitled to dividends when and as declared by the Richmond County Board from
funds legally available therefor and are entitled, in the event of liquidation,
to share ratably in all assets remaining after payment of liabilities.
Richmond County's Certificate of Incorporation and Bylaws provide that the
Richmond County Board is to be divided into three classes which shall be as
nearly equal in number as possible. Directors are elected by classes to three-
year terms, so that approximately one-third of the directors of Richmond County
are elected at each special meeting of the stockholders. In addition, Richmond
County's Bylaws provide that the power to fill vacancies is vested in the
Richmond County Board. The overall effect of such provisions may be to prevent a
person or entity from seeking to acquire control of Richmond County through an
increase in the number of directors on the Richmond County Board and the
election of designated nominees to fill such newly created vacancies.
90
<PAGE>
PREFERRED STOCK
Richmond County Preferred Stock may be issued with such designations,
powers, preferences and rights as the Richmond County Board may from time to
time determine. The Richmond County Board can, without stockholder approval,
issue Richmond County Preferred Stock with voting, dividend, liquidation and
conversion rights which could dilute the voting strength of the holders of the
Richmond County Common Stock and may assist management in impeding an unfriendly
takeover or attempted change in control. Richmond County presently does not have
plans to issue Richmond County Preferred Stock.
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
Richmond County and Bayonne are both Delaware corporations subject to the
provisions of the DGCL. If the Bayonne Merger is consummated, the holders of
Bayonne Common Stock, whose rights are currently protected by the DGCL and
governed under the Bayonne Certificate of Incorporation and the Bayonne Bylaws
will, at the Bayonne Effective Time, become stockholders of Richmond County and
continue to have rights protected by DGCL Law but governed under the Richmond
County Certificate of Incorporation and Richmond County Bylaws. There are no
material differences between the rights of the holders of Bayonne Common Stock
and the rights of holders of Richmond County Common Stock. Copies of such
governing instruments of Richmond County and Bayonne are available, without
charge, to any person, including any beneficial owner, to whom this Joint Proxy
Statement/Prospectus is delivered, on written or oral request, in the case of
documents relating to Richmond County, to Richmond County Financial Corp., 1214
Castleton Avenue, Staten Island, New York 10310, Attention: Thomas R. Cangemi,
telephone number (718) 448-2800, and in the case of Bayonne, by following the
instructions listed under "WHERE YOU CAN FIND MORE INFORMATION."
91
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
The following statements set forth certain selected condensed financial
information for Richmond County and Bayonne and Ironbound, on an unaudited pro
forma condensed combined consolidated basis giving effect to the Bayonne Merger
and Ironbound Merger applying the purchase method of accounting. The pro forma
condensed statements of income reflecting the Bayonne Merger and Ironbound
Merger assume the acquisitions of Bayonne and Ironbound were consummated on the
first day of each of the periods presented. Due to Richmond County, Bayonne and
Ironbound having different fiscal year ends, the pro forma condensed statement
of income for the year ended June 30, 1998 reflects the combination of each
entities fiscal year end with Richmond County's June 30 year end.
The unaudited pro forma condensed balance sheet presents the combined
financial position of Richmond County and Bayonne as of September 30, 1998. The
unaudited pro forma condensed balance sheet reflects (1) the acquisition of
Bayonne and the acquisition of Ironbound applying the purchase method of
accounting; and (2) certain adjustments that are directly attributable to the
Bayonne Merger and the Ironbound Merger, including allocation of the purchase
price for both mergers. The pro forma condensed balance sheet assumes that the
acquisition of Bayonne and the acquisition of Ironbound were consummated as of
September 30, 1998.
The unaudited pro forma condensed financial statements have been prepared
based upon currently available information and assumptions deemed appropriate by
management of Richmond County, Bayonne and Ironbound. This pro forma information
may not be indicative of what actual results would have been, nor does such data
purport to represent the combined financial results of Richmond County, Bayonne
and Ironbound for future periods.
There may be certain cost savings and/or revenue enhancements that will
result from the Bayonne Merger and the Ironbound Merger; the information
furnished in the Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements does not reflect either the cost savings or the revenue enhancements
that may or may not be achieved.
92
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
AT SEPTEMBER 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks........................... $ 22,764 $ 3,042 $(4,862)/(2)/ $ 25,025 $ 4,070
4,081/(3)/
Federal funds sold................................ 4,200 5 4,205 12,318
Securities held-to-maturity....................... -- 11,708 220/(3)/ 11,928 43,129
Securities available for sale, net................ 831,670 324,457 1,156,127 10,718
Loans receivable:
Real estate mortgage loans................... 765,799 278,719 (804)/(3)/ 1,043,714 38,467
Other loans.................................. 16,679 33,105 49,784 3,335
Less allowance for loan losses............... (7,920) (3,035) (10,955) (857)
---------- -------- ----------- ---------- --------
Total loans receivable, net....................... 774,558 308,789 (804) 1,082,543 40,945
Federal Home Loan Bank of
New York stock.................................. 20,375 10,511 30,886 --
Banking premises and equipment, net............... 13,530 5,524 881/(3)/ 19,935 2,601
Accrued interest receivable....................... 11,514 3,901 15,415 785
Excess of cost over fair value of net
assets acquired and other intangibles........ -- -- 28,560/(4)/ 28,560 --
Other real estate owned........................... 340 501 841 149
Other assets...................................... 13,664 4,219 17,883 587
---------- -------- ----------- ---------- --------
Total assets................................. $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302
========== ======== =========== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits..................................... $ 953,506 $420,749 $ (906)/(3)/ $1,373,349 $102,828
Borrowings................................... 400,000 146,750 1,832/(3)/ 548,582 --
Accrued expenses and other liabilities....... 9,283 10,006 (380)/(3)/ 18,675 945
(234)/(3)/
---------- -------- ----------- ---------- --------
Total liabilities............................ 1,362,789 577,505 312 1,940,606 103,773
Stockholders' equity:
Preferred stock.............................. -- -- -- --
Common stock................................. 264 91 (91)/(8)/ 360 5,213
96/(2)/ --
Additional paid-in-capital................... 254,288 60,995 (60,995)/(8)/ 379,928 4,301
125,640/(2)/
Retained earnings-substantially
restricted................................. 107,529 44,999 (44,999)/(8)/ 107,529 2,631
Unallocated common stock held
by the ESOP................................ (33,274) (4,081) 4,081/(8)/ (33,274) --
Unamortized Management Retention
Plan shares.................................. -- (2,987) 2,987/(8)/ (2,820) --
(2,820)/(3)/
Treasury stock............................... -- -- -- (672)
Comprehensive income:
Unrealized gain (loss) on
securities available-for-sale,
net of taxes............................... 1,019 (3,865) 3,865/(8)/ 1,019 56
---------- -------- ----------- ---------- --------
Total stockholders' equity................... 329,826 95,152 27,764 452,742 11,529
Total liabilities and stockholders'
equity..................................... $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302
========== ======== =========== ========== ========
<CAPTION>
----------------------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
----------------------------------------------
<S>................................................. <C> <C>
ASSETS:
Cash and due from banks........................... $ (2,031)/(5)/ $ 27,064
Federal funds sold................................ 16,523
Securities held-to-maturity....................... 92/(6)/ 55,149
Securities available for sale, net................ 1,166,845
Loans receivable:
Real estate mortgage loans................... (250)/(6)/ 1,081,931
Other loans.................................. 53,119
Less allowance for loan losses............... (11,812)
---------- ----------
Total loans receivable, net....................... (250) 1,123,238
Federal Home Loan Bank of
New York stock.................................. 30,886
Banking premises and equipment, net............... 100/(6)/ 22,636
Accrued interest receivable....................... 16,200
Excess of cost over fair value of net
assets acquired and other intangibles........ 16,130/(7)/ 44,690
Other real estate owned........................... 990
Other assets...................................... 18,470
---------- ----------
Total assets................................. $ 14,041 $2,522,691
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits..................................... $ (69)/(6)/ $1,476,108
Borrowings................................... 548,582
Accrued expenses and other liabilities....... 4/(6)/ 19,624
--
---------- ----------
Total liabilities............................ (65) 2,044,314
Stockholders' equity:
Preferred stock.............................. --
Common stock................................. (5,213)/(8)/ 374
14/(5)/
Additional paid-in-capital................... (4,301)/(8)/ 405,549
25,621/(5)/
Retained earnings-substantially
restricted................................. (2,631)/(8)/ 107,529
Unallocated common stock held
by the ESOP................................ (33,274)
Unamortized Management Retention
Plan shares.................................. (2,820)
--
Treasury stock............................... 672/(8)/ --
Comprehensive income:
Unrealized gain (loss) on
securities available-for-sale,
net of taxes............................... (56)/(8)/ 1,019
---------- ----------
Total stockholders' equity................... 14,106 478,377
Total liabilities and stockholders'
equity..................................... $ 14,041 $2,522,691
========== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
93
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income............................. $ 27,662 $ 11,137 (2)/(9)/ $ 38,797 $ 1,950
Interest expense............................ 12,599 6,735 (58)/(9)/ 19,391 697
----------- ---------- ------- ----------- ----------
Net interest income......................... 15,063 4,402 (60) 19,406 1,253
Provision for loan losses................... 750 75 -- 825 --
----------- ---------- ------- ----------- ----------
Net interest income after
provision for loan losses.............. 14,313 4,327 (60) 18,581 1,253
Non-interest income......................... 1,844 538 -- 2,382 172
Non-interest expense........................ 7,632 2,768 476/(4)//(11)/ 10,876 902
----------- ---------- ------- ----------- ----------
Income before income taxes.................. 8,525 2,097 (536) 10,087 523
Provision for income taxes.................. 3,171 776 (18) 3,929/(12)/ 186
----------- ---------- ------- ----------- ----------
Net income.................................. $ 5,354 $ 1,321 $ (518) $ 6,158 $ 337
=========== ========== ======= =========== ==========
Weighted average shares outstanding:
Basic.................................. 24,362,800 9,041,000 33,938,302 997,158
Diluted................................ 24,362,800 9,174,637 34,078,621 1,031,527
Earnings per share:
Basic.................................. $ 0.22 $ 0.15 $ 0.18 $ 0.34
Diluted................................ $ 0.22 $ 0.15 $ 0.18 $ 0.34
<CAPTION>
---------------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
---------------------------------------
<S>......................................... <C> <C>
Interest income............................. $(28)/(10)/ $ 40,719
Interest expense............................ (2)(10) 20,086
-------- -----------
Net interest income......................... (26) 20,633
Provision for loan losses................... -- 825
-------- -----------
Net interest income after
provision for loan losses.............. (26) 19,808
Non-interest income......................... -- 2,554
Non-interest expense........................ 269/(7)//(11)/ 12,047
-------- -----------
Income before income taxes.................. (295) 10,315
Provision for income taxes.................. (178) 3,937/(12)/
-------- -----------
Net income.................................. $ (117) $ 6,378
======== ===========
Weighted average shares outstanding:
Basic.................................. 35,384,181
Diluted................................ 35,558,869
Earnings per share:
Basic.................................. $ 0.18
Diluted................................ $ 0.18
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
94
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income............................ $ 86,754 $ 40,860 $ (9)/(9)/ $ 127,605 $ 7,695
Interest expense........................... 37,512 24,872 229/(9)/ 62,613 2,610
----------- ---------- ------- ----------- ----------
Net interest income........................ 49,242 15,988 (238) 64,992 5,085
Provision for loan losses.................. 2,200 180 -- 2,380 --
----------- ---------- ------- ----------- ----------
Net interest income after
provision for loan losses................. 47,042 15,808 (238) 62,612 5,085
Non-interest income........................ 3,601 1,343 -- 4,944 723
Contribution to the Foundation............. 19,558 -- -- 19,558 --
Non-interest expense....................... 24,488 10,170 1,904 36,562 3,843
----------- ---------- ------- ----------- ----------
Income before income taxes................. 6,597 6,981 (2,142) 11,436 1,965
Provision (benefit) for income taxes....... 2,071 2,602 (484) 4,189/(12)/ 705
----------- ---------- ------- ----------- ----------
Net income................................. $ 4,526 $ 4,379 $(1,658) $ 7,247 $ 1,260
=========== ========== ======= =========== ==========
Weighted average shares outstanding:
Basic..................................... 24,328,143 8,865,966 33,903,645 1,035,461
Diluted................................... 24,328,143 8,963,512 34,006,069 1,058,163
Earnings (loss) per share:
Basic..................................... $(0.16) $0.49 $0.21 $ 1.22
Diluted................................... $(0.16) $0.49 $0.21 $ 1.19
<CAPTION>
-----------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
-----------------------------------
<S>........................................ <C> <C>
Interest income............................ $ (110)/(10)/ $ 135,190
Interest expense........................... (9)/(10)/ 65,214
--------- -----------
Net interest income........................ (101) 69,976
Provision for loan losses.................. -- 2,380
--------- -----------
Net interest income after
provision for loan losses................. (101) 67,596
Non-interest income........................ -- 5,667
Contribution to the Foundation............. -- 19,558
Non-interest expense....................... 1,075 41,480
--------- -----------
Income before income taxes................. (1,176) 12,225
Provision (benefit) for income taxes....... (457) 4,177/(12)/
--------- -----------
Net income................................. $ (719) $ 8,048
========= ===========
Weighted average shares outstanding:
Basic..................................... 35,349,524
Diluted................................... 35,474,650
Earnings (loss) per share:
Basic..................................... $ 0.23
Diluted................................... $ 0.23
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
95
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The Unaudited Pro Forma Condensed Combined Consolidated Statement of
Financial Condition as of September 30, 1998 has been prepared as if the Bayonne
Merger had been consummated on that date. The Unaudited Pro Forma Condensed
Combined Consolidated Statement of Income for the fiscal year ended June 30,
1998 and the three months ended September 30, 1998 were prepared as if the
Bayonne Merger and the Ironbound Merger had been consummated on July 1, 1997.
The Unaudited Pro Forma Combined Condensed Financial Statements are based on the
historical financial statements of Richmond County, Bayonne and Ironbound after
giving effect to the Bayonne Merger and the Ironbound Merger under the purchase
method of accounting and the assumptions and adjustments in the notes that
follow.
Assumptions relating to the pro forma adjustments set forth in the
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements are
summarized as follows:
(i) Estimated fair values - Estimated fair values for securities
held-to-maturity, loans, deposits and borrowings were obtained from
Bayonne's 1998 Annual Report to Shareholders -- Footnote number 15 of
"Notes to Consolidated Financial Statements" -- Fair Value of Financial
Instruments and Ironbound's 1997 Annual Report to Shareholders -- Footnote
11 of "Notes to Consolidated Financial Statements" -- Fair Value of
Financial Instruments. The resulting net discount/premium on securities
held-to-maturity and loans, respectively, for purposes of these pro forma
financial statements, is being accreted/amortized to interest income on a
straight-line basis over four and ten years, respectively. The actual
discount/premium will be accreted/amortized to interest income to produce a
constant yield to maturity. The resulting net premium and discount on
deposits and borrowings, respectively, is being amortized/accreted into
interest expense on a straight-line basis over the remaining estimated
lives of five years.
(2) The cost to acquire Bayonne has been allocated as described in the table
below:
<TABLE>
<S> <C>
Value of Richmond County Common Stock issued to acquire Bayonne
Common Stock (assumes 9,119,526 shares of Bayonne Common Stock
multiplied by 1.05 and the price per share of $13.131, the closing
average price of Richmond County Common Stock for the five day period
before and after the announcement of the Amended and Restated Bayonne
Merger Agreement)..................................................................... $125,736
Acquisition - related costs:
Transaction costs incurred by Richmond County......................................... 2,700
Severance and other payouts to Bayonne employees, net of tax.......................... 2,162
--------
Total acquisition - related costs......................................................... 4,862
--------
Total costs........................................................................... $130,598
========
</TABLE>
96
<PAGE>
(3) Purchase accounting adjustments recorded for the Bayonne transaction were
as follows:
<TABLE>
<S> <C>
Bayonne net assets-historical at September 30, 1998..................................................... $ 95,152
Adjustments to Bayonne's statement of condition:
Termination of the Bayonne ESOP (Payoff of intercompany
loan payable)................................................................................. 4,081
Termination of the Bayonne ESOP (Payoff of loan payable with third
party)........................................................................................ 380
Merging of the Bayonne 1995 RRP shares into the Richmond County
Management Retention Plan Trust............................................................... 2,820
Fair value adjustments:
Securities held-to-maturity......................................................................... 220
Loans receivable.................................................................................... (804)
Premises and equipment, net......................................................................... 881
Deposits............................................................................................ 906
Borrowings.......................................................................................... (1,832)
--------
Subtotal - net fair value adjustments................................................................. (629)
Tax effects of fair value adjustments................................................................. 234
--------
Total net adjustments to net assets acquired.......................................................... 6,886
--------
Net assets acquired................................................................................... $102,038
========
</TABLE>
(4) Excess of cost over fair value of net assets acquired for the Bayonne
Merger was calculated as follows:
<TABLE>
<S> <C>
Total cost.............................................................................................. $130,598
Net assets acquired..................................................................................... (102,038)
--------
Total excess of cost over fair value of net assets acquired
generated from the Bayonne Merger................................................................. $ 28,560
========
</TABLE>
(5) The cost to acquire Ironbound has been allocated as described in the table
below:
<TABLE>
<S> <C>
Value of Richmond County Common Stock issued to acquire Ironbound
Common Stock (assumes 997,158 shares of Ironbound Common Stock multiplied by 1.45 and the
price per share of $17.73, the closing average price of Richmond County Common Stock for
the five day period before and after the announcement of the Ironbound Merger)......................... $ 25,635
Acquisition - related costs:
Transaction costs incurred by Richmond County.......................................................... 675
Severance and other payouts to Ironbound employees..................................................... 1,356
--------
Total acquisition - related costs......................................................................... 2,031
--------
Total costs............................................................................................ $ 27,666
========
</TABLE>
(6) Purchase accounting adjustments recorded for the Ironbound Merger were as
follows:
<TABLE>
<S> <C>
Ironbound net assets-historical at September 30, 1998.................................................... $11,529
Fair value adjustments:
Securities held-to-maturity......................................................................... 92
Loans receivable.................................................................................... (250)
Premises and equipment, net......................................................................... 100
Deposits............................................................................................ 69
-------
Subtotal - net fair value adjustments.................................................................. 11
Tax effects of fair value adjustments at 37.2%......................................................... (4)
-------
Total net adjustments to net assets acquired........................................................... 7
-------
Net assets acquired.................................................................................... $11,536
=======
</TABLE>
97
<PAGE>
(7) Excess of cost over fair value of net assets acquired for the Ironbound
Merger was calculated as follows:
<TABLE>
<S> <C>
Total cost............................................................................................... $ 27,666
Net assets acquired...................................................................................... (11,536)
--------
Total excess of cost over fair value of net assets acquired
generated from the Ironbound Merger................................................................... $ 16,130
========
</TABLE>
(8) Purchase accounting adjustments to eliminate Bayonne's and Ironbound's
stockholders' equity accounts.
(9) Pro forma adjustments to interest income and interest expense were
calculated for the Bayonne Merger as follows:
<TABLE>
<CAPTION>
For The For The
Fiscal Year Ended Fiscal Year Ended
June 30, 1998 September 30, 1998
-------------------- ----------------------
<S> <C> <C>
Reduction in interest income for cash utilized
for transaction costs (based on an
average annual rate of 5.49%................................... $ (34) $ (8)
Amortization of premium on fixed assets (20 years)............... (55) (14)
Accretion of discount on loans (10 years)....................... 80 20
------- -------
Total net adjustments to
interest income........................................ $ (9) $ (2)
======= =======
Amortization of premium on fixed assets (20 years)............... $ 44 $ 11
Accretion of discount on deposits (5 years)...................... (181) (45)
Amortization of premium on borrowings (5 years).................. 366 92
------- -------
Total net adjustments to
interest expense............................................ $ 229 $ 58
======= =======
</TABLE>
(10) Pro forma adjustments to interest income and interest expense were
calculated for the Ironbound Merger as follows:
<TABLE>
<CAPTION>
For The For The
Fiscal Year Ended Three Months Ended
June 30, 1998 September 30, 1998
-------------------- ----------------------
<S> <C> <C>
Reduction in interest income for cash utilized
for transaction costs (based on an
average annual rate of 5.49%................................... $ (112) $ (28)
Amortization of premium on fixed assets (4 years)................ (23) (6)
Accretion of discount on loans (10 years)....................... 25 6
-------- --------
Total net adjustments to
interest income........................................... $ (110) $ (28)
======== ========
Amortization of premium on fixed assets (20 years)............... $ 5 $ 1
Accretion of discount on deposits (5 years)...................... (14) (3)
-------- --------
Total net adjustments to
interest expense.......................................... $ (9) $ (2)
======== ========
</TABLE>
(11) The amortization of the excess of cost over the fair value of net assets
acquired for the Bayonne Merger and Ironbound Merger is assumed straight-
line over a period of fifteen years.
(12) Income tax expense was calculated using Richmond County's actual three
months ended September 30, 1998 and fiscal year ended June 30, 1998
effective tax rates of 37.2% and 31.4%, respectively, adjusted for the non-
deductibility of the amortization charge of the excess of cost over fair
value of net assets acquired.
98
<PAGE>
(13) Basic earnings per share is calculated by dividing net income since the
Conversion on February 18, 1998 by the weighted average number of common
shares outstanding. Diluted earnings per common share is circulated using
the same method as basic earnings per common share, but reflects potential
dilution of common stock equivalents. Basic and diluted weighted average
number of common stock and common stock equivalents utilized for the
calculation of earnings per share for the periods presented were calculated
using Richmond County's historical weighted average common stock and common
stock equivalents plus 9,575,502 and 1,445,879, and common stock
equivalents, when dilutive, issued to Bayonne and Ironbound stockholders,
respectively, under the terms of the Bayonne Merger and the Ironbound
Merger.
(14) The following table summarizes the estimated impact of the amortization and
accretion of the purchase accounting adjustments made in connection with
the Bayonne Merger and Ironbound Merger on Richmond County's results of
operations for the five years:
<TABLE>
<CAPTION>
PROJECTED FUTURE EXCESS OF COST
AMOUNTS FOR THE OVER FAIR VALUE NET NET DECREASE
FISCAL YEARS ENDED OF NET ASSETS (ACCRETION) IN INCOME
JUNE 30, ACQUIRED AMORTIZATION BEFORE TAXES
------------------- ------------------- --------------- --------------
<S> <C> <C> <C>
1999 $ 2,979 $ 193 $ 3,172
2000 2,979 193 3,172
2001 2,979 193 3,172
2002 2,979 193 3,172
2003 2,979 115 3,094
2004 and thereafter 29,796 (1,505) 28,291
------- ------- -------
$44,691 $ (618) $44,073
======= ======= =======
</TABLE>
99
<PAGE>
ADDITIONAL MATTERS TO BE CONSIDERED AT THE BAYONNE MEETING
ELECTION OF DIRECTORS
The Bayonne Board currently consists of six directors and is divided into
three classes. Each of the six members of the Bayonne Board also presently
serves as a director of First Savings. Mr. Sam P. Lamparello, who served as a
director of both Bayonne and First Savings, passed away in February 1998. The
Bayonne Board subsequently reduced the size of the Bayonne Board from seven to
six members. Directors are elected for staggered terms of three years each, with
the term of office of only one of the three classes of directors expiring each
year. Directors serve until their successors are elected and qualified.
The two nominees proposed for election at the Bayonne Meeting are Patrick F.X.
Nilan and Joseph L. Wisniewski. No person being nominated as a director is being
proposed for election pursuant to any agreement or understanding between any
such person and Bayonne.
In the event that any such nominee is unable to serve, or declines to serve
for any reason, it is intended that the proxies will be voted for the election
of such other person as may be designated by the present Bayonne Board. The
Bayonne Board has no reason to believe that any of the persons named will be
unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEES IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD,
IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
PROPOSED BY THE BAYONNE BOARD.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS OF BAYONNE
The following table sets forth, as of the Bayonne Record Date, the names of
the nominees and continuing directors of Bayonne, as defined below; their ages;
a brief description of their recent business experience, including present
occupations and employment; certain directorships held by each; the year in
which each became a director and the year in which their terms (or in the case
of the nominees, their proposed terms) as director of Bayonne expire. The table
also sets forth the amount of Bayonne Common Stock and the percent thereof
beneficially owned by each director and all directors and executive officers as
a group as of the Bayonne Record Date.
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<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE/(1)/ DIRECTOR
- ----------------------- --- --------- --------
NOMINEES
<S> <C> <C> <C>
Patrick F.X. Nilan/(2)/ 68 1963 2001
Chairman of the Board of Bayonne and First Savings. Mr.
Nilan served as President and Chief Executive Officer of
First Savings until his retirement in June 1997.
Joseph L. Wisniewski 67 1967 2001
Retired Senior Vice President of First Savings. Mr.
Wisniewski was employed by First Savings in various
capacities from 1956 until his retirement in August 1996.
CONTINUING DIRECTORS
James F. Sisk 59 1983 2000
Mr. Sisk was the Public Safety Director of the City of
Bayonne until June 1998. He served as the Chief of Police
of the City of Bayonne until 1996.
Patrick D. Conaghan 61 1986 1999
Partner in the law firm of Conaghan & Conaghan.
Frederick G. Whelpley 77 1973 1999
Retired Chief Executive Officer of Bayonne Hospital.
Michael A. Nilan/(2)/ 34 1997 1999
President and Chief Executive Officer of Bayonne since
February 1997 and First Savings since July 1997. Mr.
Nilan was employed by First Savings in various capacities
prior to assuming the positions of President and Chief
Executive Officer of Bayonne and First Savings.
NAMED EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
Eugene V. Malinowski, C.P.A. 58 -- --
Vice President and Chief Financial Officer of Bayonne and
First Savings. Prior to joining First Savings, Mr.
Malinowski was Vice President, Chief Operating Officer and
Chief Financial Officer of a telephone reseller, and prior
to that was Executive Vice President and Chief Financial
Officer of a commercial bank.
Directors and executive officers as a Group (10 persons) -- -- --
</TABLE>
______________________________
(1) Includes years of service as a Director of First Savings.
(2) Patrick F.X. Nilan is the father of Michael A. Nilan.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Michael A. Nilan, President and Chief Executive Officer of Bayonne and
First Savings, participated in deliberations of the Compensation Committee of
the Bayonne Board concerning executive officer compensation during the past
fiscal year. Additionally, Patrick F.X. Nilan, who retired as President and
Chief Executive Officer of First Savings during fiscal 1998, also participated
in deliberations concerning executive officer compensation. Neither Michael A.
Nilan nor Patrick F.X. Nilan participated in deliberations concerning their own
individual compensation for fiscal 1998.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. In connection with the Second-Step Conversion, and as a
result of the transition to operating as a publicly owned company, the Bayonne
Board determined to restructure the compensation of directors to emphasize
stock-based incentives and reduce the reliance on cash-based compensation.
Accordingly, in 1997, the Bayonne Board reduced the quarterly retainer for non-
employee directors by 50% and the fees paid to non-employee directors for each
meeting attended by 33 1/3%. Non-employee directors presently receive $1,000
for each board of directors meeting attended, plus a $3,000 retainer each
quarter. The Chairman of the Board receives $1,330 for each board of directors
meeting attended, plus a quarterly retainer of $3,750. Non-employee directors
serving on the Asset/Liability Committee and the Audit Committee are paid $250
for each meeting attended, and non-employee directors serving on the Security
and Investment Committee are paid $500 monthly.
In 1987, First Savings, prior to its reorganization into the mutual holding
company form of organization, entered into annuity compensation agreements with
each of First Savings' current directors. First Savings paid all of its
obligations under the agreements in 1987, and therefore, the agreements do not
represent a current expense for First Savings. Pursuant to the agreements,
First Savings currently pays each outside director an annual benefit of $16,000.
The payments will continue to be made over the lifetime of each outside director
with no fewer than 120 monthly payments, which commenced in 1992, to be made to
each director or his beneficiary, and are in addition to other fees received by
directors. These agreements are fully funded by Presidential Life Insurance
Company and First Savings is a mere conduit for payments to each outside
director.
CONSULTING AGREEMENT. Bayonne and Patrick F.X. Nilan entered into a three
year consulting agreement subsequent to Mr. Nilan's retirement as President and
Chief Executive Officer of First Savings. Pursuant to the agreement, Mr. Nilan
will provide advice with respect to all areas in which Bayonne or First Savings
does business and in which Mr. Nilan has special knowledge, skill and expertise,
utilize his business and industry contacts to assist with the implementation of
First Savings' business plan, represent Bayonne and First Savings at civic and
community functions, and advise Bayonne and First Savings on strategic planning
matters, government affairs, industry trends and economic factors affecting
First Savings' business and future prospects. Mr. Nilan is paid a fee of
$100,000 annually for his services.
INCENTIVE PLAN. Bayonne's stockholders approved the Bayonne Incentive Plan
under which all directors of Bayonne and First Savings are eligible to receive
stock-based compensation awards. Under the Bayonne Incentive Plan, each outside
director of Bayonne and First Savings was granted non-statutory stock options to
purchase 24,346 shares of Bayonne Common Stock (with "Limited Rights" as
defined below), and awards of 9,738 shares of Bayonne Common Stock ("Stock
Awards") (collectively,
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the "Directors' Awards") on April 27, 1998, which vest in five equal
installments commencing April 27, 1999. The Limited Rights provide, in the event
of a change in control, a lump sum cash payment equal to the difference between
the exercise price of the related option and the fair market value of the shares
of Bayonne Common Stock subject to the option on the date of exercise, less any
applicable tax withholding. The non-statutory stock option awards vest in five
equal annual installments commencing on April 27, 1999, and have an exercise
price of $16.31. All options granted under the Bayonne Incentive Plan expire ten
years from the date of grant. In the event an outside director ceases service
due to death or disability, all Directors' Awards will immediately vest or
become exercisable and all stock options will remain exercisable for a period of
three years.
EXECUTIVE COMPENSATION
The report of the Compensation Committee of Bayonne (the "Compensation
Committee") and the stock performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or the Exchange Act, except
as to the extent that Bayonne specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the SEC, Bayonne is required to provide certain data and
information in regard to the compensation and benefits provided to Bayonne's
Chief Executive Officer and other executive officers of Bayonne for the fiscal
year ended March 31, 1998. The disclosure requirements for the Chief Executive
Officer and other executive officers include a report explaining the rationale
and considerations that led to fundamental compensation decisions affecting
those individuals.
The following policies and procedures were utilized to determine executive
compensation levels for fiscal 1998. As a result of the Second-Step Conversion
and other operational changes, subjective qualitative measures were more heavily
relied upon by the Compensation Committee than quantitative measures.
COMPENSATION POLICIES AND PROCEDURES. The Compensation Committee consists
of the entire Bayonne Board. The Compensation Committee is responsible for
administering the compensation and benefit programs for the executive officers
and employees of Bayonne and First Savings and to make recommendations regarding
the amount and composition of compensation paid to the executive officers,
including the President and Chief Executive Officer. Members of the
Compensation Committee who are employees of Bayonne or First Savings, however,
do not participate in the Compensation Committee's determination of their own
compensation package.
The Compensation Committee's goal is to establish executive compensation
policies that:
. Link the interests of management and stockholders;
. Link executive compensation with the long-term performance of Bayonne and
its subsidiaries;
. Attract, retain and reward highly qualified and productive persons;
. Link compensation to individual performance; and
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. Establish compensation levels that are internally equitable and
externally competitive with comparable financial institutions.
The compensation program developed by the Compensation Committee to achieve
these goals consists primarily of:
(1) a base salary;
(2) an annual bonus; and
(3) stock-based compensation. In addition, executive officers participate
in other benefit plans available to all employees, including a
retirement plan, the Bayonne ESOP, and the Bayonne 401(k) Plan.
As a result of the Second-Step Conversion of First Savings into the stock
holding company structure, the Compensation Committee revised the executive
compensation policies to reflect the status of Bayonne as a public company. The
Compensation Committee believes that the compensation policies it has
established contributed to the success of Bayonne in making the transition to a
publicly owned company, as well as to the increase in net income and earnings
per share, recorded by Bayonne for the year ended March 31, 1998.
BASE SALARY. The Compensation Committee annually reviews and evaluates base
salary for all executive officers, and in conducting such reviews places primary
consideration upon First Savings' overall objectives and performance, peer group
comparisons and individual performance. In addition, salary levels reflect an
individual officer's responsibilities and experience and the Compensation
Committee's evaluation of competitive marketplace conditions.
Salary levels recommended by the Compensation Committee are intended to be
consistent and competitive with the practices of comparable financial
institutions and each executive's level of responsibility. The Compensation
Committee generally utilizes internal and/or external surveys of compensation
paid to executive officers performing similar duties for depository institutions
and their holding companies with particular focus on the level of compensation
paid by comparable institutions in the metropolitan New York region. For the
fiscal year ended March 31, 1998, the Compensation Committee utilized an
internal survey prepared by an independent compensation consultant.
Although the Compensation Committee's recommendations are discretionary and
no specific formula is used for decision making, salary determinations reflect
the overall performance of Bayonne and First Savings and the performance of the
individual executive officer. In addition, for the fiscal year ended March 31,
1998, the Compensation Committee gave consideration to the adjustments required
to be made by each executive officer in response to the transition of Bayonne to
a publicly owned entity in determining the appropriate salary levels.
ANNUAL INCENTIVES. In determining annual bonus awards, the Compensation
Committee considers the entire compensation package of each executive officer.
Although all determinations by the Compensation Committee regarding bonuses paid
to executive officers are discretionary and no specific formula is used for
awarding bonuses, the primary factors considered by the Compensation Committee
include the profitability of Bayonne and First Savings, the level of
responsibility of each executive
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officer and their contribution to the financial performance of Bayonne and First
Savings. No particular weighting of the factors considered by the Compensation
Committee is used to calculate bonuses.
STOCK-BASED COMPENSATION. Bayonne maintains stock benefit plans, discussed
in more detail below, for the purpose of providing long-term incentives to its
employees, including executive officers, through the award of stock options and
restricted stock awards. The Compensation Committee believes that stock options
and restricted stock awards align the interests of management with stockholders
because the executive officers receive value if the market value of the Bayonne
Common Stock increases. Under Bayonne's stock option plans, the exercise price
of options granted to executive officers is equal to or greater than the market
value of the Bayonne Common Stock on the date of grant. Therefore, the options
have value only to the extent the share price of the Bayonne Common Stock
increases. Furthermore, although the Compensation Committee has discretion to
determine the terms of options and stock awards granted to executive officers
and other employees of Bayonne and First Savings, options and stock awards
granted under Bayonne's plans typically vest in equal annual installments over a
period of five years, which provides incentives to management to maximize both
short-term and long-term stockholder value. The Compensation Committee
considered past awards of stock options and restricted stock awards, as well as
possible future awards, in determining the overall compensation package of each
executive officer.
BAYONNE 1995 STOCK OPTION PLAN. During the fiscal year ended March 31,
1996, First Savings adopted the Bayonne 1995 Stock Option Plan, which was
subsequently adopted by Bayonne. Subsequent to the adoption of the Bayonne 1995
Stock Option Plan, all of the executive officers of First Savings received
grants of options to purchase shares of First Savings Common Stock, which
options commenced vesting in equal annual installments of 20% on August 9, 1996.
Upon consummation of the Second-Step Conversion, Bayonne adopted the Bayonne
1995 Stock Option Plan and each option to purchase First Savings Common Stock
under such plan was exchanged for 2.933 options to purchase Bayonne Common
Stock. The Compensation Committee did not make any additional awards under the
Bayonne 1995 Stock Option Plan during fiscal 1998.
BAYONNE 1995 RRP. First Savings adopted the Bayonne 1995 RRP and made
awards of restricted stock to all of the executive officers of First Savings in
July 1995. The awards commenced vesting in equal annual installments of 20% on
July 28, 1996. Upon consummation of the Second-Step Conversion, Bayonne adopted
the Bayonne 1995 RRP, and all previously awarded, but unvested shares of First
Savings Common Stock and any shares that had not yet been awarded were converted
into 2.933 shares of Bayonne Common Stock. The Compensation Committee did not
make any additional awards under the Bayonne 1995 RRP during fiscal 1998.
BAYONNE INCENTIVE PLAN. Due in part to Bayonne's transition to a publicly
owned company and the desire of the Bayonne Board to link executive compensation
to the performance of the Bayonne Common Stock, the Bayonne Board adopted the
Bayonne Incentive Plan, which the stockholders approved on March 27, 1998.
Pursuant to the Bayonne Incentive Plan, executive officers and other employees
of Bayonne and First Savings are eligible to receive grants of stock options to
purchase shares of Bayonne Common Stock (with Limited Rights) and Stock Awards.
Subject to certain adjustments to prevent dilution of stock options and Stock
Awards granted to participants, the maximum number of shares reserved for
purchase pursuant to the exercise of options and option-related Awards that may
be granted under the Bayonne Incentive Plan is 486,919 shares. The maximum
number of the shares reserved for Stock Awards is 194,768 shares.
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A committee of non-employee directors of Bayonne makes awards under the
Bayonne Incentive Plan and determines the terms of all awards. Options granted
may be intended to qualify as incentive stock options under Section 422 of the
Code. Incentive stock options afford tax benefits to the recipient upon
compliance with certain conditions set forth in the Code and do not result in
tax deductions for Bayonne. The Limited Rights provide, in the event of a
change in control, a lump sum cash payment equal to the difference between the
exercise price of the related option and the fair market value of the shares of
Bayonne Common Stock subject to the option on the date of exercise, less any
applicable tax withholding. In no event may options be exercised more than ten
years from the date of grant. The committee of outside directors that
administers the Bayonne Incentive Plan may condition the vesting of options and
Stock Awards granted under the plan on the attainment of predetermined
performance goals.
No awards were made under the Bayonne Incentive Plan during fiscal 1998.
Prior to granting awards under the Bayonne Incentive Plan, Bayonne retained an
independent compensation consultant to review the current compensation of
executive officers and to make recommendations as to awards to such officers
under the Incentive Plan. Following review and consideration of the
compensation consultant's report, the committee determined on April 27, 1998, to
grant both stock options and stock awards pursuant to the Bayonne Incentive Plan
to certain executive officers of Bayonne and First Savings. All of the stock
options and stock awards initially granted will vest in equal annual
installments of 20% commencing on April 27, 1999.
CHIEF EXECUTIVE OFFICER. Michael A. Nilan entered into an employment
agreement with First Savings during fiscal 1998 that provides for a base salary
of $150,000. In addition, Mr. Nilan was paid a bonus of $2,000 for fiscal 1998
and participated in the benefit plans available to all officers and employees of
Bayonne and First Savings. No specific formula was used in connection with the
Compensation Committee's decisions regarding Mr. Nilan's base salary, bonus and
other compensation, nor did the Compensation Committee set specified
compensation levels based on the achievement of particular quantifiable
objectives or financial goals of Bayonne and First Savings. Rather, the
Compensation Committee considered the overall financial performance of Bayonne
and First Savings, the responsibilities and experience of Mr. Nilan and the
individual contributions made by Mr. Nilan. Specifically, the factors
considered by the Compensation Committee in determining Michael A. Nilan's
overall compensation package included:
. The profits recorded by Bayonne and First Savings for fiscal year 1998;
. The increase in the market value of Bayonne's Common Stock;
. The successful implementation of Bayonne's strategic business plan and the
continued operation of First Savings in a safe and sound manner;
. Actions taken by Michael A. Nilan to facilitate the transition of Bayonne
to a publicly owned entity; and
. Michael A. Nilan's active participation on behalf of Bayonne and First
Savings in civic and community events.
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THE COMPENSATION COMMITTEE
Patrick F.X. Nilan
Joseph L. Wisniewski
James F. Sisk
Patrick D. Conaghan
Frederick G. Whelpley
Michael A. Nilan
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STOCK PERFORMANCE GRAPH
The following graph shows a comparison of total stockholder return on
Bayonne's Common Stock, based on the market price of the Bayonne Common Stock
with the cumulative total return of companies in The Nasdaq Market Index and the
Nasdaq Stock Bank for the period beginning on January 9, 1995, the day Bayonne's
Common Stock began trading, through June 30, 1998. The data was supplied by
Media General Financial Services.
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SUMMARY COMPENSATION TABLE. The following table shows, for the year ended
March 31, 1998, the cash compensation paid, as well as certain other
compensation paid or accrued for that year to the Named Executive Officers of
Bayonne and First Savings in fiscal year 1998. No other executive officer of
Bayonne or First Savings earned and/or received salary and bonus in excess of
$100,000 in fiscal year 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION/(1)/ AWARDS PAYOUTS
------------------------ ------ -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR ($)/(1)/ ($) ($)/(2)/ (#)/(3)/ ($) ($) ($)
- -------------------- ------ -------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael A. Nilan/(5)/..... 1998 $150,000 $ 2,000 -- -- -- -- $82,229/(4)/
President and Chief 1997 99,000 5,000 -- -- -- -- 36,354
Executive Officer
Patrick F.X. Nilan/(6)/... 1998 $217,625 $ -- -- -- -- $98,229/(4)/
Chairman of Bayonne 1997 470,000 37,500 -- -- -- -- 82,008
and First Savings; 1996 432,597 75,000 -- 176,540 33,950 -- 38,203
former President and
Chief Executive
Officer of First
Savings
Eugene V. Malinowski...... 1998 $116,000 $12,000 -- -- -- -- $ --
Vice President and
Chief Financial
Officer
</TABLE>
________________
(1) Includes compensation deferred at the election of the officer pursuant to
the Bayonne 401(k) Plan. Salary for Patrick F.X. Nilan includes $106,250
received for services as President and Chief Executive Officer of First
Savings through June 30, 1997, $36,375 in directors fees, and $75,000 in
fees for services as a consultant to Bayonne and First Savings.
(2) Messrs. Michael A. and Patrick F.X. Nilan were awarded 2,852 and 13,580
shares of First Savings Common Stock (the "First Savings Common Stock"),
respectively, pursuant to the Bayonne 1995 RRP. The awards were granted on
July 28, 1995, and had a fair market value of $13.00, based upon the closing
price per share of First Savings Common Stock on the date of grant. Awards
granted under the Bayonne 1995 RRP vest in equal installments at a rate of
20% per year commencing on July 28, 1996, unless otherwise determined by the
Bayonne Board. Awards will be 100% vested upon termination of employment
due to death, disability or following a change in control. Upon
consummation of the Second-Step Conversion, Bayonne adopted the Bayonne 1995
RRP as a plan of Bayonne and issued Bayonne Common Stock in lieu of First
Savings Common Stock to the Bayonne 1995 RRP in accordance with its terms.
As of the effective date of the Second-Step Conversion, rights outstanding
under the Plan were assumed by Bayonne and constitute rights only for shares
of Bayonne Common Stock, with each such right being for a number of shares
of Bayonne Common Stock equal to the number of shares of First Savings
Common Stock that were available thereunder immediately prior to such
effective date multiplied by the exchange ratio of 2.933 (the "Plan Exchange
Ratio"). The price of each right has been adjusted to reflect the Plan
Exchange Ratio so that the aggregate purchase price of the right is
unaffected, but there is no change in the other terms and conditions of the
rights. Accordingly, at March 31, 1998, the number of shares awarded to
Messrs. Michael A. and Patrick F.X. Nilan pursuant to the Bayonne 1995 RRP,
as adjusted for the Second-Step Conversion, was 8,365 and 39,830,
respectively, with a market value of $124,429 and $592,471, respectively,
based upon the closing price of the Bayonne Common Stock on that date of
$14.875 per share.
(3) Messrs. Michael A. and Patrick F.X. Nilan were awarded options to purchase
3,449 and 33,950 shares of First Savings Common Stock, respectively, on
August 9, 1995 pursuant to the Bayonne 1995 Stock Option Plan. Pursuant to
the Bayonne 1995 Stock Option Plan, options commenced vesting in five equal
annual installments on August 9, 1996, with an exercise price of $13.00.
Upon consummation of the Second-Step Conversion, Bayonne adopted the Bayonne
1995 Stock Option Plan and agreed to issue shares of its Common Stock in
lieu of First Savings Common Stock in accordance with the terms of such
plan. Accordingly, the number of options awarded to Messrs. Michael A. and
Patrick F.X. Nilan pursuant to the Bayonne 1995 Stock Option Plan, as
adjusted for the Second-Step Conversion, was 10,115 and 99,575,
respectively. The adjusted exercise price of the options is $4.43. All of
the options awarded to Patrick F.X. Nilan immediately vested upon his
retirement on June 30, 1997.
(4) Includes $16,000 received by Patrick F.X. Nilan pursuant to First Savings
annuity compensation agreements. Includes the value of 10,029 and 13,429
shares allocated to Michael A. Nilan and Patrick F.X. Nilan, respectively,
pursuant to the Bayonne ESOP as of March 31, 1998. Does not include amounts
contributed by First Savings pursuant to First Savings' noncontributory
defined benefit plan, First Savings' nonqualified supplemental executive
retirement income-deferred compensation agreements, automobile insurance on
personal vehicles used in lieu of automobiles supplied by First Savings, nor
reimbursement of mileage while on company business.
(5) Michael A. Nilan was appointed President and Chief Executive Officer of
Bayonne on February 6, 1997.
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(6) Patrick F.X. Nilan retired from the positions of President and Chief
Executive Officer of First Savings effective June 30, 1997. He continues to
serve as Chairman of the Boards of Bayonne and First Savings. Effective
July 1, 1997, Michael A. Nilan was appointed President and Chief Executive
Officer of First Savings.
EMPLOYMENT AGREEMENTS. Subsequent to the Second-Step Conversion, Bayonne
and First Savings entered into employment agreements with Mr. Michael A. Nilan
(the "Executive"). The employment agreements are intended to ensure that
Bayonne and First Savings will be able to maintain a stable and competent
management base after the Second-Step Conversion.
The employment agreements, as amended and restated, provide for a three-
year term for the Executive. First Savings' employment agreement provides that,
commencing on the first anniversary date and continuing each anniversary date
thereafter, the board of directors of First Savings will review the agreements
and the Executive's performance for purposes of determining whether to extend
the agreement with First Savings for an additional year, such that the new term
would be the same as the original term. The Bayonne employment agreement
automatically extends daily, such that the new term is the same as the original
term unless written notice of non-renewal is given by the Bayonne Board after
conducting a performance evaluation of the Executive. The base salary for the
Executive under the employment agreements is $150,000. In addition to the base
salary, the employment agreements provide for, among other things, participation
in stock benefit plans and other fringe benefits applicable to executive
personnel. The employment agreements provide for termination by Bayonne or
First Savings for cause, as defined in the agreements, at any time. In the
event Bayonne or First Savings chooses to terminate the Executive's employment
for reasons other than for cause, or in the event of the Executive's resignation
from Bayonne or First Savings upon:
(1) failure to re-elect the Executive to his current offices;
(2) a material change in the Executive's functions, duties or
responsibilities;
(3) a relocation of the Executive's principal place of employment by more
than 25 miles;
(4) liquidation or dissolution of Bayonne or First Savings; or
(5) a breach of the agreement by Bayonne or First Savings, the Executive
or, in the event of death, his beneficiary, is entitled to receive the
remaining base salary payments due to the Executive and the
contributions that would have been made on the Executive's behalf to
any employee benefit plans of Bayonne or First Savings during the
remaining term of the agreements. Bayonne or First Savings will also
continue and pay for the Executive's life, health and disability
coverage for the remaining term of the employment agreements.
The employment agreements provide for severance payments in the event of a
change in control. If voluntary or involuntary termination follows a change in
control" of Bayonne or First Savings, as defined in the employment agreements,
the Executive or, in the event of death, his beneficiary, will be entitled to a
payment equal to the greater of (1) the payments due for the remaining term of
the agreement; or (2) a severance payment equal to three times the average of
the five preceding taxable years' compensation. Bayonne and First Savings would
also continue the Executive's life, health, and disability coverage for 36
months.
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Payments to the Executive under First Savings' employment agreement will be
guaranteed by Bayonne in the event that payments or benefits are not paid by
First Savings. Payments under the Bayonne employment agreement will be made by
Bayonne. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the employment
agreements will be paid by Bayonne or First Savings if the Executive is
successful on the merits pursuant to a legal judgment, arbitration or
settlement. The employment agreements also provide that Bayonne and First
Savings will indemnify the Executive to the fullest extent allowable under
federal and Delaware law, respectively. In the event of a change in control of
Bayonne or First Savings, the total amount of payments that would be due under
the employment agreements, based solely on cash compensation paid to Mr. Michael
A. Nilan over the past three fiscal years and excluding any benefits under any
employee benefit plan that may be payable, would be approximately $237,000. The
Bayonne Merger constitutes a change in control under the terms of the employment
agreements.
CHANGE IN CONTROL AGREEMENTS. Subsequent to the Second-Step Conversion,
First Savings entered into change in control agreements with three executive
officers of First Savings and Bayonne entered into change in control agreements
with Mr. Malinowski and another executive officer (collectively, the CIC
Agreements"). Such agreements have terms of three years. The CIC Agreements
provide that commencing on the first anniversary date and continuing on each
anniversary thereafter, First Savings' CIC Agreements may be renewed by the
Bayonne Board for an additional year while the term of Bayonne's CIC Agreements
are extended on a daily basis unless written notice of non-renewal is given by
the Bayonne Board. The CIC Agreements with Bayonne also provide that in the
event voluntary or involuntary termination follows a change in control of First
Savings or Bayonne, the officer is entitled to receive a severance payment equal
to three times the officer's average annual compensation for the five years
preceding termination, depending on the term of the officers' CIC Agreement.
First Savings' CIC Agreements have a similar change in control provision;
however, the officer would only be entitled to receive a severance payment under
one agreement. Bayonne and First Savings will also continue, and pay for, the
officer's life, health and disability coverage for 36 months following
termination. Payments to the officer under First Savings' CIC Agreements will
be guaranteed by Bayonne in the event that payments or benefits are not paid by
First Savings. In the event of a change in control of First Savings or Bayonne,
the total payments that would be due under the CIC Agreements, based solely on
the cash compensation paid to the officers covered by the CIC Agreements over
the past three fiscal years and excluding any benefits under any employee
benefit plan that may be payable, would be approximately $886,000 million. The
Bayonne Merger constitutes a change in control under the terms of the CIC
Agreements.
RETIREMENT PLAN. First Savings maintains a retirement plan pursuant to
which all employees age 21 or older who have worked at First Savings for a
period of six months are eligible to accrue benefits. First Savings annually
contributes an amount to the retirement plan necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
ERISA. The retirement plan operates on a plan year beginning December 15 each
year. Immediately following the execution of the Bayonne Merger Agreement,
Bayonne took all appropriate steps to "freeze" benefit accruals under the
retirement plan.
At the normal retirement age of 65 (or the fifth anniversary of plan
participation, if later), the plan is designed to provide a life annuity
guaranteed for ten years. The retirement benefit provided is an amount equal to
2% of a participant's average monthly salary, multiplied by the total number of
years of service from the date of employment to normal retirement date. This
amount is reduced by
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approximately .63% of average monthly salary up to the covered compensation wage
base (as defined in the retirement plan) multiplied by the total number of years
of service (up to a maximum of 35 years). Notwithstanding the above formula, the
retirement plan will pay a minimum monthly benefit equal to 2% of monthly
salary, times years of service up to ten years of service. Retirement benefits
are also payable upon retirement due to early and late retirement, disability or
death. A reduced benefit is payable upon early retirement at or after age 55 and
the completion of ten years of service with First Savings. Upon termination of
employment other than as specified above, a participant is eligible to receive
his vested accrued benefit as a retirement annuity commencing on such
participant's normal date. Benefits are payable in various annuity forms with
the normal form being an annuity for the participant's life, with a minimum
guarantee of payments for five years. For the plan year ended December 14, 1998,
First Savings made a contribution to the retirement plan of $259,000.
The following table indicates the annual retirement benefit that would be
payable under the retirement plan upon retirement at age 65 in calendar year
1997, expressed in the form of a life annuity with a five year guaranteed
payment for the final average salary and benefit service classification
specified below. Benefits payable under the retirement plan are not subject to
a deduction for social security or other amounts.
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
------------------------------------------------------------------------------------------------------------
HIGH 5 YEAR FINAL
AVERAGE
Earnings/(1)/ 5 10 15 20 25 30 35 40
- ----------------- ------------ --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 2,000 $ 4,000 $ 4,125 $ 5,500 $ 6,875 $ 8,250 $ 9,625 $ 11,625
$ 40,000 4,000 8,000 9,188 12,250 15,313 18,375 21,438 25,438
$ 60,000 6,000 12,000 15,188 20,250 25,313 30,375 35,438 41,438
$ 80,000 8,000 16,000 21,188 28,250 35,313 42,375 49,438 57,438
$100,000 10,000 20,000 27,188 36,250 45,313 54,375 63,438 73,438
$150,000 15,000 30,000 42,188 56,250 70,313 84,375 98,438 113,438
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
</TABLE>
______________
(1) High five-year average monthly earnings means the average of a participant's
monthly earnings in the five consecutive years yielding the highest such
average while a participant in the retirement plan. For participants with
less than five years of service, it is the average of monthly earnings for
all complete calendar years of participation.
(2) Limited due to maximum earnings limits under Section 401(a)(17) of the Code.
As of December 14, 1997, officers Michael A. Nilan, Patrick F.X. Nilan and
Eugene V. Malinowski had 11, 37 and one year of credit service, respectively,
and accrued benefits under the retirement plan equal to annual retirement
benefits of $16,061, $149,436 and $0, respectively. Mr. Patrick F.X. Nilan
retired from First Savings on June 30, 1997 and received a lump sum benefit
payment of $1.6 million under the retirement plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME-DEFERRED COMPENSATION AGREEMENTS.
First Savings has previously maintained supplemental executive retirement
agreements for certain executives of First Savings and their beneficiaries whose
benefits from the tax-qualified defined benefit plan maintained by First Savings
were reduced by reason of (i) the annual limitation on benefits and
contributions imposed by Section 415 of the Code and (ii) the limitation imposed
by Section 401(a)(17)
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of the Code with respect to compensation that can be taken into consideration in
the determination of benefits. The lump sum payments represented the present
value of the executives' accrued annual benefits under the supplemental
executive retirement agreements based on a current actuarial valuation. First
Savings determined that paying the participants in a lump sum would benefit
First Savings over time by saving the annual accruals that would otherwise be
required to fund the supplemental executive retirement agreements. First Savings
has discontinued this plan.
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OPTION EXERCISES AND YEAR-END VALUE. Set forth below is certain
information concerning exercised and unexercisable options during the fiscal
year ended March 31, 1998 for the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED YEAR-END/(1)/ FISCAL YEAR-END/(2)/
--------------------- -----------------------
UPON VALUE
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------- ------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael A. Nilan....... - - 4,046/6,069 $42,260/$63,390
Patrick F.X. Nilan..... 62,391 $518,762/(3)/ 37,184/0 $ 388,387/$0
Eugene V. Malinowski... - - -/- -/-
</TABLE>
_________________
(1) Represents the number of options of Bayonne Common Stock held as of March
31, 1998.
(2) Equals the difference between the $4.43 exercise price of such options and
the aggregate fair market value of the shares of Bayonne Common Stock that
would be received upon exercise, assuming such exercise occurred on March
31, 1998, at which date the last sale of the Bayonne Common Stock, as
quoted on the Nasdaq National Market, was at $14.875 per share.
(3) The market price of the Bayonne Common Stock on September 30, 1997, the
date Mr. Patrick F.X. Nilan exercised 42,476 options, was $12.625, and the
market price of the Bayonne Common Stock on February 10, 1998, the date Mr.
Patrick F.X. Nilan exercised 19,915 options, was $13.00.
TRANSACTIONS WITH CERTAIN RELATED PERSONS. All loans made by First
Savings to its directors and executive officers are made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features. First
Savings is permitted to offer loans to executive officers and directors on terms
not available to the public, but available to other employees, in accordance
with recently modified federal regulations. Under First Savings's existing
policy, any loan to an executive officer or director, must be approved, in
advance, by a majority of the disinterested members of the Bayonne Board.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Bayonne's independent auditors for the fiscal year ended March 31, 1998
were KPMG Peat Marwick LLP. The Bayonne Board has reappointed KPMG Peat Marwick
LLP to continue as independent auditors for First Savings and Bayonne for the
year ending March 31, 1999, subject to ratification of such appointment by the
stockholders.
Representatives of KPMG Peat Marwick LLP will be present at the Bayonne
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders present at the Bayonne Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP
AS THE INDEPENDENT AUDITORS OF BAYONNE.
THE BAYONNE BOARD RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF BAYONNE.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
To be considered for inclusion in Bayonne's proxy statement and form of
proxy relating to the 1999 Bayonne Meeting of Stockholders, which will be held
if the Merger is not completed, a stockholder proposal must be received by the
Corporate Secretary of Bayonne at the address set forth on the first page of
this Joint Proxy Statement/Prospectus not later than _____ __, 1999. Any such
proposal will be subject to 17 C.F.R. (S) 240.14a-8 of the Rules and Regulations
under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT A BAYONNE MEETING
The Bylaws of Bayonne set forth the procedures by which a stockholder may
properly bring business before a meeting of stockholders. The Bylaws of Bayonne
provide an advance notice procedure for a stockholder to properly bring business
before an annual meeting. The stockholder must give written advance notice to
the Secretary of Bayonne not less than 90 days before the date originally fixed
for such meeting; provided, however, that in the event that less than 100 days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the date on which
Bayonne's notice to stockholders of the annual meeting date was mailed or such
public disclosure was made. The advance notice by stockholders must include the
stockholder's name and address, as they appear on Bayonne's record of
stockholders, a brief description of the proposed business, the reason for
conducting such business at the annual meeting, the class and number of shares
of Bayonne's capital stock that are beneficially owned by such stockholder and
any material interest of such stockholder in the proposed business. In the case
of nominations to the Bayonne Board, certain information regarding the nominee
must be provided. Nothing in this paragraph shall be deemed to require Bayonne
to include in its proxy statement or the proxy relating to any annual meeting
any stockholder proposal which does not
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meet all of the requirements for inclusion established by the SEC in effect at
the time such proposal is received.
LEGAL MATTERS
The validity of the shares of Richmond County Common Stock which will be
issued in the Bayonne Merger will be passed upon for Richmond County by Muldoon,
Murphy & Faucette, Washington, D.C. In addition, Muldoon, Murphy & Faucette,
Washington, D.C., will pass upon the tax-free nature of the Bayonne Merger for
Richmond County and McCarter & English, LLP will pass on the tax-free nature of
the Bayonne Merger for Bayonne.
EXPERTS
The consolidated financial statements of Richmond County and subsidiary as
of June 30, 1998 and 1997, and for each of the years in the three-year period
ended June 30, 1998, incorporated by reference in the 1998 Richmond County Form
10-K and incorporated by reference herein and in the Registration Statement of
which this Joint Proxy Statement/Prospectus is a part, have been so incorporated
by reference in reliance upon the report of Ernst & Young LLP, independent
public accountants, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Bayonne and subsidiaries as of
March 31, 1998 and 1997, and for each of the years in the three-year period
ended March 31, 1998 incorporated by reference in the 1998 Bayonne Form 10-K and
incorporated by reference herein and in the Registration Statement of which this
Joint Proxy Statement/Prospectus is a part, have been so incorporated by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
public accountants, incorporated by reference in the 1998 Bayonne Form 10-K and
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
STOCKHOLDER PROPOSALS
Any proposal of a stockholder intended to be presented at the 1999 Annual
Meeting of Richmond County must be received by Richmond County Financial Corp.
at 1214 Castleton Avenue, Staten Island, New York 10310 no later than
________________ to be eligible for inclusion in the proxy statement and form of
proxy. Any such proposal shall be subject to 17 C.F.R. (S)240.14a-8 promulgated
by the SEC under the Exchange Act.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as adjudged liable to the corporation. Any
such indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Registrant has also entered into employment agreements with certain
executive officers, which agreements require that the Registrant maintain a
directors' and officers' liability policy for the benefit of such officers and
that the Registrant will indemnify such officers to the fullest extent permitted
by law.
In addition, pursuant to the Bayonne Merger Agreement, the Registrant has
agreed that, for a period of six years following the effective time of the
Merger, the Registrant will indemnify and hold harmless each present and former
director and officer of Bayonne or its direct or indirect subsidiaries, and each
officer or employee of Bayonne or its direct or indirect subsidiaries who is
serving or has served as a director or trustee of another entity expressly at
Bayonne's request or direction, with respect to matters existing or occurring
prior to the effective time of the Bayonne Merger. The Registrant has also
agreed in the Bayonne Merger Agreement to maintain for a period of three years
following the effective time of the Bayonne Merger the directors' and officers'
liability insurance coverage maintained by Bayonne (or substantially equivalent
coverage under substitute policies) with respect to any claims arising out of
any actions or omissions occurring prior to the effective time of the Bayonne
Merger.
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<PAGE>
In accordance with the DGCL (being Chapter 1 of Title 8 of the Delaware
Code), Articles 10 and 11 of the Registrant's Certificate of Incorporation
provide as follows:
TENTH:
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or
an Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgment, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith; provided, however, that, except
as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter and "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Section A and B of this Article TENTH shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
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<PAGE>
an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable
standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article TENTH or otherwise shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
subsidiary or Affiliate or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General
Corporation Law.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
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Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
Item 21. Exhibits and Financial Statement, Schedules.
(a) Exhibits.
2.1 Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc. is included as ANNEX A to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
3.1 Certificate of Incorporation of Richmond County Financial Corp. (1).
3.2 Bylaws of Richmond County Financial Corp. (1).
4.1 Richmond County Financial Corp. Specimen Stock Certificate (1).
5.1 Form of Opinion of Muldoon, Murphy & Faucette regarding
legality.*
8.1 Form of Opinion of Muldoon, Murphy & Faucette regarding tax
matters.*
8.2 Form of Opinion of Bayonne's Tax Counsel McCarter & English, LLP
regarding tax matters.**
10.1 Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp. is
included as ANNEX B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement.*
10.2 Form of Employment Agreement between Richmond County Savings Bank and
certain executive officers and Form of Employment Agreement between
Richmond County Financial Corp. and certain executive officers (1).
10.3 Form of Change in Control Agreement between Richmond County Savings
Bank and certain executive officers and Form of Change in Control
Agreement between Richmond County Financial Corp. and certain
executive officers (1).
10.4 Richmond County Savings Bank Employee Severance Compensation Plan (1).
10.5 Management's Supplemental Executive Retirement Plan (1).
10.6 Employee Stock Ownership Plan and Trust (1).
10.7 Richmond County Financial Corp. 1998 Stock-Based Incentive Plan (2).
11.0 Statement Re: Computation of Per Share Earnings (3).
23.1 Consent of Muldoon, Murphy & Faucette (included in Exhibit 5.1
hereto).*
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<PAGE>
23.2 Consent of Muldoon, Murphy & Faucette (included in Exhibit 8.1
hereto).*
23.3 Consent of McCarter & English, LLP.**
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond County
Financial Corp.
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors for Bayonne
Bancshares, Inc.
23.6 Consent of Tucker Anthony Incorporated.*
23.7 Consent of Sandler O'Neill & Partners, L.P.*
24.1 Powers of Attorney (see the signature page to this Form S-4
Registration Statement).
27.0 Financial Data Schedule.
99.1 Opinion of Tucker Anthony Incorporated is included as ANNEX C to the
Joint Proxy Statement/Prospectus which is part of this Registration
Statement.*
99.2 Opinion of Sandler O'Neill & Partners, L.P. is included as ANNEX D to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
99.3 Consent of Person to be Named as Director of Richmond County Financial
Corp.*
99.4 Richmond County Financial Corp, Proxy Card *
99.5 Bayonne Bancshares, Inc. Proxy Card*
____________________
* To be filed by amendment. Previously filed.
** To be filed by amendment.
(1) Incorporated by reference into this document from the Exhibits filed
with the Registration Statement on Form S-1 and any amendments
thereto, Registration No. 333-37009 filed with the SEC on October 2,
1997.
(2) Incorporated by reference into this document from the Appendix to the
Proxy Statement for the Annual Meeting of Stockholders held on
September 28, 1998, filed with the SEC on August 28, 1998.
(3) Incorporated by reference into this document from Richmond County's
Annual Report for the year ended June 30, 1998, filed with the SEC on
August 27, 1998.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
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(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not
exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) ((S) 230.424(b) of
this chapter) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act , each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section
15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder,
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act , the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
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(c)(2) The undersigned Registrant hereby undertakes: that every prospectus
(i) that is filed pursuant to the paragraph immediately preceding,
or (ii) that purports to meet the requirements of Section 10(a)(3)
of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 of the Securities Act , will be filed
as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act , each such post-
effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Borough of Staten Island, State of
New York, on December 11, 1998.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
---------------------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 11, 1998.
We, the undersigned officers and directors of Richmond County
Financial Corp. hereby severally and individually constitute and appoint Michael
F. Manzulli, the true and lawful attorney and agent (with full power of
substitution and resubstitution in each case) of each of us to execute in the
name, place and stead of each of us (individually and in any capacity stated
below) any and all amendments to this Registration Statement and all instruments
necessary or advisable in connection therewith and to file the same with the
Securities and Exchange Commission, said attorney and agent to have power to act
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person and we hereby ratify and confirm our
signatures as they may be signed by or said attorney and agent to any and all
such amendments and instruments.
NAME TITLE
---- -----
/s/ Michael F. Manzulli Chairman of the Board and
- ---------------------------
Michael F. Manzulli Chief Executive Officer (principal
executive officer)
/s/ Anthony E. Burke President, Chief
- ---------------------------
Operating Officer
Anthony E. Burke and Director
/s/ Thomas R. Cangemi Senior Vice President,
- ---------------------------
Chief Financial
Thomas R. Cangemi Officer, Treasurer and Secretary
(principal financial and accounting officer)
<PAGE>
/s/ Godfrey H. Carstens, Jr. Director
- ---------------------------------
Godfrey H. Carstens, Jr.
/s/ Robert S. Farrell Director
- --------------------------------
Robert S. Farrell
/s/ William C. Frederick Director
- --------------------------------
William C. Frederick, M.D.
/s/ James L. Kelley Director
- --------------------------------
James L. Kelley
/s/ T. Ronald Quinlan, Jr. Director
- --------------------------------
T. Ronald Quinlan, Jr.
/s/ Maurice K. Shaw Director
- --------------------------------
Maurice K. Shaw
<PAGE>
EXHIBIT INDEX
2.1 Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc. is included as ANNEX A
to the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
3.1 Certificate of Incorporation of Richmond County Financial Corp. (1).
3.2 Bylaws of Richmond County Financial Corp. (1).
4.1 Richmond County Financial Corp. Specimen Stock Certificate (1).
5.1 Form of Opinion of Muldoon, Murphy & Faucette regarding
legality.*
8.1 Form of Opinion of Muldoon, Murphy & Faucette regarding tax
matters.*
8.2 Form of Opinion of McCarter & English, LLP regarding tax matters.**
10.1 Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp. is
included as ANNEX B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement.*
10.2 Form of Employment Agreement between Richmond County Savings Bank and
certain executive officers and Form of Employment Agreement between
Richmond County Financial Corp. and certain executive officers (1).
10.3 Form of Change in Control Agreement between Richmond County Savings
Bank and certain executive officers and Form of Change in Control
Agreement between Richmond County Financial Corp. and certain
executive officers (1).
10.4 Richmond County Savings Bank Employee Severance Compensation Plan
(1).
10.5 Management's Supplemental Executive Retirement Plan (1).
10.6 Employee Stock Ownership Plan and Trust (1).
10.7 Richmond County Financial Corp. 1998 Stock-Based Incentive Plan (2).
11.0 Statement Re: Computation of Per Share Earnings (3).
23.1 Consent of Muldoon, Murphy & Faucette (included in Exhibit 5.1
hereto).*
23.2 Consent of Muldoon, Murphy & Faucette (included in Exhibit 8.1
hereto).*
23.3 Consent of McCarter & English, LLP.**
<PAGE>
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond
County Financial Corp.
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors for Bayonne
Bancshares, Inc.
23.6 Consent of Tucker Anthony Incorporated.*
23.7 Consent of Sandler O'Neill & Partners, L.P.*
24.1 Powers of Attorney (see the signature page to this Form S-4
Registration Statement).
27.0 Financial Data Schedule.
99.1 Opinion of Tucker Anthony Incorporated is included as ANNEX C to the
Joint Proxy Statement/Prospectus which is part of this Registration
Statement.*
99.2 Opinion of Sandler O'Neill & Partners, L.P. is included as ANNEX D to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
99.3 Consent of Person to be Named as Director of Richmond County
Financial Corp.*
99.4 Richmond County Financial Corp. Proxy Card *
99.5 Bayonne Bancshares, Inc. Proxy Card *
____________________
* Previously filed.
** To be filed by amendment.
(1) Incorporated by reference into this document from the Exhibits filed
with the Registration Statement on Form S-1 and any amendments
thereto, Registration No. 333-37009 filed with the SEC on October 2,
1997.
(2) Incorporated by reference into this document from the Appendix to the
Proxy Statement for the Annual Meeting of Stockholders held on
September 28, 1998, filed with the SEC on August 28, 1998.
(3) Incorporated by reference into this document from Richmond County's
Annual Report for the year ended June 30, 1998, filed with the SEC on
August 27, 1998.
<PAGE>
EXHIBIT 23.4
Consent of Ernst & Young LLP
Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 6, 1998, included in the Joint Proxy
Statement/Prospectus of Richmond County Financial Corp. that is made a part of
the Pre-Effective Amendment No. 1 to the Registration Statement for the
registration of 10,041,277 shares of its common stock.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
New York, New York
December 11, 1998
<PAGE>
EXHIBIT 23.5
INDEPENDENT ACCOUNTANT'S CONSENT
The Board of Directors
Bayonne Bancshares, Inc.:
We consent to the incorporation by reference into the registration statement on
Form S-4 of Richmond County Financial Corp. of our report dated April 27, 1998,
with respect to the consolidated statements of financial condition of Bayonne
Bancshares, Inc. and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended March 31, 1998, which report
appears in the Form 10-K of Bayonne Bancshares, Inc., incorporated by reference
into the registration statement on Form S-4 of Richmond County Financial Corp.,
dated October 30, 1998 and to the reference to our Firm under the heading
"Experts" in the registration statement.
/s/ KPMG Peat Marwick LLP
-----------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
December 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,762
<INT-BEARING-DEPOSITS> 4,002
<FED-FUNDS-SOLD> 4,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 831,670
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 782,478
<ALLOWANCE> 7,920
<TOTAL-ASSETS> 1,692,615
<DEPOSITS> 953,506
<SHORT-TERM> 0
<LIABILITIES-OTHER> 9,283
<LONG-TERM> 400,000
0
0
<COMMON> 264
<OTHER-SE> 329,562
<TOTAL-LIABILITIES-AND-EQUITY> 1,692,615
<INTEREST-LOAN> 13,728
<INTEREST-INVEST> 13,269
<INTEREST-OTHER> 665
<INTEREST-TOTAL> 27,662
<INTEREST-DEPOSIT> 7,970
<INTEREST-EXPENSE> 12,599
<INTEREST-INCOME-NET> 15,063
<LOAN-LOSSES> 750
<SECURITIES-GAINS> 513
<EXPENSE-OTHER> 7,632
<INCOME-PRETAX> 8,525
<INCOME-PRE-EXTRAORDINARY> 8,525
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,354
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
<YIELD-ACTUAL> 7.08
<LOANS-NON> 3,797
<LOANS-PAST> 0
<LOANS-TROUBLED> 85
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,276
<CHARGE-OFFS> 119
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 7,920
<ALLOWANCE-DOMESTIC> 4,448
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,472
</TABLE>
