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As filed with the Securities and Exchange Commission on December 15, 1998
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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RICHMOND COUNTY FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 6036 06-1498455
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number Identification Number)
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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)
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COPIES TO:
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DOUGLAS P. FAUCETTE, ESQ. JOHN J. GORMAN, ESQ.
MARC P. LEVY, ESQ. LUSE LEHMAN GORMAN
MULDOON, MURPHY & FAUCETTE POMERENK & SCHICK, P.C.
5101 WISCONSIN AVENUE, N.W. 5335 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20016 SUITE 400
(202) 362-0840 WASHINGTON, D.C. 20015
(202) 274-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES 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
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(d) 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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Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities To Be To Be Price Offering Registration
Registered Registered(1) Per Share(2) Price (2) Fee (2)
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Common Stock, par
value $0.01 per 1,616,846 N/A $21,186,254 $5,890
share ("Common Stock")
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(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 the consummation of the acquisition of Ironbound
Bankcorp, NJ ("Ironbound") by Richmond County.
(2) Pursuant to Rules 457(f)(2) and 457(c), the registration fee for the
Richmond County Common Stock is based on the book value of Ironbound Common
Stock, par value $5.00 per share, on September 30, 1998 ($19.00), and
computed based on the estimated maximum number of such shares, including
shares issuable upon the exercise of outstanding stock options, that may be
exchanged for the securities being registered.
----------------------------------------------
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 NATIONAL
MARKET SYSTEM OF THE NASDAQ STOCK MARKET AND IS TRADED UNDER THE SYMBOL"RCBK".
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LOGO OF IRONBOUND BANKCORP, NJ
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Richmond County Financial Corp. and Ironbound
Bankcorp, NJ have agreed on a merger of Richmond County and Ironbound. 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 Ironbound common stock that you hold
will be converted automatically into a right to receive 1.45 shares of common
stock of Richmond County subject to possible adjustment under certain
circumstances.
We cannot complete the merger unless the Ironbound stockholders approve it.
Ironbound will hold a meeting of its stockholders to vote on this merger
proposal. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the
Ironbound 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 date, time and place of the Ironbound meeting is as follows:
IRONBOUND BANKCORP, NJ
__________, 1999, __:__ local time
___________________________
___________________________
___________________________
___________________________
This document provides you with detailed information about the Ironbound meeting
and the proposed merger. You can also get information about Richmond County
from publicly available documents that Richmond County has filed with the
Securities and Exchange Commission. Information about Ironbound has been
included with this document. We encourage you to read this entire document
carefully.
We strongly support this combination of Ironbound with Richmond County and join
with all of the other members of our Board of Directors in enthusiastically
recommending that you vote in favor of the merger.
Edward Cruz
Chairman of the Board
Ironbound Bankcorp, NJ
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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 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 COMMON STOCK IS TRADED ON THE NATIONAL MARKET SYSTEM OF THE
NASDAQ STOCK MARKET. THE TRADING SYMBOL FOR RICHMOND COUNTY
COMMON STOCK IS "RCBK."
PROXY STATEMENT/PROSPECTUS DATED ______________, 199__
AND FIRST MAILED TO STOCKHOLDERS ON ______________, 199__
<PAGE>
IRONBOUND BANKCORP, NJ
36 PACIFIC STREET AT NEW YORK AVENUE
NEWARK, NEW JERSEY 07105
(973) 589-3800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________ __, 199__
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Ironbound
Bankcorp, NJ ("Ironbound") will be held at ____________, ________________,
________, New Jersey ________ on ______, ________ __, 199__ at __:__ a.m., local
time, (the "Ironbound Meeting") for the following purposes, all of which are
more completely set forth in the accompanying Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, (the "Ironbound Merger Agreement"), dated as of
July 17, 1998 by and between Richmond County Financial Corp. ("Richmond
County") and Ironbound. The Ironbound Merger Agreement provides for the
merger of Ironbound with and into Richmond County (the "Ironbound
Merger"), pursuant to which each share of common stock of Ironbound,
par value $5.00 per share, will be converted into the right to receive
1.45 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 Ironbound Merger Agreement.
2. To transact such other business as may properly come before the
Ironbound Meeting or any adjournment or postponement thereof.
Pursuant to Ironbound's Bylaws, the board of directors of Ironbound has
fixed ____________________, 199__ as the record date for the determination of
stockholders entitled to notice of and to vote at the Ironbound 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
Ironbound Meeting. A list of Ironbound stockholders entitled to vote at the
Ironbound Meeting will be available for examination for any purpose germane to
the Ironbound Meeting, during ordinary business hours, at the principal
executive offices of Ironbound located at 36 Pacific Street at New York Avenue,
Newark, New Jersey 07105 for ten days prior to the Ironbound Meeting and will
also be available at the Ironbound Meeting.
In the event that there are not sufficient votes to approve the foregoing
proposal at the time of the Ironbound Meeting, the Ironbound Meeting may be
adjourned in order to permit further solicitation by Ironbound.
By Order of the Board of Directors
___________________________________
Corporate Secretary
Newark, New Jersey
_________ __, 199__
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE AND ADOPT THE IRONBOUND MERGER AGREEMENT.
WHETHER OR NOT YOU PLAN TO ATTEND THE IRONBOUND 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 IRONBOUND PRIOR TO THE IRONBOUND
MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE, OR BY ATTENDING THE IRONBOUND MEETING, FILING A WRITTEN NOTICE OF
REVOCATION WITH THE SECRETARY OF THE IRONBOUND MEETING AND VOTING IN PERSON.
<PAGE>
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
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SUMMARY................................................................... 1
The Companies.......................................................... 1
Richmond County Financial Corp...................................... 1
Ironbound Bankcorp, NJ.............................................. 1
The Stockholders' Meeting.............................................. 1
Ironbound Stockholders.............................................. 1
Record Date; Vote Required............................................. 1
Ironbound Stockholders.............................................. 1
Our Reasons for the Merger............................................. 1
Our Recommendations to Stockholders.................................... 2
Ironbound Stockholders.............................................. 2
The Ironbound Merger................................................... 2
General............................................................. 2
Exchange of Shares.................................................. 2
Ironbound Stockholders........................................... 2
Opinion of Financial Advisors.......................................... 3
Ironbound........................................................... 3
Stock Options.......................................................... 3
Ironbound Stock Options............................................. 3
Management and Operations after the Merger............................. 3
What We Need to do to Complete the Merger.............................. 3
Termination of the Agreement; Expenses................................. 4
Waiver and Amendment................................................... 4
Accounting Treatment................................................... 5
Regulatory Approvals................................................... 5
Ironbound Merger Stock Option Agreement................................ 5
Interests of Directors and Officers in the Merger that may be
Different From Your Interests....................................... 5
Appraisal Rights....................................................... 6
Ironbound Stockholders.............................................. 6
Certain Federal Income Tax Consequences................................ 6
Ironbound Stockholders.............................................. 6
Certain Differences in the Rights of Stockholders................... 6
The Bayonne Merger..................................................... 6
Selected Historical Financial Data of
Richmond County and Ironbound (Unaudited)........................... 7
Selected Historical Unaudited Financial and Other Data................. 8
Selected Historical Unaudited Financial and Other Data................. 11
Unaudited Pro Forma Combined Selected
Financial Information............................................... 13
Selected Unaudited Pro Forma Financial Data
of Richmond County, Bayonne and Ironbound........................... 14
Comparative Per Share Data............................................. 15
INDEX OF DEFINED TERMS.................................................... 16
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THE COMPANIES............................................................. 19
Richmond County........................................................ 19
Ironbound.............................................................. 19
WHERE YOU CAN FIND MORE INFORMATION....................................... 19
FORWARD-LOOKING STATEMENTS................................................ 21
MARKET PRICES AND DIVIDEND INFORMATION.................................... 22
MEETING OF IRONBOUND STOCKHOLDERS......................................... 23
Date, Time and Place; Purpose of Meeting............................... 23
Record Date............................................................ 23
Proxies; Voting and Revocation of Proxies.............................. 24
Vote Required; Principal Stockholders.................................. 25
BENEFICIAL OWNERSHIP OF IRONBOUND COMMON STOCK............................ 27
Principal Security Ownership........................................... 27
THE IRONBOUND MERGER...................................................... 29
General................................................................ 29
Background of the Ironbound Merger..................................... 29
Recommendation of the Ironbound Board; Ironbound's Reasons
for the Merger...................................................... 31
Opinion of Ironbound's Financial Advisor............................... 32
Stock Trading History............................................... 34
Contribution Analysis............................................... 35
Comparable Company Analysis......................................... 35
Analysis of Selected Merger Transactions............................ 36
Impact Analysis..................................................... 36
Discounted Cash Flow Analysis....................................... 37
Remaining Independent Scenario...................................... 37
Exchange of Ironbound Shares........................................... 38
Procedures for Exchange of Certificates................................ 39
Interests of Directors and Officers in the Ironbound Merger
that may be Different From Your Interests........................... 40
Management and Operations Following the Ironbound Merger............... 43
Employee Matters....................................................... 43
Conditions to the Ironbound Merger..................................... 45
Regulatory Approvals Needed to Complete the Ironbound Merger........... 50
Conduct of Business Pending the Ironbound Merger....................... 53
Representations and Warranties......................................... 57
Acquisition Proposals.................................................. 58
Waiver and Amendment; Termination...................................... 59
Price-Based Termination................................................ 61
Nasdaq National Market Listing......................................... 61
Anticipated Accounting Treatment....................................... 62
Federal Income Tax Consequences of the Ironbound Merger................ 62
Resales of Richmond County Common Stock................................ 63
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No Appraisal Rights.................................................... 64
Expenses............................................................... 64
Ironbound Effective Time............................................... 64
CERTAIN RELATED TRANSACTIONS.............................................. 65
Ironbound Merger Stock Option Agreement................................ 65
Ironbound Bank Merger Agreement........................................ 68
THE BAYONNE MERGER........................................................ 69
REGULATION AND SUPERVISION................................................ 69
General................................................................ 69
New York State Law..................................................... 70
FDIC Regulations....................................................... 71
Investment Activities.................................................. 73
Transactions with Affiliates........................................... 73
Enforcement............................................................ 74
Insurance of Deposit Accounts.......................................... 75
Payment of FICO Bonds.................................................. 76
Federal Reserve System................................................. 76
Community Reinvestment Act............................................. 76
Holding Company Regulation............................................. 77
Interstate Banking and Branching....................................... 79
DESCRIPTION OF RICHMOND COUNTY CAPITAL STOCK.............................. 80
General................................................................ 80
Common Stock........................................................... 81
Preferred Stock........................................................ 82
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS.............................. 82
General................................................................ 82
Number of Members of the Board of Directors............................ 83
Election of the Board of Directors..................................... 83
Pre-emptive Rights..................................................... 83
Voting Rights.......................................................... 84
Removal of Directors................................................... 84
Special Meetings of the Stockholders................................... 84
Annual Meeting of Stockholders......................................... 85
Organization........................................................... 85
Conduct of Business.................................................... 85
List of Stockholders................................................... 86
Amendment to Bylaws.................................................... 86
Merger or Business Combination......................................... 86
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS................................................... 88
LEGAL MATTERS............................................................. 95
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EXPERTS................................................................... 95
INFORMATION NOT REQUIRED IN PROSPECTUS.................................... II-1
SIGNATURES................................................................ II-8
EXHIBIT INDEX............................................................. II-10
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ANNEX A Agreement and Plan of Merger, dated as of July 17, 1998, by and
between Richmond County Financial Corp. and Ironbound Bankcorp NJ.
ANNEX B Stock Option Agreement, dated as of July 17, 1998, by and between
Ironbound Bankcorp, NJ and Richmond County Financial Corp.
ANNEX C Opinion of Ostrowski & Company, Inc.
ANNEX D Financial Information Relating to Ironbound Bankcorp, NJ.
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<PAGE>
SUMMARY
This brief summary highlights selected information from the Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. You should carefully read the entire 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.
IRONBOUND BANKCORP, NJ
36 Pacific Street
Newark, New Jersey 07105
(937) 589-3800
Ironbound Bankcorp, NJ is a New Jersey bank holding company. We operate
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 $115.2 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 stockholders.
THE STOCKHOLDERS' MEETING (PAGE __)
Ironbound Stockholders. The Ironbound Bankcorp, NJ special meeting will be held
on ____________, at __:__ _.m., local time, at________________, ______________.
At the Ironbound special meeting, you will be asked:
1. to approve the merger of our company with Richmond County;
2. to act on any other items that may be submitted to a vote at the special
meeting.
RECORD DATE; VOTE REQUIRED (PAGE __)
Ironbound Stockholders. You can vote at the meeting of Ironbound stockholders
if you owned Ironbound common stock at the close of business on ______, 199__.
You will be able to cast one vote for each share of Ironbound common stock you
owned at that time. In order to approve the merger, the holders of a majority
of the shares of Ironbound common stock outstanding must vote in its favor. You
can vote your shares by attending the Ironbound 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. You can revoke your proxy as late as the date of
the meeting either by sending in a new proxy, or by changing your vote by
attending the meeting and voting in person.
OUR REASONS FOR THE MERGER (PAGE __)
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
<PAGE>
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 (PAGE __)
Ironbound Stockholders. The board of directors of Ironbound 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 IRONBOUND 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 Ironbound 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 end of the first quarter of 1999.
EXCHANGE OF SHARES (PAGE __)
Ironbound Stockholders. As an Ironbound stockholder, each of your shares of
Ironbound common stock will automatically become exchangeable for 1.45 shares of
Richmond County common stock. The total number of shares you receive will
therefore be equal to 1.45 times the number of shares of Ironbound 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 Ironbound common stock for shares of
Richmond County common stock by sending your Ironbound common stock 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 Ironbound
Shares" on page __ of this document. For example, if you owned ten shares of
Ironbound common stock, after the merger you will send in the letter of
transmittal and your old Ironbound certificates and in exchange you will receive
fourteen 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. Of course, the
market price of Richmond County will continue to fluctuate prior to and after
completion of the merger. If during a period of time prior to the closing of
the merger, the price of Richmond County common stock is less than $15.945 but
equal to or greater than $14.00 per share, the merger exchange ratio will be
adjusted so that the value to be received for each share of Ironbound common
stock is $23.12. If during a period of time prior to the closing of the merger,
the price of Richmond County common stock is less than $14.00, Ironbound may
terminate the transaction, proceed with the merger as structured, or attempt to
renegotiate the exchange ratio. A vote in favor of the Agreement authorizes the
Ironbound board of directors to exercise its discretion in such event, without
any further action by the Ironbound stockholders.
Shares of Richmond County are quoted on the National Market System of the Nasdaq
Stock Market. On July 16, 1998, the last trading day before we announced the
merger, Richmond County common stock closed at $18.313 per share. Ironbound
common stock is traded very infrequently on the over-the-counter market, or on a
private basis. The latest trade of Ironbound common stock prior to the
announcement of the merger of which management is aware was on July 15, 1998 at
$19.00 per share. On _______, Richmond County common stock closed at $_____ per
share.
2
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Based on the exchange ratio in the merger, which is 1.45, the market value of
the consideration that Ironbound stockholders will receive in the merger for
each share of Ironbound common stock would be $26.55 based on Richmond County's
closing stock price on July 16, 1998 , 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. Such quotations are available from your stock broker, in major
newspapers such as The Wall Street Journal and on the Internet.
OPINION OF FINANCIAL ADVISORS (PAGE ___)
Ironbound. Ostrowski & Company, Inc. has delivered to the Ironbound board of
directors its opinion that, as of the date of this document, the terms of the
Ironbound merger agreement are fair from a financial point of view to the
holders of Ironbound common stock. We have attached this opinion to this
document as ANNEX C. You should read it completely to understand the
procedures followed, assumptions made, matters considered, qualifications and
limitations on the review made by Ostrowski & Company, Inc. in providing this
opinion.
STOCK OPTIONS (PAGE __)
Ironbound Stock Options. Upon completion of the merger, each option to acquire
Ironbound common stock granted under Ironbound stock option plans that is
outstanding and unexercised immediately before completing the merger will become
the right to receive shares of Richmond County common stock. The value of each
Ironbound Option is equal to the per share price of Richmond County common
stock on July 17, 1998, multiplied by the Ironbound exchange ratio, less the
exercise price of the options.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE __)
The Richmond County board of directors will not change as a result of the
merger. The members of Ironbound's board of directors who are willing to
serve will serve on a divisional board after the merger.
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 the Ironbound stockholders.
2. Approval of the merger by certain federal and state regulatory authorities.
3. Receipt by Richmond County and Ironbound of a legal opinion from their
respective tax counsel that, for United States federal income tax purposes,
Ironbound 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 Ironbound common stock.
5. The absence of any injunction or legal restraint blocking the merger or
3
<PAGE>
government proceedings trying to block the merger.
6. Receipt by Richmond County of letters from Ironbound "affiliates"
(including Ironbound's officers and directors) restricting their trading in
shares of Richmond County stock and agreeing to vote in favor of the merger
at the Ironbound special meeting (a condition which, as of the date of this
document, has been satisfied).
7. The purchase by Ironbound of its executive offices, subject to the terms
agreed to by Ironbound and Richmond County (a condition which, as of the
date of this document, has been satisfied).
Where the law permits, Richmond County and Ironbound 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, or
if any governmental entity issues a final, appealable 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 breach of any
representation, warranty or covenant contained in the Agreement by the
party seeking to terminate;
3. One party breaches the Agreement (and does not correct the breach promptly)
in a way that would entitle the terminating party to not complete the
merger, as long as the party seeking to terminate the Agreement has not
materially breached the Agreement;
4. Ironbound's stockholders do not approve the merger;
5. By Ironbound, if the price of Richmond County common stock is less than
$14.00 during the five-day period beginning on the date that the parties
have received the last consent, approval or waiver for the merger to occur;
6. By Richmond County, if the Ironbound board of directors does not recommend
or withdraws, modifies or amends its recommendation to Ironbound's
stockholders to approve the merger; or
7. The occurrence of an event, condition, change or occurrence that has or
could reasonably be expected to result in a material adverse effect (as
defined on page __) and the breaching party does not remedy the effect of
the event within a specified notification period.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses.
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 Ironbound stockholders unless the affected stockholders
approve the amendment or waiver.
4
<PAGE>
ACCOUNTING TREATMENT (PAGE __)
We expect the merger to be accounted for as a "purchase." 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
Ironbound's assets, less liabilities, on its financial statements.
REGULATORY APPROVALS (PAGE __)
The merger must be approved by the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, 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.
IRONBOUND MERGER STOCK OPTION AGREEMENT (PAGE __)
Ironbound, at the request of Richmond County, entered into a stock option
agreement granting Richmond County an option to purchase Ironbound common stock.
Ironbound 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 Ironbound 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 Ironbound common stock. The purchase
price per share under the option agreement is $20.00 per share.
Richmond County cannot exercise its option unless certain events occur. These
events are business combination or acquisition transactions relating to
Ironbound 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 MAY BE 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 Ironbound.
These include, among other things, provisions in the Ironbound Merger Agreement
relating to indemnification, the payout of cash payments under existing
employment agreements and the acceleration of and the vesting of stock options.
Richmond County will also enter into employment agreements with Michael J.
Gagliardi and Thomas Lupo, currently the President and Chief Executive Officer
and Executive Vice President, respectively, of Ironbound. Under these
agreements, Mr. Gagliardi will be employed as an executive vice president of
Richmond County Savings Bank and will earn a salary of $160,000. The term of
Mr. Gagliardi's employment agreement is three years. Mr. Lupo will be employed
as a senior vice president of Richmond County Savings Bank and will receive an
annual salary of $125,000. The term of Mr. Lupo's employment agreement is three
years. In addition, Richmond County will appoint the current members of the
board of directors of Ironbound willing to serve to an advisory board of
directors. This board will advise Richmond County with respect to deposit and
lending activities in Ironbound's market area and will maintain and develop
customer relationships. Each non-employee member of this divisional board
(except the chairman of such board) will receive an annual retainer of $5,000,
as well as a $750 fee for each board meeting attended. The chairman of the
5
<PAGE>
divisional board will receive an annual retainer of $10,000, as well as a
$750 fee for each board meeting attended.
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 __)
Ironbound Stockholders. New Jersey law does not provide you with dissenters'
appraisal rights in the merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGE __)
Ironbound Stockholders. We expect that for United States federal income tax
purposes, your exchange of shares of Ironbound 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, Ironbound's stockholders automatically will
become stockholders of Richmond County and their rights as stockholders of
Richmond County will be governed by the 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, differ from the rights of the stockholders of Ironbound, as defined
in its Certificate of Incorporation and Bylaws, with respect to certain matters,
including among others, pre-emptive rights, voting right limitations, and the
removal of members of the board of directors.
THE BAYONNE MERGER (PAGE __)
In a separate and unrelated transaction, Richmond County is also acquiring
Bayonne Bancshares, Inc. Bayonne is a savings and loan holding company
organized under the laws of the State of Delaware in 1997. It operates 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 Bayonne Merger does not require the approval of
Ironbound stockholders.
6
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF
RICHMOND COUNTY AND IRONBOUND
The following tables show summarized historical financial data for each of
Richmond County and Ironbound. The information in the following tables is based
on historical financial information that Richmond County has presented in its
prior Securities and Exchange Commission filings and Ironbound has presented in
its prior regulatory 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 Ironbound are included in the
document attached as ANNEX D to this document. The historical financial
statements of Richmond County are incorporated by reference into this document.
Richmond County's audited historical financial statements were audited by
Ernst & Young LLP, independent certified public accountants, and Ironbound's
December 31, 1997 and December 31, 1996 audited historical financial statements
were audited by Deloitte & Touche LLP, independent auditors. Richmond County's
unaudited financial statements for the three months ended September 30, 1998 and
1997 and Ironbound's unaudited financial statements for the nine months ended
September 30, 1998 and 1997, include normal, recurring adjustments necessary
to fairly present the data for such period. The unaudited data is not
necessarily indicative of expected results of a full year's operation.
Because Richmond County's fiscal year ends on June 30 and Ironbound's
fiscal year ends on December 31, the financial data for Ironbound for the nine
months ended September 30 have been presented to coincide with the fiscal
reporting period for Richmond County. Following the Ironbound 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 Richmond County financial information contained herein for
periods prior to December 31, 1997 relates solely to Richmond County Savings
Bank. Ironbound was organized in July 1997. Therefore, all Ironbound financial
information for periods prior to September 30, 1997 relates to Ironbound Bank.
Richmond County's audited annual historical financial statements were audited by
Ernst & Young LLP, independent certified public accountants, and Ironbound's
audited annual historical financial statements were audited by Deloitte &
Touche LLP, independent auditors.
7
<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 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
New York stock.................. 20,375 -- 15,550 -- -- -- --
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 -- -- -- --
Total 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 for possible
loan losses.................. 15,063 10,158 49,242 38,074 32,809 31,865 31,401
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 the
Conversion/(5)/................. $.22 N/A $(0.16) N/A N/A N/A N/A
========== ==========
</TABLE>
(footnotes on next page)
8
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR 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") interpretation 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 and 1997, 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 on February 18, 1998 (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.
9
<PAGE>
(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>
IRONBOUND BANKCORP, NJ
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
UNAUDITED
AT SEPTEMBER 30, AT DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL DATA:
Total assets................................... $115,172 $108,859 $112,213 $106,356 $89,656 $88,962 $86,035
Investment securities available for sale....... 11,216 11,105 13,910 12,505 18,591 11,088 13,980
Investment securities held-to-maturity......... 42,632 44,533 42,093 46,617 33,437 41,041 33,718
Loans, net..................................... 40,945 37,812 37,873 34,973 28,143 26,415 27,321
Deposits....................................... 102,828 97,321 100,711 95,238 79,666 79,785 77,109
Total stockholders' equity..................... 11,530 10,861 10,844 10,289 9,613 8,595 8,364
</TABLE>
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................ $5,785 $5,770 $7,695 $6,953 $6,081 $5,500 $5,557
Interest expense............................... 2,070 1,937 2,610 2,238 1,778 1,568 1,764
------ ------ ------ ------ ------ ------ ------
Net interest income............................ 3,715 3,833 5,085 4,715 4,303 3,932 3,793
Provision (credit) for possible
loan losses................................... (190) -- -- -- 105 190 625
------ ------ ------ ------ ------ ------ ------
Net interest income after provision
(credit) for possible loan losses............. 3,905 3,883 5,085 4,715 4,198 3,742 3,168
Non-interest income:
Fees and other charges, net and
other income.................................. 508 545 707 692 691 634 513
Net gains (losses) on sales of securities
and whole loans............................... -- 16 16 (3) 48 6 470
Non-interest expense........................... 2,889 2,898 3,843 3,924 3,895 4,082 3,746
------ ------ ------ ------ ------ ------ ------
Income before provision for
income taxes.................................. 1,524 1,496 1,965 1,480 1,042 320 405
Provision for income taxes/(1)/................ 541 540 704 633 219 -- --
------ ------ ------ ------ ------ ------ ------
Net income..................................... $ 983 $ 956 $1,261 $ 847 $ 823 $ 320 $ 405
====== ====== ====== ====== ====== ====== ======
Basic net income per share..................... $ 0.99 $ 0.92 $ 1.22 $ 0.81 $ 0.79 $ 0.31 $ 0.41
Net income per share assuming dilution......... $ 0.95 $ 0.90 $ 1.19 $ 0.80 $ 0.79 $ 0.31 $ 0.41
Cash dividends paid per common share........... $ 0.15 $ 0.15 $ 0.20 $ 0.10 $ -- $ -- $ --
- ----------------
(1) There was no provision for income taxes in the years ended December 31,
1994 and 1993 due to reductions in the deferred tax valuation allowance
after the utilization of net operating loss carryovers during these years
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL RATIOS AND
OTHER DATA:
Return on average assets/(1)(5)/............... 1.17% 1.16% 1.14% 0.85% 0.92% 0.36% 0.48%
Return on average stockholders' equity/(2)(5)/. 11.77 11.91 11.68 8.50 9.00 3.70 4.96
Stockholders' equity to total assets........... 10.00 9.97 9.66 9.67 10.72 9.66 9.72
Average stockholders' equity to average
assets at end of period/(6)/................ 9.96 9.74 9.79 9.69 10.68 9.69 9.62
Net interest rate spread/(5)(7)/............... 3.93 4.27 4.22 4.41 4.63 4.39 4.41
Net interest margin/(5)/....................... 4.71 4.95 4.90 5.05 5.20 4.80 4.84
Operating expenses to average assets/(5)/...... 3.43 3.52 3.49 3.67 4.38 4.64 4.42
Net interest income to operating expenses/(5)/. 1.30 1.33 1.32 1.20 1.10 0.97 1.01
Efficiency ratio/(3)(5)/....................... 67.41 65.53 65.75 72.47 77.24 88.85 78.43
Dividend payout ratio/(4)/..................... 15.21% 16.26% 16.31% 11.96% -- -- --
</TABLE>
- ----------
(1) Return on average assets is calculated by dividing the net income by the
average outstanding assets.
(2) Return on average stockholders' equity is calculated by dividing net income
by average stockholders' equity. The September 30, 1998 and 1997 ratios are
annualized.
(3) Efficiency ratio is calculated by dividing non-interest expense by net
interest income (on a taxable equivalent) plus non-interest income. The
September 30, 1998 and 1997 ratios are annualized.
(4) Dividend payout ratio is calculated by dividing cash dividends by net
income. September 30, 1998 and 1997 ratios are annualized.
(5) The September 30, 1998 and 1997 ratios are annualized.
(6) 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.
(7) The net interest margin represents net interest income as a percent of
average interest-earning assets.
12
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL INFORMATION
The following unaudited pro forma combined selected financial information
combine Richmond County's historical results with Ironbound's historical results
as if the Ironbound Merger had become effective as of the dates indicated in the
case of the balance sheet information presented, and as if the Ironbound 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 Ironbound Merger and the Bayonne Merger
are expected to be completed during the same time period, the following pro
forma tables reflect the Ironbound Merger and the Bayonne Merger. The pro forma
---
information in the tables assumes that the Ironbound Merger and the Bayonne
Merger are accounted for using the purchase method of accounting. For
information regarding unaudited pro forma condensed combined consolidated data,
please see pages __ through __.
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.
The excess purchase price over the fair value of the assets and liabilities is
recorded as goodwill. For a more detailed description of purchase accounting,
see "THE IRONBOUND MERGER -- Anticipated Accounting Treatment."
Because Richmond County's fiscal year ends on June 30, Ironbound's fiscal
year ends on December 31, and Bayonne Bancshares, Inc.'s fiscal year ends on
March 31, the financial data for Ironbound and Bayonne Bancshares, Inc., for the
three months ended September 30 have been presented to coincide with the fiscal
reporting period for Richmond County. Following the Ironbound 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 Ironbound. The
historical financial statements of Richmond County are incorporated by reference
into this document. See "WHERE YOU CAN FIND MORE INFORMATION" on page __ of
this document. The historical financial statements of Ironbound are attached as
ANNEX D to 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, Ironbound and Bayonne 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 Ironbound Merger and the Bayonne Merger. Except as described in
the notes to the Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements found beginning on page __ of this document, the information
furnished in these tables does not reflect either the cost savings or the
revenue enhancements.
13
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
OF RICHMOND COUNTY, BAYONNE AND IRONBOUND
<TABLE>
<CAPTION>
AT
SEPTEMBER 30,
1998
---------------
<S> <C>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
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
THREE MONTHS AT OR FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
1998 1998
------------- -------------
<S> <C> <C>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Net interest income after provision for loan losses...... $ 19,807 $ 67,596
Net income............................................... 6,377 8,048/(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.
14
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
We have summarized below the per share information of Richmond County and
Ironbound on a pro forma combined and pro forma equivalent basis, also giving
effect to the Bayonne Merger. The information set forth below is only a summary
and you should read it in conjunction with the historical financial statements
and related notes contained in the annual reports and other information that
Richmond County and Ironbound have attached to this document. See "WHERE YOU CAN
FIND MORE INFORMATION" on page __.
The information in the following table is based on the historical financial
information that we have presented in our prior Securities and Exchange
Commission or regulatory filings.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
1998 1998/(5)/
------------- ----------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE/(1)/:
Richmond County......................................... $ 0.22 $(0.16)/(4)/
Ironbound............................................... 0.34 1.22
Richmond County pro forma (Richmond County,
Bayonne and Ironbound combined)....................... 0.18 0.23
Ironbound pro forma equivalent.......................... 0.26 0.33
DILUTED EARNINGS (LOSS) PER SHARE/(1)/:
Richmond County......................................... $ 0.22 $(0.16)/(4)/
Ironbound............................................... 0.33 1.19
Richmond County pro forma (Richmond County,
Bayonne and Ironbound combined)....................... 0.18 0.23
Ironbound pro forma equivalent.......................... 0.26 0.33
CASH DIVIDENDS DECLARED PER SHARE/(2)/:
Richmond County......................................... $0.070 $0.110
Ironbound............................................... 0.050 0.200
Richmond County pro forma (Richmond County,
Bayonne and Ironbound combined)....................... 0.070 0.110
Ironbound pro forma equivalent.......................... 0.102 0.160
BOOK VALUE PER SHARE AT PERIOD END/(3)/:
Stated:
Richmond County......................................... $12.48 $12.44
Ironbound............................................... 11.56 11.28
Richmond County pro forma (Richmond County,
Bayonne and Ironbound combined)....................... 12.58 N/A
Ironbound pro forma equivalent.......................... 18.24 N/A
Tangible:
Richmond County......................................... $12.44 $12.39
Ironbound............................................... 11.56 11.28
Richmond County pro forma (Richmond County,
Bayonne and Ironbound combined)....................... 11.72 N/A
Ironbound pro forma equivalent.......................... 17.00 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,
Bayonne and Ironbound 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. Ironbound pro forma equivalent cash dividends
per share represent such amounts multiplied by the Exchange Ratio of 1.45.
(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 1.45. The Ironbound 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 1.45.
(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.
(5) The year ended December 31, 1997 was used for Ironbound.
15
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
"1994 Plan"..............................................................
"1998 Employee Plan".....................................................
"1998 Directors' Plan"...................................................
"affiliate"..............................................................
"bank holding company"...................................................
"Bayonne"................................................................
"Bayonne Merger".........................................................
"beneficial ownership"...................................................
"BHC Act"................................................................
"BIF"....................................................................
"Broker non-vote"........................................................
"capital asset"..........................................................
"Code"...................................................................
"Commissioner"...........................................................
"Conversion".............................................................
"Costs"..................................................................
"covered transaction"....................................................
"CRA"....................................................................
"critically undercapitalized"............................................
"Department of Justice"..................................................
"DGCL"...................................................................
"Dissenters' Shares".....................................................
"Distribution Date"......................................................
"domestic building and loan association".................................
"Effective Date".........................................................
"Effective Time".........................................................
"Employment Agreements"..................................................
"ERISA"..................................................................
"Exchange Act"...........................................................
"Exchange Agent".........................................................
"Excluded Shares"........................................................
"Exercise Termination Event".............................................
"FASB"...................................................................
"FDI Act"................................................................
"FDIC"...................................................................
"FDICIA".................................................................
"Federal Reserve Act"....................................................
"FHLB"...................................................................
"FICO"...................................................................
"First Savings"..........................................................
"Foundation".............................................................
"FRB"....................................................................
"GAAP"...................................................................
"Guidelines".............................................................
"HOLA"...................................................................
"Incentive Plan".........................................................
</TABLE>
16
<PAGE>
"Indemnified Party"......................................................
"Initial Termination Date"...............................................
"interested".............................................................
"Interested Stockholder".................................................
"Interstate Banking Act".................................................
"investment power".......................................................
"Ironbound Acquisition Transaction"......................................
"Ironbound"..............................................................
"Ironbound Bank".........................................................
"Ironbound Bank Merger"..................................................
"Ironbound Bank Retirement Savings Plan".................................
"Ironbound Board"........................................................
"Ironbound Common Stock".................................................
"Ironbound Continuing Employee"..........................................
"Ironbound Effective Date"...............................................
"Ironbound Effective Time"...............................................
"Ironbound Employee Plans"...............................................
"Ironbound Employment Agreements"........................................
"Ironbound Exchange Ratio"...............................................
"Ironbound Indemnified Party"............................................
"Ironbound Meeting"......................................................
"Ironbound Merger".......................................................
"Ironbound Merger Agreement".............................................
"Ironbound Merger Consideration".........................................
"Ironbound Merger Stock Option"..........................................
"Ironbound Merger Stock Option Notice Date"..............................
"Ironbound Merger Stock Option Closing Date".............................
"Ironbound Merger Stock Option Shares"...................................
"Ironbound Employment Agreements"........................................
"Ironbound Merger Stock Option Agreement"................................
"Ironbound Option".......................................................
"Ironbound Option Plan"..................................................
"Ironbound Record Date"..................................................
"Last Triggering Event"..................................................
"Limit"..................................................................
"LTM earnings"...........................................................
"Material Adverse Effect"................................................
"Mergers"................................................................
"Named Officers".........................................................
"Nasdaq National Market".................................................
"Northeast"..............................................................
"NYBB"...................................................................
"NYBD"...................................................................
"NYBL"...................................................................
"NYCRA"..................................................................
"O&Co."..................................................................
"O&Co. Engagement Letter"................................................
"opt in".................................................................
"opt out"................................................................
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"OTS"....................................................................
"person".................................................................
"portfolio assets".......................................................
"prompt correction action"...............................................
"prudent person".........................................................
"purchase"...............................................................
"QTL"....................................................................
"QTL Test"...............................................................
"qualified thrift investments"...........................................
"Registration Statement".................................................
"Richmond County"........................................................
"Richmond County Common Stock"...........................................
"Richmond County Market Value"...........................................
"Richmond County Preferred Stock"........................................
"Richmond County Savings"................................................
"Richmond County Savings ESOP"...........................................
"Richmond County Savings 401(k) Plan"....................................
"risk-based capital ratio"...............................................
"SAIF"...................................................................
"SEC"....................................................................
"Securities Act".........................................................
"Service"................................................................
"SFAS"...................................................................
"significantly undercapitalized".........................................
"Superintendent".........................................................
"Superior Proposal"......................................................
"Tier I".................................................................
"Tier II"................................................................
"Triggering Event".......................................................
"undercapitalized".......................................................
"Valuation Date".........................................................
"Valuation Plan".........................................................
"Voting power"...........................................................
"well capitalized".......................................................
</TABLE>
18
<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 Savings 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 and the Richmond County Form 10-Q for the period ended
September 30, 1998 which is incorporated herein by reference. See "WHERE YOU
CAN FIND MORE INFORMATION."
IRONBOUND
Ironbound is a bank holding company organized under the laws of the State
of New Jersey in 1997. 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 Bank's deposits
are insured by the FDIC through the BIF.
At September 30, 1998, Ironbound had total assets of $115.2 million,
deposits of $102.8 million, and stockholders' equity of $11.5 million.
For more information about Ironbound, reference is made to the financial
information relating to Ironbound, which is attached hereto as ANNEX D.
WHERE YOU CAN FIND MORE INFORMATION
Richmond County files 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 company files 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's
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 a Registration Statement to register with the SEC
the shares of Richmond County Common Stock to be issued to Ironbound
stockholders in the Ironbound Merger (the "Registration Statement"). This Proxy
Statement/Prospectus is a part of the Registration Statement and constitutes a
Prospectus of Richmond County, and a Proxy Statement of Ironbound for the
Ironbound Meeting.
19
<PAGE>
The SEC allows Richmond County to "incorporate by reference" information
into this Proxy Statement/Prospectus, which means that Richmond County 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 Proxy Statement/Prospectus, except for any information
superseded by information contained directly in the Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference the documents set
forth below that Richmond County has previously filed with the SEC. The
documents contain important information about its financial condition.
RICHMOND COUNTY SEC FILINGS (FILE NO. 0-23271)
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
Richmond County incorporate by reference additional documents that it might
file with the SEC between the date of this Proxy Statement/Prospectus and the
date of the Ironbound their Meeting. 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.
Richmond County has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to Richmond County.
Ironbound has supplied all information contained or incorporated by
reference in this Proxy Statement/ Prospectus relating to Ironbound.
Documents incorporated by reference are available from Richmond County
without charge, excluding all exhibits unless specifically incorporated by
reference as an exhibit to this Proxy Statement/Prospectus. Stockholders of
Ironbound may obtain documents incorporated by reference in this Proxy
Statement/Prospectus by requesting them in writing or by telephone from Richmond
County at the following address:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Attention: Thomas R. Cangemi, Secretary
Telephone No. (718) 448-2800
If you would like to request documents from Richmond County, please do so
by _________________ to receive them before the Ironbound 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.
20
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Proxy Statement/Prospectus to vote your shares at the
Ironbound Meeting. Richmond County and Ironbound have not authorized anyone to
provide you with information that is different from what is contained in this
Proxy Statement/Prospectus. This Proxy Statement/Prospectus is dated
______________, 199_. You should not assume that the information contained in
the Proxy Statement/Prospectus is accurate as of any date other than that date,
and neither the mailing of this Proxy Statement/Prospectus to stockholders nor
the issuance of Richmond County's securities in the merger shall create any
implication to the contrary.
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 Proxy Statement/Prospectus or in any of the
materials that we've 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 Proxy Statement/Prospectus, the documents attached hereto or any other
written or oral statements made by, or on behalf of, Richmond County may include
forward-looking statements with respect to the financial condition, results of
operations and business of Richmond County, 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. Richmond County
undertakes 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 current and subsequent filings with the SEC.
21
<PAGE>
MARKET PRICES AND DIVIDEND INFORMATION
Richmond County Common Stock is listed on the National Market System of the
Nasdaq Stock Market (the "Nasdaq National Market") under the symbol "RCBK."
There is no established trading market for Ironbound Common Stock.
The following table sets forth, for the calendar periods indicated, the
high and low prices per share for the Richmond County Common Stock as reported
on the Nasdaq National Market, and the bid prices per share for Ironbound Common
Stock, as traded over the counter or in private trades, 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.
<TABLE>
<CAPTION>
RICHMOND COUNTY IRONBOUND COMMON STOCK
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 $12.75 $11.50 $0.05
Quarter ended June 30.......... N/A N/A N/A 14.00 13.25 0.05
Quarter ended September 30..... N/A N/A N/A 14.75 14.00 0.05
Quarter ended December 31...... N/A N/A N/A 14.75 14.50 0.05
1998
Quarter ended March 31......... $19.63 $15.68 $0.05 $14.75 $14.75 $0.05
Quarter ended June 30.......... 19.75 17.75 0.06 15.75 15.00 0.05
Quarter ended September 30..... 18.69 11.88 0.07 19.00 15.75 0.05
Quarter ended December 31
(As of ________, 1998)......
</TABLE>
The following table sets forth the closing price per share of Richmond
County Common Stock, and the equivalent per share price for Ironbound Common
Stock giving effect to the Ironbound Merger on (i) July 16, 1998, the last
business day preceding the public announcement of the proposed Ironbound Merger;
and (ii) _________, 199_, the last practicable trading day prior to the mailing
of this Proxy Statement/Prospectus. The equivalent per share price of Ironbound
Common Stock was computed by multiplying the price of Richmond County Common
Stock by the 1.45 Ironbound Exchange Ratio:
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
RICHMOND COUNTY IRONBOUND SHARE OF
COMMOM STOCK COMMON STOCK IRONBOUND STOCK
--------------- ------------- ---------------
<S> <C> <C> <C>
July 16, 1998.......... $18.313 $19.00 $26.55
________ __, 1998...... $______ $_____ $_____
</TABLE>
There is no established trading market for Ironbound Common Stock. Trading
in Ironbound Common Stock is limited and sporadic. The absence of an
established market may affect the prices at which Ironbound's shares are traded.
Subject to the foregoing, the last trade of Ironbound Common Stock prior to the
announcement of the proposed Ironbound Merger Agreement and known to Ironbound's
management occurred on July 15, 1998, at a price of $19.00 per share.
22
<PAGE>
You should obtain current market quotations for Richmond County Common
Stock as the market price of Richmond County Common Stock will fluctuate between
the date of this Proxy Statement/Prospectus and the date on which the Ironbound
Merger is consummated, and thereafter. Because the number of shares of Richmond
County Common Stock to be received by Ironbound stockholders in the Ironbound
Merger is fixed (subject to certain adjustments) and because the market price of
Richmond County Common Stock fluctuates, the value of the shares of Richmond
County Common Stock that holders of Ironbound Common Stock would receive in the
Ironbound Merger may increase or decrease prior to and after the Ironbound
Merger. No assurance can be given concerning the market price of Richmond
County Common Stock before or after the Ironbound Effective Time (the time
specified in the Certificate of Merger filed with the Delaware Secretary of
State (the "Ironbound Effective Time")). See "THE IRONBOUND MERGER -- Exchange
of Ironbound Shares" and "-- Waiver and Amendment; Termination."
MEETING OF IRONBOUND STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This Proxy Statement/Prospectus is being furnished to stockholders of
Ironbound in connection with the solicitation of proxies by the Ironbound Board
for use at the Ironbound Meeting to be held at _____________________,
________________, ________, New Jersey on ___________ __, 199_, at _:__ a.m.,
local time. At the Ironbound Meeting, holders of Ironbound Common Stock will be
asked to consider and vote upon (i) a proposal to approve and adopt the
Ironbound Merger Agreement, which is included as ANNEX A to this Proxy
Statement/Prospectus, and the consummation of the transactions contemplated
thereby, which are more fully described herein; and (ii) act upon such other
matters as may properly be brought before the Ironbound Meeting.
THE IRONBOUND BOARD HAS UNANIMOUSLY APPROVED THE IRONBOUND MERGER AGREEMENT
AND HAS DETERMINED THAT THE TERMS OF THE IRONBOUND MERGER AND THE IRONBOUND
MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, IRONBOUND AND ITS
STOCKHOLDERS. THE IRONBOUND BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT
IRONBOUND'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE IRONBOUND
MERGER AGREEMENT.
See "THE IRONBOUND MERGER -- Background of the Ironbound Merger" and
"SUMMARY-- Our Recommendation to the Ironbound Stockholders" and " -- Reasons
for the Ironbound Merger."
RECORD DATE
The Ironbound Board has fixed the close of business on _________, 199_ as
the Ironbound Record Date for the determination of the holders of Ironbound
Common Stock entitled to receive notice of and to vote at the Ironbound Meeting
(the "Ironbound Record Date"). Only holders of record of Ironbound Common Stock
at the close of business on the Ironbound Record Date are entitled to receive
notice of and to vote at the Ironbound Meeting. At the close of business on the
Ironbound Record Date, there were _________ shares of Ironbound Common Stock
outstanding and entitled to be voted at the Ironbound Meeting, which were held
by approximately _____ holders of record. The presence, in person
23
<PAGE>
or by proxy, of the holders of at least a majority of the total number of
outstanding shares of Ironbound Common Stock entitled to vote at the Ironbound
Meeting is necessary to constitute a quorum.
PROXIES; VOTING AND REVOCATION OF PROXIES
Each holder of record of shares of Ironbound Common Stock on the Ironbound
Record Date is entitled to cast one vote per share of Ironbound Common Stock on
the proposal to approve and adopt the Ironbound Merger and on any other matter
properly submitted for the vote of Ironbound stockholders at the Ironbound
Meeting.
Ironbound intends to count shares of Ironbound Common Stock present in
person at the Ironbound Meeting but not voted, and shares of Ironbound Common
Stock for which it has received proxies but with respect to which holders of
shares have abstained on any matter, as present at the Ironbound Meeting for
purposes of determining the presence or absence of a quorum for the transaction
of business. Because the approval and adoption of the Ironbound Merger requires
the affirmative vote of the holders of a majority of the outstanding shares of
Ironbound 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 Ironbound Merger. 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
Ironbound Merger without specific instructions from such customers. Given that
the approval and adoption of the Ironbound Merger requires a majority vote, the
failure to provide specific instructions to a broker with respect to shares (a
"broker non-vote") will be counted AGAINST the Ironbound Merger Agreement.
All shares of Ironbound Common Stock which are entitled to be voted and are
represented at the Ironbound Meeting by properly executed proxies received by
Ironbound in time to be voted at the Ironbound Meeting, and which are not
revoked, will be voted in accordance with the instructions indicated on such
proxies. If no instructions are given, such proxies will be voted:
(1) FOR approval and adoption of the Ironbound Merger and
(2) otherwise in the discretion of the proxy holders as to any other matter
which may come before the Ironbound Meeting, including, among other
things, a motion to adjourn or postpone the Ironbound 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
Ironbound 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 the best judgment of the Ironbound Board. However, such
discretionary authority will only be exercised to the extent allowable under
applicable federal and state securities and corporation laws. Ironbound does
not have any knowledge of any matters to be presented at the Ironbound Meeting
other than the matters set forth above.
The presence of a stockholder at the Ironbound Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may
revoke a proxy at any time prior to its exercise by:
24
<PAGE>
(1) filing a written notice of revocation with the Corporate Secretary of
Ironbound prior to the Ironbound Meeting;
(2) delivering to the Corporate Secretary of Ironbound prior to the
Ironbound Meeting a duly executed proxy bearing a later date; or
(3) attending the Ironbound Meeting, filing a written notice of revocation
with the secretary of the meeting and voting in person.
Any written notice of revocation or subsequently executed proxy should be
sent so as to be delivered to Ironbound Bankcorp, NJ, 36 Pacific Street at New
York Avenue, Newark, New Jersey 07105, Attention: Corporate Secretary, or hand
delivered to Ironbound's Corporate Secretary at such address on or before the
day of the Ironbound Meeting or to the Inspector of Elections of the Ironbound
Meeting before the taking of the vote at the Ironbound 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 AND
- -------------------------------------------------------------------------------
TO VOTE AT THE IRONBOUND MEETING. Examples of such documentation include a
- --------------------------------
broker's statement, letter or other document confirming your ownership of shares
of Ironbound Common Stock.
Ironbound will bear the cost of soliciting proxies from the holders of
Ironbound Common Stock. Proxies may be solicited personally, by telephone,
facsimile or other means, by directors, officers and employees of Ironbound or
its subsidiaries, without additional compensation. Such directors, officers and
employees may, however, be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Ironbound will also request persons, firms
and corporations holding shares of Ironbound 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 IRONBOUND COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE, SIGN
AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO IRONBOUND IN THE
ENCLOSED POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
VOTE REQUIRED; PRINCIPAL STOCKHOLDERS
The approval and adoption of the Ironbound Merger Agreement will require
the affirmative vote of the holders of at least a majority of the outstanding
shares of Ironbound Common Stock entitled to vote at the Ironbound 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 Ironbound Merger Agreement. Shares underlying broker non-votes will not be
counted as having been voted in person or by proxy at the Ironbound Meeting and
will have the same effect as a vote AGAINST the Ironbound Merger Agreement.
Such stockholder approval is a condition to the consummation of the Ironbound
Merger.
As of September 30, 1998, directors and executive officers of Ironbound and
their affiliates beneficially owned and were entitled to vote 421,055 shares of
Ironbound Common Stock, or 41.18% of the outstanding Ironbound Common Stock
which may be voted at the Ironbound Meeting (exclusive of shares of Ironbound
Common Stock which may be acquired upon the exercise of options under the
25
<PAGE>
Ironbound 1994 Stock Option Plan, the Ironbound Bankcorp, NJ 1998 Stock Option
Plan for Employees/Active Officers of the Company's Wholly owned Subsidiary,
Ironbound Bank and the Ironbound Bankcorp, NJ 1998 Stock Option Plan for Non-
Employee Directors (collectively, the "Ironbound Option Plans")). Such persons
have agreed to vote or direct the vote of all such shares of Ironbound Common
Stock that they are entitled to vote at the Ironbound Meeting "FOR" approval and
adoption of the Ironbound Merger Agreement. As of September 30, 1998, Richmond
County may be deemed to be the beneficial owner of 198,434 shares of Ironbound
Common Stock issuable pursuant to the Ironbound Merger Stock Option Agreement
(the "Ironbound Merger Stock Option Agreement") attached hereto as ANNEX B.
Pursuant to the Ironbound Merger Stock Option Agreement, Richmond County has the
right to exercise an option to purchase the aforesaid 198,434 shares upon the
occurrence of certain events (all of which are described in the Ironbound Merger
Stock Option Agreement), none of which has occurred as of the date hereof.
Richmond County has expressly disclaimed beneficial ownership of such 198,434
shares. See "CERTAIN RELATED TRANSACTIONS -- Ironbound Merger Stock Option
Agreement."
26
<PAGE>
BENEFICIAL OWNERSHIP OF IRONBOUND COMMON STOCK
PRINCIPAL SECURITY OWNERSHIP
The following table sets forth information with respect to the shares of
Ironbound Common Stock beneficially owned by each director and executive officer
of Ironbound, and by all directors and executive officers of Ironbound as a
group as of September 30, 1998. For the purposes of the following table, in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), a person is deemed to "beneficially own" any shares of
Ironbound 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. 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 Ironbound Common Stock indicated.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL COMMON STOCK
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- --------------- ------------------------------------ ------------------ -------------
<S> <C> <C> <C>
Common Stock Edward Cruz 91,450/(1)(2)/ 9.17%
Cruz Plaza
Holmdel, NJ 07733
Common Stock Evaristo Cruz 93,121/(1)(3)/ 9.34%
Cruz Plaza
Holmdel, NJ 07733
Common Stock Lino A. DeAlmeida, Jr. 27,500 2.76%
29 State Highway 34, Suite 203
Coltsneck, NJ 07722
Common Stock S. Thomas Gagliano 13,889/(8)/ 1.39%
78 Apple Street
Tinton Falls, NJ 07724
Common Stock Michael J. Gagliardi 34,500/(7)/ 3.39%
36 Pacific Street
Newark, NJ 07105
Common Stock Jose Lopez, Jr. 36,462/(4)/ 3.66%
844 McCarter Highway
Newark, NJ 07102
Common Stock Thomas Lupo 34,000/(5)(7)/ 3.34%
36 Pacific Street
Newark, NJ 07105
Common Stock Anthony J. Marques 62,931/(6)/ 6.31%
Route 611 and Ferry Road
Danboro, PA 18916
Common Stock Licinio Neves 27,202 2.73%
103 Main Street
Woodbridge, NJ 07095
All directors and executive officers 421,055 42.1%
as a group (9 persons)
(footnotes on following page)
</TABLE>
27
<PAGE>
- --------------------
(1) E.E. Cruz & Company, Inc. is the registered owner of 53,092 shares of
Ironbound Common Stock. Mr. Edward Cruz and Mr. Evaristo Cruz have agreed to
divide these shares equally (26,546 shares each) which is reflected in the
above schedule.
(2) Excludes 4,231 shares held by Mr. Edward Cruz' children of which Mr. Cruz
disclaims beneficial ownership and includes 1,358 shares held by Mr. Cruz'
wife of which he disclaims beneficial ownership.
(3) Excludes 1,156 shares held by Mr. Evaristo Cruz' children of which Mr. Cruz
disclaims beneficial ownership.
(4) Includes 1,734 shares held by Mr. Lopez' children and excludes 2,000 shares
held in trust for Mr. Lopez' children with a third party as trustee.
(5) Includes 1,400 shares held by Pende Investors, an investment partnership in
which Mr. Lupo has a 20% partnership interest and for which he votes all
shares held, 1,000 shares held in trust for Mr. Lupo's son and 2,000 shares
held in Mr. Lupo's Individual Retirement Account.
(6) Includes 57,881 shares held by Mr. Marques' father over which Mr. Marques
has voting power.
(7) Includes 19,500 shares for Mr. Gagliardi and 19,500 shares for Mr. Lupo
which are exercisable under Ironbound Bank's stock option plan.
(8) Includes 5,787 shares held by Mr. Gagliano's former wife over which Mr.
Gagliano has voting power.
(9) Includes 39,000 stock option shares which are exercisable (19,500 shares
each) by Mr. Gagliardi and Mr. Lupo.
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<PAGE>
THE IRONBOUND MERGER
The following information concerning the Ironbound Merger relates to
matters contained in the Ironbound Merger Agreement. It describes the material
aspects of the Ironbound Merger but does not purport to be a complete
description and is qualified in its entirety by reference to the Ironbound
Merger Agreement which is incorporated herein by reference and attached hereto
as ANNEX A. Ironbound stockholders are urged to read carefully the Ironbound
Merger Agreement.
GENERAL
Pursuant to the terms of the Ironbound 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 Ironbound, Ironbound will be merged with and into
Richmond County and Ironbound's stockholders will become stockholders of
Richmond County. Richmond County will be the surviving corporation in the
Ironbound Merger, and will continue its corporate existence under the laws of
the State of Delaware. Upon consummation of the Ironbound Merger, the separate
corporate existence of Ironbound will terminate.
Immediately after the consummation of the Ironbound Merger, Ironbound Bank
will merge into Richmond County Savings, with the surviving bank being Richmond
County Savings (the "Ironbound Bank Merger"). It is the intent of Richmond
County Savings, subject to applicable statutes, regulations or regulatory
conditions, to operate the offices of Ironbound Bank as a separate operational
division of Richmond County Savings. See "CERTAIN RELATED TRANSACTIONS --
Ironbound Bank Merger Agreement."
BACKGROUND OF THE IRONBOUND MERGER
The first contacts between Ironbound and Richmond County occurred in April,
1998 at the executive management level. Messrs. Manzulli (Chairman of the Board
and Chief Executive Officer of Richmond County) and Gagliardi (President and
Chief Executive Officer of Ironbound) were known to each other as executive
officers of financial institutions in the New York metropolitan area and through
their involvement in various industry trade organizations. On April 7th, Messrs.
Gagliardi and Lupo (Executive Vice President of Ironbound) had a luncheon
meeting with Mr. Manzulli in response to a telephone call from Mr. Manzulli. At
this meeting, only a general discussion regarding, among other things, their
respective banking companies, industry trends and business strategies took
place. Following this meeting and as a result of subsequent telephone
conversations between Mr. Manzulli and Mr. Gagliardi, a meeting was held on
April 29th among Messrs. Manzulli and Burke (President of Richmond County) and
Messrs. Gagliardi, Lupo and Edward Cruz (Chairman of the Board of Ironbound) for
the purpose of discussing a possible affiliation between Ironbound and Richmond
County.
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<PAGE>
The April meetings and discussions were reported to the Executive Committee
and the Ironbound Board at the regularly scheduled meetings held in May. The
Ironbound Board authorized management and the Chairman to continue discussions
with Richmond County. In June, confidentiality agreements were entered into
between the companies, and thereafter, the companies began exchanging financial
and other information regarding each other. On June 16th, a meeting between
Messrs. Gagliardi, Lupo and Cruz of Ironbound and Messrs. Manzulli and Burke was
held at Richmond County's offices, at which a preliminary term sheet for a
possible merger of Ironbound into Richmond County was reviewed. The term sheet
provided for an exchange of 1.38 shares of Richmond County Common Stock for each
share of Ironbound Common Stock, and outlined a provision whereby Ironbound
could terminate the agreement if the price of Richmond County Common Stock
declined to a certain level and declined by more than a selected peer group of
stocks. Messrs. Manzulli and Burke were invited to, and did, attend the
regularly scheduled meeting of the Ironbound Board on June 17th for the purpose
of presenting their proposal and responding to questions from the Ironbund
Board. After the presentation from Richmond County, the Ironbound Board
scheduled a special meeting for June 23rd to review the Richmond County proposal
further, and the Ironbound Board authorized the firm of Ostrowski & Company,
Inc. ("O&Co") to attend the special board meeting as financial advisor to
Ironbound.
At the June 23rd special meeting of the Ironbound Board, O&Co reviewed the
financial terms of the Richmond County proposal with the Ironbound Board and
responded to various questions. A merger committee of the Ironbound Board was
appointed to continue negotiations with Richmond County in consultation with
O&Co, and the committee was authorized to retain special counsel for Ironbound
in connection with a possible merger transaction with Richmond County. At a
July 2nd special meeting, the Ironbound Board met with its financial advisor and
legal counsel and reviewed the terms of a draft merger agreement that had been
provided by counsel to Richmond County, including the proposed exchange ratio,
stock option agreement and related documents. O&Co presented a financial and
valuation analysis of the proposal, and indicated that negotiations had resulted
in a likely exchange ratio of 1.45 shares of Richmond County Common Stock for
each share of Ironbound Common Stock. A special meeting was again held on
July 8th, at which time counsel reviewed changes that had been made to the
merger agreement and O&Co further reviewed the financial aspects of the
transaction. A special meeting of the Ironbound Board was scheduled for
July 15th to receive the report of the due diligence review conducted by
Ironbound's legal and financial advisors, review a final copy of the merger
agreement and if acceptable, to approve the transaction. On July 15th the legal
and financial advisors reported favorably as to their due diligence review of
Richmond County and reviewed with the Ironbound Board the terms and conditions
of the proposed merger and related merger agreement, including the Merger Stock
Option Agreement. It was noted that the definitive agreement was revised, at
Ironbound's request, to delete any reference to an index in connection with the
Richmond County Common Stock price at which Ironbound may terminate the
agreement. O&Co summarized its financial and valuation analyses of the proposed
merger and provided its opinion that the terms of the Ironbound Merger Agreement
are fair from a financial point of view to the Ironbound stockholders. After
conclusion of the review and
30
<PAGE>
discussion, a vote was taken and the Ironbound Board unanimously approved the
Ironbound Merger Agreement and authorized the Chairman or the President to
execute the Ironbound Merger Agreement and related documents on behalf of
Ironbound.
RECOMMENDATION OF THE IRONBOUND BOARD; IRONBOUND'S REASONS FOR THE MERGER
Ironbound's Board has determined that the Ironbound Merger and the
Ironbound Merger Agreement are fair to, and in the best interests of, Ironbound
and its stockholders. In reaching this determination, the Ironbound Board
consulted with its financial advisor with respect to the financial aspects and
fairness of the transaction. In arriving at its determination, the Ironbound
Board also considered a number of factors including, but not limited to, the
following:
(1) Information concerning the businesses, earnings, operations, financial
condition and prospects of Ironbound and Richmond County, both
individually and as combined;
(2) The financial advice rendered by O&Co, as financial advisor to
Ironbound, that the terms of the Ironbound Merger Agreement are fair,
from a financial standpoint, to the Ironbound stockholders. (See
"-- Opinion of Ironbound's Financial Advisor");
(3) The terms of the Ironbound Merger Agreement, the Ironbound Merger Stock
Option Agreement and the other documents executed in connection with
the Ironbound Merger;
(4) The tax-free nature of the transaction to Ironbound's stockholders for
Federal income tax purposes;
(5) The historical trading prices for Ironbound Common Stock and Richmond
County Common Stock and published analysts' reports concerning the
value of Richmond County Common Stock;
(6) The anticipated cost savings and efficiencies available to the combined
entity as a result of the Ironbound Merger;
(7) The current and prospective economic, competitive and regulatory
environment facing each institution and other financial institutions;
(8) The results of the due diligence investigations of Richmond County,
including an assessment of credit policies, asset quality, interest
rate risk, litigation and adequacy of loan loss reserves;
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<PAGE>
(9) Ironbound's strategic alternatives to the Ironbound Merger, including
the continued operation of Ironbound Bank as an independent community
bank; and
(10) The terms of the Ironbound Merger Agreement, including the provision
which allows Ironbound to terminate the Ironbound Merger Agreement if
the Richmond County Market Value is less than $14.00.
The Ironbound Board also took into account that the Ironbound stockholders
would have the opportunity to participate in the future growth of Richmond
County by obtaining Richmond County Common Stock in the Ironbound Merger and to
receive dividends. The Ironbound Board determined that, based on many factors,
the Ironbound Merger will result in a stronger and more effective competitor in
the rapidly changing marketplace for banking services and will allow the
combined entity to take advantage of opportunities that might not be available
to Ironbound on its own. In reaching their determination to approve and
recommend the Ironbound Merger, the Ironbound Board did not assign any specific
or relative values to any of the foregoing factors, and individual directors may
have given differing value to different factors.
OPINION OF IRONBOUND'S FINANCIAL ADVISOR
O&Co was retained by Ironbound as its financial advisor to provide, among
other services, advice and assistance relating to the evaluation and execution
of mergers and acquisitions pursuant to an engagement letter dated June 19, 1998
("O&Co Engagement Letter"). Ironbound selected O&Co on the basis of its in-depth
knowledge of the bank and thrift industry; the qualifications, experience and
reputation of its personnel in the banking and investment communities; as well
as its experience in the valuation of bank and thrift institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions.
As part of the advisory services described above, the Ironbound Board
requested O&Co's opinion as to the fairness, from a financial point of view, of
the terms of the Ironbound Merger Agreement to the holders of Ironbound Common
Stock. Pursuant to the terms of the Ironbound Merger Agreement, Ironbound will
be acquired by Richmond County through the merger of Ironbound with and into
Richmond County. The Ironbound Merger Agreement provides that each outstanding
share of Ironbound Common Stock shall become and be converted into the right to
receive 1.45 shares of Richmond County Common Stock provided, however, that,
notwithstanding any other provision of the Ironbound Merger Agreement, no
fraction of a share of Richmond County Common Stock and no certificates or scrip
therefor will be issued in the Ironbound Merger; instead Richmond County will
pay each holder of Ironbound Common Stock who would otherwise be entitled to a
fraction of a share of Richmond County Common Stock an amount in cash, rounded
to the nearest cent, determined by multiplying such fraction by Richmond
County's Market Value as defined on page ____. The Ironbound Exchange Ratio is
subject to adjustment if Richmond County's Market Value is less than $15.945 but
greater than or equal to $14.00. Such adjustment is equal to the number of
shares of Richmond County Common Stock obtained by dividing (1) $23.12 per share
by (2) the Richmond County Market
32
<PAGE>
Value. In the event that the Richmond County Market Value is less than $14.00,
Ironbound may elect to terminate the Ironbound Merger Agreement. On July 15,
1998, O&Co delivered its opinion to the Ironbound Board that, as of such date,
the terms of the Ironbound Merger Agreement are fair from a financial point of
view, to the Ironbound stockholders.
THE FULL TEXT OF O&CO'S FAIRNESS OPINION IS ATTACHED AS ANNEX C TO THIS
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE FAIRNESS OPINION SET FORTH HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO ANNEX C. HOLDERS OF IRONBOUND COMMON STOCK ARE URGED TO
READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS OF THE REVIEW UNDERTAKEN
BY O&CO IN CONNECTION THEREWITH. O&CO'S OPINION IS DIRECTED SOLELY TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE TERMS OF THE IRONBOUND MERGER
AGREEMENT AND DOES NOT CONSTITUTE ANY RECOMMENDATION TO THE IRONBOUND BOARD OR
TO THE HOLDERS OF IRONBOUND COMMON STOCK WITH RESPECT TO ANY VOTE AT THE
MEETING.
In connection with providing this opinion, O&Co examined and relied upon,
among other things: the draft Ironbound Merger Agreement dated July 15, 1998 as
well as additional required terms to be incorporated into the Ironbound Merger
Agreement; annual reports to stockholders, proxy statements and related audited
financial statements for Ironbound for each of the three fiscal years ended
December 31, 1995, 1996 and 1997; certain unaudited interim financial reports
for Ironbound for the quarters ended March 31, 1998 and June 30, 1998; certain
other financial information for Ironbound, including pro forma financial
statements and management's estimates relating to, among other things, earnings,
asset quality, loan delinquencies and capital; audited financial statements for
Richmond County Savings for each of the two fiscal years ended June 30, 1996 and
1997; the Richmond County prospectus dated December 16, 1997, certain unaudited
interim financial reports for Richmond County for the quarters ended September
30, 1997, December 31, 1997, March 31, 1998 and June 30, 1998; certain other
financial information for Richmond County, including pro forma financial
statements and management's estimates relating to, among other things, earnings,
asset quality, loan delinquencies and capital. O&Co conducted discussions with
executive management of Ironbound and Richmond County concerning historical
financial performance and condition, market area economic conditions, future
business prospects and financial forecasts. O&Co also reviewed comparable
financial, operating and market data for the banking industry and selected peer
groups, compared the terms of the Ironbound Merger Agreement with other bank and
thrift merger and acquisition transactions; and have considered such additional
financial and other information deemed relevant.
In preparing its opinion, O&Co relied upon the accuracy, completeness and
fair presentation of all information supplied or otherwise made available to
them by, or on behalf of, Ironbound and Richmond County. O&Co has not
independently verified such information or undertaken an independent evaluation
or appraisal of the assets or liabilities of Ironbound or Richmond County, nor
was O&Co furnished any such evaluations or appraisals. With respect to
33
<PAGE>
forecasts of expected future financial performance, O&Co has been advised that
they reflect the best currently available estimates and judgement of the
executive management of Ironbound and Richmond County. O&Co's opinion is
necessarily based upon the information available to them and the market,
economic and other conditions, as they exist and can be evaluated, as of the
date of the opinion.
In connection with providing its fairness opinion to the Ironbound Board,
O&Co performed a variety of financial analyses. The following is a summary of
the material terms of such analyses but does not purport to be a complete
description of O&Co's analyses or presentations to the Ironbound Board. The
preparation of a fairness opinion is a complex process involving subjective
judgments and does not necessarily lend itself to partial analyses or summary
description. O&Co 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 the processes underlying O&Co's opinion.
In performing its analyses, O&Co made numerous assumptions with respect to
industry performance, business and economic conditions and various other
matters, many of which may be more or less favorable than actual results.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
No company or transaction utilized in O&Co's analyses was identical to Ironbound
or Richmond County or to the terms of the Ironbound Merger Agreement. Because
such estimates are inherently subject to uncertainty, O&Co assumes no
responsibility for their accuracy.
STOCK TRADING HISTORY. O&Co examined the quarterly trading pricing trends
for community banks and thrifts headquartered in Connecticut, Maine,
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island
and Vermont (collectively, the "Northeast"), from the first quarter 1997 through
the second quarter 1998. During that time period, the average quarterly
price/earnings ratio for the Northeast community bank stock was between
14.6 times and 20.7 times last 12 months earnings ("LTM earnings"), with a low
of 14.6 times LTM earnings for the first quarter of 1997 and a high of
21.4 times LTM earnings for the first quarter of 1998. The quarterly average
price/earnings ratio for the Northeast community thrift stocks traded between
16.8 times and 19.2 times LTM earnings over the same time period. The lowest
quarterly average multiple for thrift stocks was 16.8 times LTM earnings for the
first quarter of 1997 and the highest was 21.7 times LTM earnings for the third
quarter of 1997.
The quarterly average of the Northeast community bank stock prices measured
against book value for the same time period generally traded between 178 percent
and 249 percent of book value, with a low of 178 percent for the first quarter
1997 and a high of 264 percent for the first quarter of 1998. The quarterly
average for the Northeast community thrift stocks over the same time period
traded between 134 percent and 181 percent of book value. The lowest value was
134 percent for the first quarter of 1997; and the highest value was 195 percent
for the first quarter of 1998.
34
<PAGE>
Richmond County completed its conversion from a New York State-chartered
mutual bank to a New York State-chartered stock institution, with the concurrent
formation of a holding company, on February 18, 1998. Consequently, comparable
historical trading data comparisons for Richmond County were not made.
Ironbound stock is relatively closely held, with the board of directors and
executive management holding approximately 38% of the outstanding shares of
Ironbound Common Stock. Ironbound Common Stock is not listed on any exchange and
trades infrequently. Therefore, comparable trading market data for Ironbound
does not exist.
CONTRIBUTION ANALYSIS. O&Co prepared a contribution analysis showing the
percentage contributed by Ironbound to the combined company on a pro forma basis
of assets and deposits at June 30, 1998. This analysis showed that Ironbound
stockholders would contribute 6.6% of pro forma consolidated assets, 9.6% of
pro forma consolidated deposits and 3.2% of consolidated pro forma equity. Net
income contributions were considered based upon six months ended June 30,1998
results annualized for Ironbound and year end results of Richmond County,
adjusted only for the elimination of its $19.6 million contribution to the
Foundation. Based on these results, Ironbound contributes 7.7% to consolidated
pro forma earnings. Ironbound stockholders would receive approximately 5.27% of
the pro forma ownership of the combined company assuming Richmond County's
market price is at least $15.945.
COMPARABLE COMPANY ANALYSIS. O&Co compared the financial condition and
operating performance of Ironbound with a peer group of the Nasdaq National
Market and exchange listed financial institutions headquartered in the Northeast
with assets between $50 and $150 million. Ironbound reported a return on average
assets of 1.15%, and return on average equity of 11.76%, based on six months
ended June 30, 1998 results annualized, and an equity to assets ratio of 9.79%
as of June 30, 1998. Based on trailing 12 months earnings per share as of March
31, 1998, the peer group averaged a return on average assets of 0.79%, an
average return on average equity of 8.32% and an average equity to assets ratio
of 10.04% as of March 31, 1998. Ironbound reported a somewhat higher return on
assets, return on equity and a higher equity to asset ratio than its peer group.
Trading comparisons were not made for Ironbound Common Stock due to its closely
held nature.
O&Co compared the financial condition and operating performance of Richmond
County with a peer group of Nasdaq National Market and exchange-listed banks and
thrifts headquartered in the Northeast with assets between $1.1 billion and $1.5
billion. Richmond County reported a return of average assets of 0.98% and a
return on average equity of 4.74%, based on June 30, 1998 year end results,
adjusted for the elimination of its $19.6 million contribution to the
Foundation, and an equity to assets ratio of 20.59% as of June 30, 1998; the
peer group had an average return on average assets of 1.04%, an average return
on average equity of 12.40% and an average equity to assets ratio of 8.43%.
Richmond County reported operating performance lower than the peer group, with a
much higher equity to assets ratio.
35
<PAGE>
O&Co also compared the trading performance of Richmond County with this
peer group. At July 14, 1998, Richmond County's Common Stock price was $18.38,
or 28.7 times earnings for the 12 months ended June 30, 1998 and 148% of
reported June 30, 1998 book value, compared to the peer group averages for these
same measures of 19.1 times trailing 12 months earnings for the 12 months ended
March 31, 1998, and 219% of reported March 31, 1998 book value. Richmond
County's trading performance was above its peers on an earnings multiple basis
but lower than its peers on a book value basis.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. O&Co reviewed certain financial
data, as of the date of the announcement, for acquisitions of commercial banks
and thrifts in the Northeast announced between January 1997 and June 1998. O&Co
also reviewed acquisitions of commercial banks and thrifts in New Jersey between
January 1997 and July 13, 1998. O&Co calculated the average multiple of price to
target's earnings for trailing 12 months, the average percentage of price to
book value and the average premium (price in excess of reported equity) as a
percentage of deposits, on a quarterly basis beginning January 1, 1997 through
June 30, 1998. A value of $26.64 per share of Ironbound Common Stock for the
Richmond County proposal was utilized for the following comparisons based upon
the July 14, 1998 closing price for Richmond County Common Stock of $18.38 and
an Exchange Ratio of 1.45. The calculations for transactions announced in the
second quarter of 1998 resulted in the following comparisons:
(1) price as a multiple to earnings for the Northeast banks 22.9 times, the
Northeast thrifts 27.5 times, and New Jersey transactions 36.1 times,
compared with the value of the Richmond County's proposal of 20.9 times
Ironbound's 1998 earnings estimate;
(2) price as a percentage of book value for the Northeast banks 246%, the
Northeast thrifts of 260%, and New Jersey transactions of 315%,
compared with the value of the Richmond County proposal of 240% of
Ironbound's stockholders' equity; and
(3) premium as a percentage of deposits for the Northeast banks of 21.1%,
the Northeast thrifts of 23.7%, and New Jersey transactions of 24.6%,
compared with the value of the Richmond County's proposal of a premium
of 15.5% of Ironbound's deposits.
IMPACT ANALYSIS. O&Co analyzed the changes in the amount of earnings per
share and book value represented by the issuance of 1.45 shares of Richmond
County Common Stock for each share of Ironbound fully converted common stock, or
$26.64 per share based on the July 14, 1998 closing price for Richmond County
Common Stock of $18.38. The analyses considered, among other things, the impact
on diluted earnings per share and book value per share of Ironbound. The
analysis was based upon reported June 30, 1998 balance sheet data for Ironbound
and Richmond County and the six months ended June 30, 1998 operating results
annualized for Ironbound and the 12 months ended June 30, 1998 operating results
for Richmond County, adjusted only for the elimination of its $19.6 million
contribution to the Foundation.
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<PAGE>
O&Co also analyzed certain per share values for fully converted Ironbound
Common Stock on an independent basis as well as the equivalent values based on
the 1.45 per share exchange ratio, as proposed in the Ironbound Merger, and the
July 14, 1998 closing price for Richmond County Common Stock of $18.38. The
respective estimated equivalent 1998 annual earnings per equivalent share of
Ironbound Common Stock was $0.95 or 26% lower than Ironbound's estimated 1998
earnings per share; book value per equivalent share of Ironbound Common Stock as
of June 30, 1998, was $17.65 and 63% higher than Ironbound's book value per
share as of the same date; and the annual cash dividends for each equivalent
share of Ironbound Common Stock was $0.29. Ironbound currently pays an annual
cash dividend of $0.20 per share.
DISCOUNTED CASH FLOW ANALYSIS. O&Co performed an analysis which estimated
the future cash flows to Ironbound stockholders over a three year period under
various circumstances, assuming Ironbound performed in accordance with the
earnings forecasts of its management. To approximate the terminal value of
Ironbound Common Stock at the end of the three-year period, O&Co applied price
to earnings multiples ranging from 20.0 times to 26.0 times, which resulted in
values that equated to percentages of book value ranging from 255% to 332% The
terminal values were then discounted to present values using discount rates
ranging from 10.0% to 17.5%, chosen to reflect assumptions regarding rates of
return and risk premiums required by holders or prospective holders of Ironbound
Common Stock. This analysis indicated a range of present values per share of
$21.52 to $36.35.
REMAINING INDEPENDENT SCENARIO. O&Co discussed with Ironbound's
management and board of directors the various expenses associated with remaining
as an independent company while achieving acceptable stockholder returns. In
order to survive independently in a highly competitive market, Ironbound would
have to broaden its product and service offerings to attract and retain
customers. This strategy would require a near-term investment in Ironbound
through the attraction and retention of additional qualified professionals and a
substantial investment in technology. Moreover, the potential benefit of new
products and services is long-term with no certainty as to the degree of success
and Ironbound's operating performance could suffer in the short-term with
adverse implications to stockholder value.
Ironbound has agreed to pay O&Co up to $70,000 for advisory services in
connection with the merger, including rendering a written opinion as to the
fairness of the proposed transaction from a financial point of view, to holders
of Ironbound Common Stock. Ironbound has made payments totaling $45,000 as of
the mailing of the Proxy Statement/Prospectus. Pursuant to the O&Co Engagement
Letter, Ironbound has also agreed to reimburse O&Co for its reasonable out-of-
pocket expenses, including legal fees, incurred in connection with its
engagement and to indemnify O&Co and its affiliates and their respective
directors, officers, employees, agents and controlling persons against certain
expenses and liabilities.
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<PAGE>
EXCHANGE OF IRONBOUND SHARES
At the Ironbound Effective Time, each issued and outstanding share of
Ironbound Common Stock, except for Excluded Shares, as defined on the next page,
will be converted into and exchangeable for 1.45 shares of Richmond County
Common Stock. If the Richmond County Market Value is less than $15.945 but
equal to or greater than $14.00, the Ironbound Exchange Ratio will be increased
so that the value of the consideration at the Valuation Date to be paid for each
share of Ironbound Common Stock to be converted to Richmond County Common Stock
(and cash in lieu of fractional shares) is $23.12. "Richmond County Market
Value" shall be the average of the closing sales prices, as reported on the
Nasdaq National Market, for the 15 consecutive trading days immediately
preceding the day that is the Valuation Date. "Valuation Date" means the latest
of:
(1) the day of expiration of the last waiting period with respect to any of
the required regulatory approvals,
(2) the day on which the last of the required regulatory approvals is
obtained; and
(3) the day on which the last of the required stockholder approvals have
been obtained as contemplated by the Ironbound Merger Agreement.
Although Richmond County is required, in limited circumstances described
above, to increase the Ironbound Exchange Ratio, under no circumstances may the
Ironbound Exchange Ratio be decreased. The Ironbound Exchange Ratio was arrived
at through arm's-length negotiations between Richmond County and Ironbound. The
Ironbound Merger Agreement provides that, if Richmond County effects a stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares of Richmond County Common Stock, an appropriate adjustment to
the Ironbound Exchange Ratio will be made.
The market price of Richmond County Common Stock will fluctuate between the
date of this document and the date on which the Ironbound Merger is consummated
and thereafter. Because the number of shares of Richmond County Common Stock to
be received by Ironbound's stockholders in the Ironbound 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 Ironbound 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 Ironbound 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 Ironbound Effective Time.
No fractional shares of Richmond County Common Stock will be issued in
connection with the Ironbound Merger. Instead, Richmond County will make a cash
payment, rounded to
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the nearest cent, to each Ironbound stockholder who otherwise would be entitled
to receive a fractional share equal to the product of (1) the fractional portion
which an Ironbound stockholder would otherwise, receive and (2) the Richmond
County Market Value.
Upon consummation of the Ironbound Merger, Excluded Shares will be
canceled, retired and no payment will be made with respect thereto. "Excluded
Shares" includes (1) shares held directly or indirectly by Richmond County
(other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) and (2) shares held by Ironbound as treasury stock.
In addition, at the Ironbound Effective Time, each outstanding and
unexercised option to purchase shares of Ironbound Common Stock (other than the
Ironbound Merger Stock Option defined on page ____), pursuant to the Ironbound
Option Plans, shall be converted automatically into the right to receive such
number of shares (rounded to the nearest whole share) of Richmond County Common
Stock as is equal in value to the product of: the Ironbound Exchange Ratio and
the market value of Richmond County Stock (determined on July 17, 1998), less
the exercise price of the Ironbound Options, multiplied by the number of
Ironbound options held . Richmond County, or at the option of Richmond County,
Ironbound, will make such payment at the Ironbound Effective Time to each
optionee provided that the optionee delivers to Richmond County his written
acceptance, in a form acceptable to Richmond County, of such payment as full and
complete consideration for the cancellation of each Ironbound option. Any
grants of options to purchase Ironbound Common Stock made under the Ironbound
Option Plan shall be null and void, following the payment for the Ironbound
Stock Options as described above.
No fractional shares of Richmond County Common Stock will be issued in the
Ironbound Merger. Instead, the Ironbound Merger Agreement provides that each
holder of shares of Ironbound Common Stock exchanged pursuant to the Ironbound
Merger who would otherwise have been entitled to receive a fraction of a share
of Richmond County Common Stock will receive, in lieu thereof, cash in an amount
equal to such fractional part of a share of Richmond County Common Stock
multiplied by the Richmond County Market Value. No such holder will be entitled
to dividends, voting rights or any other rights as a stockholder in respect of
any fractional share which such holder would otherwise have been entitled to
receive.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
RICHMOND COUNTY. Shares of Richmond County Common Stock issued and
outstanding immediately prior to the Ironbound Effective Time will remain issued
and outstanding and be unaffected by the Ironbound Merger. Holders of such
common stock will not be required to exchange the certificates representing such
common stock or take any other action by reason of the consummation of the
Ironbound Merger.
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IRONBOUND. Within five business days of the Ironbound Effective Time, a
bank or trust company selected by Richmond County and reasonably satisfactory to
Ironbound (the "Exchange Agent"), will mail to each former holder of record of
Ironbound Common Stock a form of letter of transmittal. Included with this
letter will be instructions on how to exchange Ironbound stock certificates for
Richmond County stock certificates, and cash for fractional shares.
HOLDERS OF IRONBOUND 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 your
are entitled and, where applicable, a check for the amount representing any
fractional share determined in the manner described above, without interest,
will be mailed back to you. The Ironbound certificates surrendered will be
canceled.
No dividend or other distribution declared after the Ironbound Effective
Time with respect to Richmond County Common Stock will be paid to the holder of
any unsurrendered Ironbound certificate until the holder surrenders such
certificate. Only then will the holder be entitled to receive all previously
withheld dividends and distributions, without interest.
After the Ironbound Effective Time, there will be no transfers on the stock
transfer books of Ironbound of shares of Ironbound Common Stock issued and
outstanding immediately prior to the Ironbound Effective Time. If certificates
representing shares of Ironbound Common Stock are presented for transfer after
the Ironbound Effective Time, they will be canceled and exchanged for
certificates representing shares of Richmond County Common Stock.
Neither the Exchange Agent, Richmond County nor Ironbound, or any other
person, will be liable to any former holder of Ironbound Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
If a certificate for Ironbound Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Ironbound 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.
INTERESTS OF DIRECTORS AND OFFICERS IN THE IRONBOUND MERGER THAT MAY BE
DIFFERENT FROM YOUR INTERESTS
Some members of Ironbound's management and the Ironbound Board may be
deemed to have interests in the Ironbound Merger that are in addition to, or
different from the interests of stockholders. The Ironbound Board was aware of
these interests and considered them, among
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other matters, in approving the Ironbound Merger Agreement and the transactions
contemplated thereby.
Ironbound is a party to change in control agreements with its two executive
officers, Michael J. Gagliardi, the President and Chief Executive Officer, and
Thomas Lupo, the Executive Vice President and Chief Lending Officer of
Ironbound. Mr. Gagliardi is 58 years old and has been the President, Chief
Executive Officer and a director of Ironbound since its inception in 1997, and
President, Chief Executive Officer and a director of Ironbound Bank since 1994.
Mr. Lupo is 47 years old. He has been the Executive Vice President and a
director of Ironbound since its inception in 1997, and Executive Vice President
and Chief Lending Officer of Ironbound Bank since 1994. The agreements provide
a payment to each of these executive officers of one year's base salary upon a
change in control of Ironbound. Mr. Gagliardi's and Mr. Lupo's annual base
salaries for 1999 are $150,700 and $120,000, respectively. Richmond County has
agreed to honor the existing change in control agreements with the executive
officers, provided, however, that the payments under such agreements will be
made by Ironbound immediately prior to the Ironbound Effective Time.
In addition, Messrs. Gagliardi and Lupo are recipients of stock options
under the Stock Option Plans. Under one of these the Stock Option Plans, each
of the two executive officers was granted 24,804 options. With respect to this
plan twenty thousand options have vested with respect to each officer. The
remaining 4,804 options will vest in each officer on such officer's next
succeeding anniversary of his date of employment, or January 17, 1999, for
Mr. Gagliardi and February 14, 1999, for Mr. Lupo. In addition, on April 22,
1998, Mr. Gagliardi and Mr. Lupo received options to purchase 3,500 shares.
In addition to the options referenced above, directors Edward Cruz and
Evaristo Cruz each received 12,500 options, director Jose Lopez received
8,000 options, and directors Lino A. DeAlmeida, Jr., S. Thomas Gagliano, Anthony
J. Marques, and Licinio Neves each received 6,000 options to purchase Ironbound
Common Stock. These awards are scheduled to vest in the recipients in equal
installments over a three year period commencing one year from the date of
grant, or one year from April 22, 1998.
As a result of the Ironbound Merger, however, all outstanding options under
the Ironbound stock option plans, whether vested or unvested, will be converted
automatically into the right to receive Richmond County Common Stock equal in
value to the product of the Ironbound Exchange Ratio and the market value of
Richmond County Common Stock (determined as of July 17, 1998), less the
exercise price of the Ironbound Options, multiplied by the number of Ironbound
Options held.
At the Ironbound Effective Time, Richmond County Savings will enter into
employment agreements with Messrs. Gagliardi and Lupo, each of which will have a
three year term that can be extended on each anniversary of the date of the
agreement for an additional year. In accordance with the agreements, Mr.
Gagliardi will be employed as an executive vice president
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of Richmond County Savings at an annual salary of $160,000. Mr. Lupo will be
employed as a senior vice president of Richmond County Savings at an annual
salary of $125,000. In addition to annual salary, they will be entitled to other
benefits as are provided uniformly to full-time employees of Richmond County
Savings and will be eligible to participate in or receive benefits under any
employee benefit plans. These include cash incentive or bonus plans established
for similarly situated employees, or supplemental retirement plans, stock or
option plans, made available in the future to key employees of Richmond County
Savings.
No members of the Ironbound Board will be appointed to the Richmond County
or Richmond County Savings boards. Richmond County will, however, appoint the
current members of the Ironbound Board, willing to serve, to a three year term
on a divisional board of directors. The divisional board will advise Richmond
County with respect to deposit and lending activities in Ironbound's market area
and will maintain and develop customer relationships. Each non-employee member
of this divisional board (other than the chairman of such board) will receive an
annual retainer of $5,000 and $750 fee for each board meeting attended. The
chairman of the divisional board will receive an annual retainer of $10,000 and
a $750 fee for each board meeting attended. Each member of the divisional board
will be prohibited from competing directly with Richmond County for the duration
of the term for which they were elected or appointed. Richmond County has also
agreed to appoint Edward Cruz to the board of directors of the Foundation.
Ironbound has, prior to entering into the Ironbound Merger Agreement,
entered into an agreement to purchase its main office complex from Pacific Urban
Renewal, Inc., a real estate company owned by two of Ironbound's board members,
Edward and Evaristo Cruz, and a former board member, Anthony Marques, Sr. (whose
son, Anthony Marques, Jr. serves on the Ironbound Board). The agreed upon
purchase price for the building will be $1,850,000, supported by an appraisal.
Richmond County had conditioned the closing of the Ironbound Merger on the sale
of the main office complex to Ironbound, or an Ironbound subsidiary. This
condition was satisfied in October, 1998.
Richmond County has agreed to indemnify each present and former director
and officer of Ironbound and its subsidiaries and each officer or employee of
Ironbound and its subsidiaries that is serving or has served as a director or
trustee of another entity at Ironbound's request or direction. This
indemnification relates to any costs or expenses, judgments, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation arising out of matters existing or occurring at or prior to the
Ironbound Effective Time (including the transactions contemplated by the
Ironbound Merger Agreement). In this connection, Richmond County also agreed to
advance any such costs to each of these persons as they are incurred, in each
case to the fullest extent they would have been indemnified by Ironbound and its
subsidiaries and as then permitted under applicable law. The indemnification
with which Richmond County will furnish Ironbound's officers, directors and
employees will last for three years after the Ironbound Effective Date (as
defined on the next page).
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MANAGEMENT AND OPERATIONS FOLLOWING THE IRONBOUND MERGER
The Richmond County Board will not change as a result of the Ironbound
Merger. However, the Ironbound Merger Agreement furnishes Ironbound's officers
and directors with different rights from their rights as stockholders, relating
to indemnification, the payout of cash payments under existing employment
agreements, the acceleration of certain benefits and the vesting of certain
benefits under certain employee benefit plans. Additionally, Richmond County
will enter into employment agreements with Messrs. Gagliardi and Lupo as
described above. In addition, Richmond County will appoint the current members
of the Ironbound Board willing to serve, to a divisional board of directors as
described above.
Also, following the Ironbound Merger the parties intend, subject to
regulatory approval, to merge Richmond County Savings and Ironbound Bank and
consolidate their operations. The surviving bank will be named Richmond County
Savings Bank. Richmond County Savings intends, subject to applicable statutes,
regulations or regulatory conditions, to operate the former offices of Ironbound
Bank as a separate operational division of Richmond County Savings.
EMPLOYEE MATTERS
Each person who is employed by Ironbound or Ironbound Bank immediately
prior to the Ironbound Effective Time and whose employment is not specifically
terminated (an "Ironbound Continuing Employee") shall, at the Ironbound
Effective Time, become an employee of Richmond County or Richmond County
Savings, respectively. However:
(1) No Ironbound Continuing Employees will 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 Messrs. Michael J. Gagliardi and Thomas Lupo, all
of Ironbound's Continuing Employees who remain following the effective
date of the Ironbound Merger (the date the Certificate of Merger is
filed with the Delaware Secretary of State relating to the Ironbound
Merger) (the "Ironbound Effective Date"), will be at will employees of
Richmond County or Richmond County Savings. No contractual right to
employment will inure to such employees because of the Ironbound Merger
Agreement.
(3) As of the Ironbound Effective Time, each Ironbound Continuing Employee
who is a participant in the Ironbound Bank Retirement Savings Plan (the
"Ironbound Bank Retirement 401(k) Plan") shall become fully vested in
his or her account balance in the Ironbound Bank Retirement 401(k) Plan
and the Ironbound Bank Retirement 401(k) Plan will either be merged
into the Richmond County Savings Bank 401(k) Savings Plan in RSI
Retirement Trust (the "Richmond County
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Savings 401(k) Plan") following or, terminated immediately prior to,
on, or after the Ironbound Effective Time. This determination will be
made by Richmond County Savings. Effective as of the date of the merger
of the Ironbound Bank Retirement Savings Plan into the Richmond County
Savings 401(k) Plan, if applicable, or the termination of the Ironbound
Bank Retirement Savings Plan (or the Ironbound Effective Time, if
subsequent to such termination), if applicable, Ironbound Employees who
are then participating in the Ironbound Bank Retirement Savings Plan
shall become participants in the Richmond County Savings 401(k) Plan.
(4) Richmond County will honor existing employment agreements, including
the change in control provisions of such agreements between Ironbound
and Ironbound Bank and certain employees and stock option plans, and
other benefit plans (collectively, "Ironbound Employment Agreements" or
"Ironbound Employee Plans"). Richmond County will also honor the
payment of benefits by Ironbound as of the Ironbound Effective Time or
earlier as agreed to by Richmond County and Ironbound under such
agreements and plans in conformance with Ironbound's prior disclosure
to Richmond County. To the extent previously disclosed to, and agreed
to by, Richmond County, payments under the Ironbound Employment
Agreements may be made by Ironbound immediately prior to the Ironbound
Effective Time.
(5) Except as otherwise provided in paragraphs (3) and (4) above,
appropriate steps shall be taken to terminate all Ironbound Employee
Plans as of the Ironbound Effective Time or as promptly as practical
thereafter. Except as provided in paragraph (3), immediately following
the Ironbound Effective Time, each Ironbound Continuing Employee will
be eligible to participate in Richmond County employee plans, on the
same basis as any newly-hired employee of Richmond County or Richmond
County Savings. However, with respect to each Richmond County employee
plan, other than the Richmond County Savings Bank Employee Stock
Ownership Plan (the "Richmond County Savings ESOP"), for purposes of
determining eligibility to participate, vesting, and entitlement to
benefits, service with Ironbound or Ironbound Bank shall be treated as
service with Richmond County or Richmond County Savings. Such service
will 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 Savings ESOP, Ironbound Continuing Employees
will be treated as newly-hired employees of Richmond County or Richmond
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County Savings as of the Ironbound Effective Date and credit for
service will begin accruing as of that date.
CONDITIONS TO THE IRONBOUND MERGER
The respective obligations of Richmond County and Ironbound to effect the
Ironbound Merger are subject to the satisfaction of the following conditions at
or prior to the Ironbound Effective Time:
(1) the Ironbound Merger Agreement shall have been approved by the
requisite vote of Ironbound's stockholders;
(2) the requisite regulatory approvals, regulatory consents and waivers
shall have been obtained and shall remain in full force and effect;
(3) all statutory waiting periods shall have expired;
(4) all other consents, waivers and approvals of any third parties which
are necessary to permit the consummation of the Ironbound Merger and
the other transactions contemplated thereby shall have been obtained or
made except for those the failure to obtain would not have a Material
Adverse Effect on Ironbound and its subsidiaries taken as a whole or on
Richmond County and its subsidiaries taken as a whole;
(5) none of the approvals or waivers referred to above shall contain any
term or condition which would have a Material Adverse Effect (as
defined on page __) on Ironbound and its subsidiaries taken as a whole
or Richmond County and its subsidiaries taken as a whole;
(6) neither Richmond County nor Ironbound 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 Ironbound Merger,
the Ironbound Bank Merger or any other transactions contemplated by the
Ironbound Merger Agreement;
(7) no statute, rule or regulation shall have been enacted by any
governmental authority which prohibits, restricts or makes illegal
consummation of the Ironbound Merger, the Ironbound Bank Merger or any
other transactions contemplated by the Ironbound Merger Agreement;
(8) the Registration Statement (as contemplated by the Ironbound Merger
Agreement) 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 Ironbound Registration Statement;
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(9) all required approvals by state securities or "blue sky" authorities
with respect to the transactions contemplated by the Ironbound Merger
Agreement shall have been obtained;
(10) Richmond County shall have received a letter of agreement from each
Ironbound affiliate agreeing to comply with Rule 145 of the Securities
Act of 1933, as amended (the "Securities Act"); and to be present in
person or by proxy and vote in favor of the Ironbound Merger at the
Ironbound Meeting; and
(11) Richmond County shall have caused the shares of Richmond County Common
Stock to be issued by Richmond County in exchange for the shares of
Ironbound Common Stock to be listed on the market on which Richmond
County stock will be trading.
The obligations of Richmond County to effect the Ironbound Merger are
further subject to the satisfaction, or waiver by Richmond County, of the
following conditions:
(1) each of the obligations of Ironbound and Ironbound Bank, respectively,
required to be performed by it at or prior to the Ironbound Effective
Time shall have been duly performed and complied with in all material
respects;
(2) the representations and warranties of Ironbound and Ironbound Bank
contained in the Ironbound Merger Agreement shall be true and correct
(subject to prior disclosure of any necessary qualification to the
Material Adverse Effect threshold defined on page __) as of July 17,
1998 and as of the Ironbound 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 Ironbound;
(3) all action required to be taken by Ironbound and Ironbound Bank to
authorize the performance of the terms of the Ironbound Merger
Agreement and the consummation by Ironbound and Ironbound Bank of the
transactions contemplated thereby shall have been duly and validly
taken by the board of directors and stockholders of Ironbound or
Ironbound Bank. Richmond County shall have received certified copies
of the resolutions evidencing such authorization;
(4) Ironbound shall have obtained the consent or approval of each person
(other than the governmental approvals or consents referred to in the
Ironbound Merger Agreement) whose consent or approval shall be
required in order to permit the succession by the surviving
corporation pursuant to the Ironbound Merger to any obligation, right
or interest of Ironbound or its subsidiaries under any license,
agreement, or instrument to which Ironbound or its subsidiaries is a
party or
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is otherwise bound. This does not apply to consents and approvals for
which failure to obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Richmond County;
(5) Richmond County shall have received certificates (such certificates to
be dated as of a day as close as practicable to the closing date) from
appropriate authorities as to the corporate existence and good
standing of Ironbound and its subsidiaries;
(6) Richmond County shall have received an opinion of Muldoon, Murphy &
Faucette, counsel to Richmond County, dated as of the Ironbound
Effective Date, that the Ironbound Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and that accordingly:
(a) no gain or loss will be recognized by Richmond County, Richmond
County Savings, Ironbound or Ironbound Bank as a result of the
Ironbound 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 Ironbound who exchange
their Ironbound Common Stock for Richmond County Common Stock
pursuant to the Ironbound Merger;
(c) the tax basis of Richmond County Common Stock received by
stockholders who exchange their Ironbound Common Stock for Richmond
County Common Stock in the Ironbound Merger will be the same as the
tax basis of Ironbound Common Stock surrendered pursuant to the
Ironbound Merger. This tax basis will be 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
(d) the holding period of Richmond County Common Stock received by each
stockholder in the Ironbound Merger will include the holding period
of Ironbound Common Stock exchanged therefor. However, the
stockholder must have held Ironbound Common Stock as a capital
asset on the Ironbound 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 Ironbound and Ironbound Bank, or
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(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 Ironbound
Merger Agreement to be true and correct or true and correct in all material
respects.
The obligations of Ironbound to effect the Ironbound Merger are further
subject to the satisfaction, or waiver by Ironbound, 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 Closing
pursuant to the terms of the Ironbound 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 Ironbound 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 17, 1998 and as of the
Ironbound Effective Time as though made at and as of the Ironbound
Effective Time (except as to any representation or warranty which
specifically relates to an earlier date),
(3) Ironbound 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 Ironbound Merger Agreement and the consummation by
Richmond County and Richmond County Savings of the transactions
contemplated thereby 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 Ironbound shall have received
certified copies of the resolutions evidencing such authorization;
(5) Richmond County shall have obtained the consent or approval of each
person (other than the governmental approvals or consents referred to
in the Ironbound Merger Agreement) whose consent or approval shall be
required in connection with the transactions contemplated thereby under
any license, agreement, or instrument to which Richmond County or its
subsidiaries is a party or is otherwise bound. This does not apply to
those consents and 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 transactions contemplated
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by the Ironbound Merger Agreement) or upon the consummation of the
transactions contemplated by the Ironbound Merger Agreement;
(6) Ironbound shall have received certificates (such certificates to be
dated as of a day as close as practicable to the closing date of the
Ironbound Merger) from appropriate authorities as to the corporate
existence and good standing of Richmond County and its subsidiaries;
(7) Ironbound shall have received an opinion of Luse Lehman Gorman Pomerenk
& Schick, P.C., counsel to Ironbound, dated as of the Ironbound
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 Ironbound
Effective Time, the Ironbound 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, Ironbound, or Ironbound Bank as a result of the
Ironbound 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 Ironbound who exchange
their Ironbound Common Stock for Richmond County Common Stock
pursuant to the Ironbound Merger;
(c) the tax basis of Richmond County Common Stock received by
stockholders who exchange their Ironbound Common Stock for Richmond
County Common Stock in the Ironbound Merger will be the same as the
tax basis of Ironbound Common Stock surrendered pursuant to the
Ironbound Merger. This tax basis will be 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
(d) the holding period of Richmond County Common Stock received by each
stockholder in the Ironbound Merger will include the holding period
of Ironbound Common Stock exchanged therefor, provided that such
stockholder held such Ironbound Common Stock as a capital asset on
the Ironbound Effective Date.
No assurance can be provided as to when, or whether, the regulatory
consents and approvals necessary to consummate the Ironbound Merger will be
obtained or whether all of the other conditions precedent to the Ironbound
Merger will be satisfied or waived by the
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party permitted to do so. See "-- Regulatory Approvals Needed to Complete the
Ironbound Merger" below. If the Ironbound Merger is not effective on or before
April 30, 1999, the Ironbound Merger Agreement may be terminated by a vote of a
majority of the board of directors of either Richmond County or Ironbound unless
the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in the Ironbound Merger Agreement
by the party seeking to terminate the Ironbound Merger Agreement.
REGULATORY APPROVALS NEEDED TO COMPLETE THE IRONBOUND MERGER
Consummation of the Ironbound Merger and the Ironbound Bank Merger is
subject to a number of regulatory approvals and consents. The Ironbound Bank
Merger is subject to the prior approval of the FDIC under the Bank Merger Act,
12 U.S.C. (S)1828(c) (the "Bank Merger Act"). 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
15 to 30 days must be satisfied prior to consummation of the Ironbound Bank
Merger after FDIC approval. Richmond County filed an application with the FDIC
on ___________, 1998.
Further, pursuant to Section 601 of the New York State Banking Law (the
"NYBL"), the 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 Ironbound Bank Merger with the Superintendent on
_________, 1998. In determining whether to approve the application for the
merger of Ironbound with and into Richmond County, the Superintendent will
consider, among other factors, whether the Ironbound 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
Ironbound 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, and such factors will be
considered by the Superintendent in connection with Richmond County's
application.
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The Ironbound Merger is subject to the approval of the Board of Governors
of the Federal Reserve System ("FRB") or the Federal Reserve Bank of New York,
acting pursuant to delegated authority (the "Reserve Bank") or the waiver by the
FRB of such requirement. Richmond County has filed a request for a waiver from
this application requirement, as the FRB will have no continuing jurisdiction
over the merged company and the transaction is being reviewed by other banking
agencies. There can be no assurance that the waiver will be granted. If such
waiver is not granted, Richmond County will be required to file an application
with the FRB or the Reserve Bank. There can be no assurance as to the timing of
such approval or that the FRB will approve the Ironbound Merger. The FRB is
required to evaluate such applications by taking into consideration, among other
things, the financial and managerial resources and future prospects of the
companies involved, the convenience and needs of the communities to be served
and the conformity of the transaction to applicable law, regulation and
supervisory policies. In addition, the FRB may not approve any proposed
acquisition (1) which would result in a monopoly or would 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 (2) which in any
section of the country may have the effect of substantially lessening
competition or tending to create a monopoly or which in any other manner would
be in restraint of trade, unless the FRB finds that the anti-competitive effects
of the proposed acquisition are clearly outweighed in the public interest by the
probable effect of the acquisition in meeting the convenience and needs of the
community to be served.
The Ironbound Merger and the Ironbound Bank Merger are also subject to the
prior approval of the Commissioner of the New Jersey Department of Banking and
Insurance (the "Commissioner"). In determining whether to approve the Ironbound
Merger, the Commissioner must consider whether the Ironbound Merger:
(1) would be detrimental to the safety and soundness of Ironbound and
Ironbound Bank;
(2) would result in an undue concentration of resources or a substantial
reduction in competition in New Jersey; or
(3) would have a significantly adverse impact on the convenience and needs
of the communities served by Ironbound Bank.
With respect to the Ironbound Bank Merger, the Commissioner shall not
withhold approval unless the Commissioner finds that the Ironbound Bank Merger
Agreement contains provisions that are not in conformance with New Jersey law or
that the Ironbound Bank Merger will not be in the public interest.
Under the Community Reinvestment Act of 1977 ("CRA"), the FDIC and FRB must
take into account the record of performance of Richmond County Savings and
Ironbound Bank in meeting the credit needs of the entire community, including
low- and moderate-income
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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." Richmond County Savings and Ironbound Bank each received a
"Satisfactory" rating during their last respective federal and state CRA
examinations.
In addition, under federal law, prior to consummation of a merger, a period
of 15 to 30 days must expire following approval by the FDIC and FRB, within
which period the United States Department of Justice ("Department of Justice")
may file objections to the Ironbound Merger under the federal antitrust laws.
The post-approval waiting period may be reduced by the FDIC or FRB 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 Ironbound
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 Ironbound Merger, or if such proceeding is instituted or challenge
is made, as to the result thereof.
The Ironbound Merger and Ironbound Bank Merger cannot proceed in the
absence of the requisite regulatory approvals. See "-- Conditions to the
Ironbound 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 that causes such approvals to fail to satisfy the condition set
forth in the Ironbound Merger Agreement and described below under "-- Conditions
to the Ironbound Merger." There can likewise be no assurance that the
Department of Justice or the Attorney General of the State New York will not
challenge the Ironbound 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 Ironbound 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 does not include review of the Ironbound
Merger from the standpoint of the adequacy of the consideration to be received
by Ironbound stockholders. Furthermore, regulatory approvals do not constitute
an endorsement or recommendation of the Ironbound Merger.
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CONDUCT OF BUSINESS PENDING THE IRONBOUND MERGER
Pursuant to the Ironbound Merger Agreement, Richmond County has agreed
that, during the period from the date of the Ironbound Merger Agreement to the
Ironbound Effective Time (except as expressly provided for in the Ironbound
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;
(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 Ironbound to perform their respective
covenants and agreements on a timely basis under the Ironbound Merger
Agreement;
(4) take no action which would adversely affect, delay, or materially
condition the ability of Richmond County, Richmond County Savings,
Ironbound or Ironbound Bank to obtain any necessary approvals, consents
or waivers of any governmental authority required for the transactions
contemplated by the Ironbound Merger Agreement; and
(5) take no action that results in or is reasonably likely to have a
Materially Adverse Effect on Richmond County or Richmond County
Savings.
Pursuant to the Ironbound Merger Agreement, Ironbound has agreed that,
during the period from the date of the Ironbound Merger Agreement to the
Ironbound Effective Time (except as expressly provided for in the Ironbound
Merger Agreement and except to the extent required by law or regulation or by
regulatory authorities), Ironbound 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 Ironbound to perform their respective
covenants and agreements on a timely basis under the Ironbound Merger
Agreement;
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(4) take no action which would adversely effect, delay or materially
condition the ability of Richmond County, Richmond County Savings,
Ironbound or Ironbound Bank to obtain any necessary approvals, consents
or waivers of any governmental authority required for the transactions
contemplated by the Ironbound Merger Agreement; and
(5) take no action that results in or is reasonably likely to have a
Material Adverse Effect on Ironbound or Ironbound Bank.
In addition, pursuant to the Ironbound Merger Agreement, Ironbound has
agreed that, during the period from the date of the Ironbound Merger Agreement
to the Ironbound Effective Time (except as otherwise provided in the Ironbound
Merger Agreement and except to the extent required by law or regulation or by
regulatory authorities), 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:
(1) change any provisions of its certificate of incorporation or bylaws 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 Ironbound, except pursuant to the exercise of
stock options or warrants outstanding as of the date of the Ironbound
Merger Agreement in the ordinary course of business and consistent
with past practice;
(3) declare or pay any dividend or make any other distribution on, or
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, other than the $0.05 regular
quarterly cash dividend payable by Ironbound;
(4) as promptly as practicable following the date of the Ironbound Merger
Agreement, the Ironbound 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 payment dates.
Ironbound shall not thereafter change its regular dividend payment
dates and record dates;
(5) nothing in the Ironbound Merger Agreement will be construed to permit
holders of shares of Ironbound Common Stock to receive two dividends
from either Ironbound or from Ironbound and Richmond County in any one
quarter. Subject to applicable regulatory restrictions, if any,
Ironbound Bank may pay a cash dividend that is, in the aggregate,
sufficient to fund any dividend by Ironbound permitted under the terms
of the Ironbound Merger Agreement;
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(6) 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 other than a direct or
indirect wholly owned subsidiary of Ironbound; or
(b) cancel, release or assign any indebtedness of any individual,
corporation or other entity except pursuant to contracts or
agreements in force as of July 17, 1998 and which have been
previously disclosed to Richmond County;
(7) except to the extent required by law or as specifically provided for
elsewhere in the Ironbound 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 Ironbound's non-officer employees following
such increase to exceed by more than 5% the total annual compensation
expenses of Ironbound with respect to such person for the 12-month
period ended March 31, 1998. Additionally, such increase must not
cause the annual rate of such individual's compensation to increase by
more than 10% of such person's compensation at March 31, 1998.
Further, Ironbound 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
Ironbound Employee Plan with or for the benefit of any employee or
director. Ironbound must not voluntarily accelerate the vesting of any
stock options or other compensation or benefit; make any discretionary
continuation to any Ironbound 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 increase the costs to
Ironbound or any subsidiary of any employee plan;
(8) except as contemplated by the Ironbound Merger Agreement, change its
method of accounting as in effect at December 31, 1997, except as
required by changes in GAAP as concurred in by Ironbound's independent
auditors;
(9) settle any claim, action or proceeding involving any liability of
Ironbound or any of its subsidiaries for money damages in excess of
$25,000 or impose material restrictions upon the operations of
Ironbound or any of its subsidiaries;
(10) 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
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material, individually or in the aggregate, to Ironbound, except in
satisfaction of debts previously contracted;
(11) except pursuant to commitments existing at July 17, 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;
(12) 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 Ironbound's portfolio made in accordance with the
Ironbound 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;
(13) make any investment in any debt security, including mortgage-backed
and mortgage-related securities, other than United States Government
and United States 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 Office of Thrift
Supervision ("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;
(14) 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
Ironbound Merger Agreement;
(15) make, grant or purchase any loan or make any commitment to lend in
excess of $500,000 to any individual borrower, unless such loan is
fully secured by real estate or liquid collateral and conforms in all
material respects with Ironbound's existing loan policy. Ironbound
Bank is also permitted to renew currently outstanding loans in amounts
above $500,000 provided that the loan has a satisfactory payment
history and the renewal is not in excess of the original loan
principal amount;
(16) 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
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borrowings of Ironbound or any of its subsidiaries in effect as of
July 17, 1998 or in connection with borrowings or reverse repurchase
agreements permitted under the Ironbound Merger Agreement;
(17) make any capital expenditures in excess of $50,000 per expenditure
from July 17, 1998 until the Ironbound Effective Date, other than
pursuant to binding commitments existing as of July 17, 1998
previously disclosed to Richmond County, other than expenditures
necessary to maintain existing assets in good repair or to make
payment of necessary taxes;
(18) organize, capitalize, lend to, or otherwise invest in, any subsidiary,
or invest in or acquire any equity or voting interest in any firm,
corporation or business enterprise (other than securities of the FHLB
that are purchased in the ordinary course of business consistent with
past practice);
(19) elect to the Ironbound Board or to any office any person who is not a
member of the Ironbound Board or an officer of Ironbound as of
July 17, 1998;
(20) accept any proposed deposits by any municipality or government agency
the terms of which exceed 90 days; or
(21) agree or make any commitment to take any action that is describe
above.
At Richmond County's request, Ironbound will cause Ironbound Bank 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
Ironbound Merger, and no earlier than five business days prior to the Ironbound
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 Ironbound have made certain customary
representations and warranties relating to, among other things, the parties'
respective organization, authority relative to the Ironbound 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 Ironbound Merger Agreement attached hereto as ANNEX A.
Pursuant to the Ironbound Merger Agreement, it is a
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condition to each party's obligation to consummate the Ironbound Merger that the
representations and warranties of the other party contained in the Ironbound
Merger Agreement be true and correct in all material respects as of the date of
the Ironbound Merger Agreement and as of the Ironbound Effective Time. However,
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
warranties and its subsidiaries, taken as a whole, as represented in the
Ironbound Merger Agreement. See "-- Conditions to the Ironbound Merger."
ACQUISITION PROPOSALS
Ironbound 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 in this paragraph), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries. Further, Ironbound 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. Ironbound 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, Ironbound shall
deliver to Richmond County a copy of such inquiry or proposal promptly. However,
the Ironbound 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 Ironbound 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 Ironbound Board receives a written opinion from its independent
financial advisor that such proposal may be superior to the
Ironbound Merger from a financial point of view to Ironbound's
stockholders,
(b) the Ironbound Board, after consultation with independent legal
counsel, determines in good faith that such action is necessary for
the Ironbound 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, another party, Ironbound:
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(i) provides reasonable notice to Richmond County to the effect
that it is furnishing information to, or entering into
discussions or negotiations with, such party; and
(ii) receives from such party 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 Ironbound Board,
after consultation with independent legal counsel, determines in good
faith that such action is necessary for the Ironbound Board to comply
with its fiduciary duties to stockholders under applicable law.
"Acquisition Proposal" means any of the following (other than the
transactions contemplated under the Ironbound Merger Agreement)
involving Ironbound 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 10% or more of the assets of Ironbound or Ironbound
Bank, 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 Ironbound or the filing of a
registration statement under 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 Ironbound Effective Time, any provision of the Ironbound
Merger Agreement may be (i) waived in writing by the party benefitted by the
provision or (ii) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties to the Ironbound
Merger Agreement. However, after the vote by the stockholders of Ironbound or
Richmond County, no amendment or modification may be made that would reduce the
Ironbound Merger Consideration or contravene any provision of the Delaware
General Corporation Law ("DGCL") or the federal banking laws, rules and
regulations.
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The Ironbound Merger Agreement may be terminated at or prior to the
Ironbound Effective Time, either before or after approval of the matters
presented in connection with the Ironbound Merger by the stockholders of both
Richmond County and Ironbound, as follows:
(1) by the mutual consent of Richmond County and Ironbound, if the board of
directors of each so determines by vote of a majority of the members of
their entire respective boards;
(2) by either Richmond County or Ironbound, if either of their respective
board of directors so determines by vote of a majority of the members
of their entire respective boards if the stockholders of Ironbound do
not approve the Ironbound Merger Agreement at the Ironbound Meeting;
(3) by either Richmond County or Ironbound, if either (a) any approval,
consent or waiver of a governmental agency required to permit
consummation of the transactions contemplated by the Ironbound 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 Ironbound Merger Agreement;
(4) by either Richmond County or Ironbound, if either of their respective
board of directors so determines by vote of a majority of the members
of their entire respective board, in the event that the Ironbound
Merger is not consummated by April 30, 1999, ("Initial Termination
Date"), unless the failure to so consummate by such time is due to the
breach of any representation, warranty or covenant contained in the
Ironbound Merger Agreement by the party seeking to terminate;
(5) by Richmond County or Ironbound, if there has occurred since July 17,
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 Ironbound, 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;
(6) by Richmond County or Ironbound (provided that the party seeking
termination is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Ironbound 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 Ironbound Merger
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Agreement, which failure or non-compliance is material in the
context of the transactions contemplated by the Ironbound Merger
Agreement; or
(b) subject to the Material Adverse Effect standard established in the
Ironbound Merger Agreement, any inaccuracies, omissions or breach
in the representations, warranties, covenants or agreements of the
other party contained in the Ironbound 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;
(7) by Richmond County, if the Ironbound Board does not publicly recommend
in the Proxy Statement that Ironbound's stockholders approve and adopt
the Ironbound Merger Agreement or if, after recommending in the Proxy
Statement that Ironbound stockholders approve and adopt the Ironbound
Merger Agreement, the Ironbound Board shall have withdrawn, modified or
amended such recommendation in any respect materially adverse to
Richmond County; or
(8) by Ironbound, as discussed below under "-- Price-Based Termination."
PRICE-BASED TERMINATION
The Ironbound Merger Agreement provides that if the Richmond County Market
Value on the Valuation Date is less than $14.00 (as adjusted to account for a
stock dividend, reclassification, split-up, combination, exchange of shares or
other similar transaction between July 17, 1998 and the Valuation Date), then
Ironbound, during the five-day period commencing with the Valuation Date, may
terminate the Ironbound Merger Agreement, proceed with the Ironbound Merger as
structured, or attempt to renegotiate the Exchange Ratio.
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 Ironbound Merger to be approved
for quotation on the Nasdaq National Market, subject to official notice of
issuance, prior to or at the Ironbound Effective Time. The obligations of the
parties to consummate the Ironbound Merger are subject to approval for quotation
on the Nasdaq National Market of such shares. See "-- Conditions to the
Ironbound Merger" above.
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ANTICIPATED ACCOUNTING TREATMENT
The Ironbound Merger will be accounted for under the purchase method of
accounting in accordance with GAAP. Under this method of accounting, Richmond
County will record the fair market value of Ironbound'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 Ironbound's operations beginning from the
Ironbound Effective Date.
The unaudited pro forma condensed combined financial information contained
in this Proxy Statement/Prospectus has been prepared using the purchase
accounting method to account for the Ironbound Merger. See "Unaudited Pro Forma
Condensed Combined Consolidated Financial Statements."
FEDERAL INCOME TAX CONSEQUENCES OF THE IRONBOUND MERGER
The following is a discussion of the material federal income tax
consequences of the Ironbound Merger to Richmond County, Ironbound and holders
of Ironbound 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 the Ironbound 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 Ironbound 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 Ironbound Effective Time, and in rendering such opinions, such counsel
will require and rely upon representations contained in certificates of officers
of Richmond County, Ironbound and others.
HOLDERS OF IRONBOUND COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE IRONBOUND 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 Ironbound to
consummate the Ironbound Merger that Richmond County and Ironbound each shall
have received an opinion of their respective counsel, dated as of the Ironbound
Effective Time, in form and substance customary in transactions of the type
contemplated by the Ironbound Merger Agreement and reasonably satisfactory to
Richmond County and Ironbound, respectively, to the effect that the Ironbound
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:
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(1) no gain or loss will be recognized by Richmond County, Richmond County
Savings, Ironbound or Ironbound Bank as a result of the Ironbound
Merger;
(2) no gain or loss will be recognized by the stockholders of Ironbound
who exchange all of their Ironbound Common Stock solely for Richmond
County Common Stock pursuant to the Ironbound 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 Ironbound Common Stock for Richmond County Common
Stock in the Ironbound Merger will be the same as the tax basis of
Ironbound Common Stock surrendered pursuant to the Ironbound 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 Ironbound Merger will include the holding period of
Ironbound Common Stock exchanged therefor, provided that such
stockholder held such Ironbound Common Stock as a capital asset on the
Ironbound Effective Date.
RESALES OF RICHMOND COUNTY COMMON STOCK
The shares of Richmond County Common Stock to be issued in the Ironbound
Merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares issued to any Ironbound
stockholder who may be deemed to be an "affiliate" of Ironbound for purposes of
Rule 145 under the Securities Act. Affiliates of Ironbound may not sell their
shares of Richmond County Common Stock acquired in connection with the Ironbound
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 Proxy Statement/Prospectus does not cover any resales of Richmond County
Common Stock received in the Ironbound Merger by persons who may be deemed to be
affiliates of Ironbound. Persons who may be deemed to be affiliates of
Ironbound generally include individuals or entities that control, are controlled
by or are under common control with Ironbound, and may include certain officers
and directors as well as principal stockholders of Ironbound.
For purposes of Rule 145, Ironbound has obtained from each person who is an
affiliate of Ironbound 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 14A:11-1 of the New Jersey Statutes Annotated, 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 held of record by more than
1,000 stockholders, or if they will receive, pursuant to the merger, (1) cash,
(2) shares, obligations, or other securities which, upon the completion of the
merger, will either be listed on a national securities exchange or held of
record by not less than 1,000 stockholders, or (3) a combination of cash and
such securities. Ironbound stockholders are not entitled to appraisal rights in
connection with the Ironbound Merger because the shares of Richmond County
Common Stock to be issued in the Ironbound Merger are shares of the surviving
corporation in the Ironbound Merger and there are more than 1,000 stockholders
of record of Richmond County Common Stock.
EXPENSES
All costs and expenses incurred in connection with the Ironbound Merger
Agreement, the Ironbound Merger Stock Option Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expense.
IRONBOUND EFFECTIVE TIME
The Ironbound Merger will become effective at the Ironbound 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 five business days after
satisfaction or waiver of the latest to occur of certain conditions to the
Ironbound Merger as specified in the Ironbound Merger Agreement, unless another
date is agreed to in writing by Richmond County and Ironbound. See
"-- Conditions to the Ironbound Merger." The closing of the transactions
contemplated by the Ironbound Merger Agreement will take place on the date of
such filing. It is expected that a period of time will elapse between the
Ironbound Meeting and the Ironbound Effective Time while the parties seek to
obtain the regulatory approvals required to consummate the Ironbound 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 Ironbound
Merger or, if such a challenge is made, the result thereof. See "-- Regulatory
Approvals Needed to Complete the Ironbound Merger." The Ironbound Merger
Agreement may be terminated by either party if, among other reasons, the
Ironbound Merger has not been consummated on or before April 30, 1999 unless
failure to consummate by such time is due to the breach of any representation,
warranty or covenant by the party seeking to terminate. See "-- Waiver and
Amendment; Termination."
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CERTAIN RELATED TRANSACTIONS
IRONBOUND MERGER STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the Ironbound
Merger Stock Option Agreement, which is attached hereto as ANNEX B. The
following summary is qualified in its entirety by reference to the Ironbound
Merger Stock Option Agreement. Execution of the Ironbound Merger Stock Option
Agreement was a condition to the parties entering into the Ironbound Merger
Agreement.
Concurrently with the execution of the Ironbound Merger Agreement, Richmond
County and Ironbound entered into the Ironbound Merger Stock Option Agreement.
The Ironbound Merger Stock Option Agreement is designed to enhance the
likelihood that the Ironbound Merger will be successfully consummated in
accordance with the terms contemplated by the Ironbound Merger Agreement and
Richmond County insisted on such agreement for that reason. Pursuant to the
Ironbound Merger Stock Option Agreement, Ironbound granted Richmond County the
option to purchase up to 198,664 authorized but unissued shares (the "Ironbound
Merger Stock Option Shares") of Ironbound Common Stock (representing
approximately 19.9% of the issued and outstanding shares of Ironbound Common
Stock on July 17, 1998) at a price of $20.00 per share, subject to adjustment in
certain circumstances (the "Ironbound Merger Stock Option"). In the event that
any additional shares of Ironbound Common Stock are issued or otherwise become
outstanding after July 17, 1998 (or any treasury shares held by Ironbound have
been or are sold after July 16, 1998) (other than pursuant to the Ironbound
Merger Stock Option Agreement or as set forth in the Ironbound Merger
Agreement), the number of shares of Ironbound Common Stock subject to the
Ironbound Merger Stock Option shall be increased so that, after such issuance,
it equals 19.9% of the number of shares of Ironbound Common Stock then issued
and outstanding without giving effect to any shares subject to or issued
pursuant to the Ironbound Merger Stock Option.
Pursuant to the Ironbound Merger Stock Option Agreement, Richmond County
may exercise the Ironbound Merger Stock Option, in whole or part, and from time
to time, if, but only if, a Triggering Event (as hereinafter defined) has
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that Richmond County shall have sent the written
notice of such exercise within 30 days following such Triggering Event.
Each of the following shall be an "Exercise Termination Event":
(1) the Ironbound Effective Time of the Ironbound Merger;
(2) termination of the Ironbound Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence
of a Triggering Event;
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(3) the passage of 12 months after termination of the Ironbound Merger
Agreement, if such termination follows the occurrence of a Triggering
Event; or
(4) the passage of 12 months after termination of the Ironbound Merger
Agreement, if such termination is pursuant to certain provisions of the
Ironbound Merger Agreement and a Triggering Event shall not have
occurred during such time. The "Last Triggering Event" shall mean the
last Triggering Event to occur.
The term "Triggering Event" shall mean any of the following events or
transactions occurring after July 17, 1998:
(1) (a) Ironbound or any of its subsidiaries, without having received
Richmond County's prior written consent, shall have entered into
an agreement to engage in an Ironbound Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for
purposes of Ironbound Merger Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange Act, and
the rules and regulations thereunder) other than Richmond County
or any of its subsidiaries; or (b) the Ironbound Board shall have
recommended that the stockholders of Ironbound approve or accept
any Ironbound Acquisition Transaction other than as contemplated
by the Ironbound Merger Agreement.
For purposes of the Ironbound Merger Agreement, "Ironbound Acquisition
Transaction" means:
(i) a merger or consolidation, or any similar transaction,
involving Ironbound or any of its subsidiaries,
(ii) a purchase, lease or other acquisition representing 15% or
more of the consolidated assets of Ironbound and its
subsidiaries; or
(iii) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Ironbound or
any of its subsidiaries;
(2) Ironbound or any of its subsidiaries, without having received Richmond
County's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend
or propose, an agreement to engage in an Ironbound Acquisition
Transaction with any person other than Richmond County or any of
Richmond County's subsidiaries, or, the Ironbound Board shall have
withdrawn or modified, or publicly announced its interest to withdraw
or modify, its recommendation that the stockholders of Ironbound
approve the transactions contemplated by the Ironbound Merger
Agreement,
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followed by the acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Ironbound Common
Stock;
(3) Any person, other than Richmond County, or any of Richmond County's
subsidiaries or any Ironbound subsidiary acting in a fiduciary
capacity, shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the outstanding shares
of Ironbound Common Stock. This is coupled with the circumstance
where Ironbound's stockholders shall not approve the Ironbound Merger,
or Ironbound shall not have called a meeting of stockholders, or
Ironbound shall not have held a meeting of stockholders to vote on the
Ironbound Merger no later than January 31, 1999, or Ironbound shall
have called a meeting of stockholders or shall have distributed a
proxy statement or other solicitation materials in connection with an
Ironbound Acquisition Transaction, followed by the acquisition by any
person of beneficial ownership of 25% or more of the then outstanding
common stock of Ironbound;
(4) Any person other than Richmond County or any of its subsidiaries,
other than in connection with a transaction to which Richmond County
has given its prior written consent, shall have made a bona fide
proposal to Ironbound or its stockholders by public announcement or
written communication. And that communication is or becomes the
subject of public disclosure to engage in an Ironbound Acquisition
Transaction, followed by the acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Ironbound Common
Stock;
(5) After a proposal is made by a third party to Ironbound or its
stockholders to engage in an Ironbound Acquisition Transaction,
Ironbound shall have willfully breached any representation, warranty,
covenant or obligation contained in the Ironbound Merger Agreement and
such breach would entitle Richmond County to terminate the Ironbound
Merger Agreement and shall not have been cured prior to the Ironbound
Merger Stock Option notice date;
(6) Any person other than Richmond County or any of its subsidiaries,
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 FRB, the FDIC, or other federal or state bank
regulatory authority, which has been accepted for processing, for
approval to engage in an Ironbound Acquisition Transaction. This is
followed by the acquisition by any person of beneficial ownership of
25% or more of the then outstanding Ironbound Common Stock;
(7) The holders of Ironbound Common Stock shall not have approved the
Ironbound Merger Agreement and the transactions contemplated thereby,
at the Ironbound Meeting. Or, such meeting shall not have been held
or shall have been cancelled prior to termination of the Ironbound
Merger Agreement in each of their cases,
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after it shall have been publicly announced that any person (other
than Richmond County or any affiliate of Richmond County or any person
acting in concert in any respect with Richmond County) shall have
made, or disclosed an intention to make, a proposal to engage in an
Ironbound Acquisition Transaction, followed by the acquisition by any
person of beneficial ownership of 25% or more of the then outstanding
Ironbound Common Stock; or
(8) The Ironbound Board shall not have recommended to the stockholders of
Ironbound that such stockholders vote in favor of the approval of the
Ironbound Merger Agreement and the transactions contemplated thereby
or shall have withdrawn or modified such recommendation in a manner
adverse to Richmond County. This is followed by the acquisition by
any person of beneficial ownership of 25% or more of the then
outstanding Ironbound Common Stock.
Ironbound shall notify Richmond County promptly in writing of the
occurrence of a Triggering Event, it being understood that the giving of such
notice by Ironbound shall not be a condition to the right of Richmond County to
exercise the Ironbound Merger Stock Option.
EFFECT OF THE IRONBOUND MERGER STOCK OPTION AGREEMENT. The Ironbound
Merger Stock Option Agreement is intended to increase the likelihood that the
Ironbound Merger will be consummated in accordance with the terms of the
Ironbound Merger Agreement. Consequently, certain aspects of the Ironbound
Merger Stock Option Agreement may have the effect of discouraging persons who
might now or prior to the Ironbound Effective Time be interested in acquiring
all of or a significant interest in Ironbound from considering or proposing such
an acquisition. The acquisition of Ironbound or an interest therein, or an
agreement to acquire all or part of Ironbound, could cause the Ironbound Merger
Stock Option to become exercisable. The existence of the Ironbound Merger Stock
Option Agreement could significantly increase the cost to a potential acquiror
of acquiring Ironbound compared to its cost had the Ironbound 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 Ironbound's independent accountant, Ironbound's
management believes that the exercise of the Ironbound Merger Stock Option is
likely to prohibit any acquiror from accounting for an acquisition of Ironbound
using the pooling-of-interests accounting method for a period of two years
following such exercise. Accordingly, the existence of the Ironbound Merger
Stock Option Agreement may deter significantly, or completely preclude, an
acquisition of Ironbound by certain other banking organizations. The Ironbound
Board took this factor into account before approving the Ironbound Merger Stock
Option Agreement. See "SUMMARY -- Our Recommendation to the Ironbound
Stockholders" and " -- Reasons for the Ironbound Merger."
IRONBOUND BANK MERGER AGREEMENT
In connection with the Ironbound Merger, Richmond County Savings and
Ironbound Bank have entered into the Ironbound Bank Merger Agreement pursuant to
which Ironbound Bank and Richmond County Savings will merge, with Richmond
County Savings being the
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surviving bank. It is the intention of Richmond County Savings, subject to
applicable statutes, regulations or regulatory conditions, to operate the former
offices of Ironbound Bank as a separate operational division of Richmond County
Savings. The Ironbound Bank Merger Agreement may be terminated by mutual consent
of the parties at any time and will be terminated automatically in the event the
Ironbound Merger Agreement is terminated.
THE BAYONNE MERGER
In a separate and unrelated transaction (the "Bayonne Merger"), Richmond
County is also acquiring Bayonne Bancshares, Inc. ("Bayonne"). Bayonne is a
savings and loan holding company organized under the laws of the State of
Delaware in 1997. Pursuant to the Bayonne Merger, Richmond County will issue
1.05 shares of its common stock for each share of Bayonne common stock. It is
expected that following the Ironbound Merger and the Bayonne Merger,
approximately ______ shares of Richmond County Common Stock will be outstanding.
Bayonne's wholly owned subsidiary, First Savings Bank of New Jersey, SLA ("First
Savings"), is a New Jersey State-chartered savings and loan association that
operates four banking offices and one financial center in Bayonne, New Jersey.
First Savings has operated since 1889. The deposits of First Savings are
insured by the SAIF. At September 30, 1998, Bayonne had total assets of
$672.7 million, deposits of $420.7 million, and stockholders' equity of
$95.2 million. Bayonne's principal offices are located at 568 Broadway, Bayonne,
New Jersey 07002 and its telephone number is (201) 437-1000. After the Bayonne
Merger, Bayonne will be merged with and into Richmond County, and Bayonne
stockholders will become stockholders of Richmond County. It is intended that
the Bayonne Merger will be completed in the beginning of 1999. Immediately
following the completion of the Bayonne Merger, Richmond County Savings and
First Savings will also merge. Richmond County Savings will be the name of the
surviving bank. THE BOARDS OF DIRECTORS OF RICHMOND COUNTY AND BAYONNE HAVE
UNANIMOUSLY APPROVED THE BAYONNE MERGER. THE BAYONNE MERGER REQUIRES THE
APPROVALS OF RICHMOND COUNTY'S STOCKHOLDERS AND BAYONNE'S STOCKHOLDERS. THE
COMPLETION OF THE IRONBOUND MERGER IS NOT DEPENDENT UPON THE COMPLETION OF THE
BAYONNE MERGER.
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
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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 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
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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.
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
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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:
<TABLE>
<S> <C>
Tier I Risk-Based Capital................ 21.60%
Total Risk-Based Capital................. 22.49%
Leverage Capital......................... 12.38%
</TABLE>
The following is a summary of Ironbound Bank's regulatory capital ratios at
September 30, 1998:
<TABLE>
<S> <C>
Tier I Risk-Based Capital................ 20.78%
Total Risk-Based Capital................. 21.57%
Leverage Capital......................... 9.52%
</TABLE>
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
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impair the liquidation account established in connection with the Conversion.
Richmond County Savings 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.
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
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bank. 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 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
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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
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
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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 FRB 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
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
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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.
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 Federal CRA. 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 system, and require the NYBD to
make available to the public such rating and a written summary of the results.
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 Home Owners' Loan Act, as
amended ("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.
The BIF and the SAIF are scheduled to 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
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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.
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:
(1) specified liquid assets up to 20% of total assets;
(2) intangibles, including goodwill; and
(3) 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 nine 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% of 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.
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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,
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, including New Jersey, permit such interstate acquisitions if the
statutes of the home
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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. New Jersey has not 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.
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
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July 17, 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 authorized the board of directors (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
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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.
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
GENERAL
Richmond County is a Delaware corporation subject to the provisions of the
DGCL. Ironbound is a New Jersey corporation subject to the New Jersey Statutes,
Annotated ("NJSA"). If the Ironbound Merger is consummated, the holders of
Ironbound Common Stock, whose rights are currently protected by the NJSA and
governed under the Ironbound Certificate of Incorporation and the Ironbound
Bylaws will, at the Ironbound Effective Time, become stockholders of Richmond
County whose rights will be protected by DGCL Law and governed under the
Richmond County Certificate of Incorporation and Richmond County Bylaws. The
material differences between the rights of the holders of Ironbound Common Stock
and the rights of holders of Richmond County Common Stock under the DGCL and
NJSA, respectively, and as described in the respective company's certificates of
incorporation and bylaws, are summarized below. Except for the provisions
described below, the Richmond County Certificate of Incorporation and the
Richmond County Bylaws are substantially equivalent to the Ironbound Certificate
of Incorporation and the Ironbound Bylaws. Except for the distinctions between
the DGCL and the NJSA noted below, Ironbound's rights as stockholders under the
DGCL will be substantially equivalent to their rights under the NJSA.
The following summary does not purport to be a complete statement of the
differences affecting the rights of holders of Richmond County Common Stock and
Ironbound Common Stock under the DGCL and their respective certificates of
incorporation and bylaws. This summary contains a list of the material
differences but is not meant to be relied upon as an exhaustive list or a
detailed description of the provisions discussed and is qualified in its
entirety by reference to the governing corporate instruments of Richmond County
and Ironbound.
Copies of such governing documents of Richmond County and Ironbound are
available, without charge, to any person, including any beneficial owner, to
whom this Proxy Statement/Prospectus is delivered, on written or oral request.
In the case of documents relating
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to Richmond County, requests should be made to Richmond County Financial Corp.,
1214 Castleton Avenue, Staten Island, New York 10310, Attention: Thomas R.
Cangemi, telephone number (718) 448-2800. In the case of Ironbound, requests
should be made to Ironbound Bankcorp, NJ, 36 Pacific Street at New York Avenue,
Newark, New Jersey 07105, Attention: Corporate Secretary, telephone number
(973) 589-3800.
NUMBER OF MEMBERS OF THE BOARD OF DIRECTORS
RICHMOND COUNTY. Richmond County's Bylaws do not provide for a minimum nor
a maximum number of members that must or may serve on the Richmond County Board.
The number of members of the Richmond County Board shall be the number so
designated by the Richmond County Board. In the absence of such designation,
the number of the members of the Richmond County Board shall be eight.
IRONBOUND. Ironbound's Bylaws provide that there shall be not less than
five and no more than 25 members on the Ironbound Board who are stockholders of
record. Upon the formation of Ironbound, the number of members on the Ironbound
Board was nine.
ELECTION OF THE BOARD OF DIRECTORS
RICHMOND COUNTY. Pursuant to the Richmond County Bylaws, the Richmond
County Directors are divided into three classes. Each year, the term of one of
the three classes expires. The term of the first class expires at the annual
meeting of stockholders held on September 29, 1998; the term of the second class
expiring at the annual meeting of stockholders one year thereafter; and the term
of the third class expires at the annual meeting of stockholders two year
thereafter. Replacement directors for those directors whose term expires are
elected at the Richmond County annual stockholders meeting. Directors elected at
each annual stockholders' meeting to succeed those directors whose terms have
expired will be elected for a term of office that expires at the third
succeeding annual stockholders' meeting after their election. Directors must be
nominated in accordance with the notice requirements noted below under "Conduct
of Business."
IRONBOUND. Pursuant to the Ironbound Bylaws, Ironbound directors are
elected for one year terms at each annual stockholders' meeting. Additionally,
between annual meetings, the Ironbound Board may increase the number of
Ironbound directors by up to two directors and may appoint persons to fill those
board seats. There are no nomination procedures specified in the Ironbound
Bylaws.
PRE-EMPTIVE RIGHTS
RICHMOND COUNTY. Richmond County stockholders are not afforded any pre-
emptive rights.
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IRONBOUND. Pursuant to the Ironbound Certificate of Incorporation, each
share of Ironbound Common Stock has pre-emptive rights.
VOTING RIGHTS
RICHMOND COUNTY. The Richmond County Certificate of Incorporation provides
that in no event shall any record owner of any outstanding Richmond County
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then-outstanding shares of Common
Stock be entitled or permitted to any vote in respect of the shares held in
excess of the Limit. "Limit" means 10% of the then-outstanding shares of
Richmond County Common Stock. The number of votes which may be cast by such
person beneficially owning shares in excess of the Limit is: the total number of
votes which a single record owner of all Richmond County Common Stock
beneficially owned by such person would be entitled to cast, multiplied by a
fraction, the numerator of which is the number of shares of such class or series
which are both beneficially owned by such person and owned of record by such
record owner, and the denominator of which is the total number of shares of
Richmond County Common Stock beneficially owned by such person owning shares in
excess of the Limit.
IRONBOUND. Stockholders of Ironbound have no corresponding voting rights
limit.
REMOVAL OF DIRECTORS
RICHMOND COUNTY. The Richmond County Certificate of Incorporation provides
that, subject to the rights of holders of any series of preferred stock then-
outstanding, any director, or the entire Richmond County Board, may be removed
from office at any time for cause, and only by the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of Richmond County capital stock entitled to vote in the election of
directors.
IRONBOUND. The Ironbound Certificate of Incorporation does not contain a
corresponding provision. However, the Ironbound Bylaws require an affirmative
vote of at least two-third's of the entire Ironbound Board to remove an
Ironbound director.
SPECIAL MEETINGS OF THE STOCKHOLDERS
RICHMOND COUNTY. The Richmond County Bylaws provide that, subject to the
rights of the holders of any class or series of preferred stock, special
meetings of stockholders may be called only by a resolution adopted by a
majority of the total number of directors which Richmond County would have if
there were no vacancies on the Richmond County Board.
IRONBOUND. The Ironbound Bylaws provide that a special meeting of the
Ironbound stockholders may be called when ordered by the Chairman, the
President, by at least two-thirds of the entire Ironbound Board, or by
stockholders holding, in the aggregate, at least fifty percent of the
outstanding shares of Ironbound Common Stock.
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DELAWARE. Under Delaware law, special meeting of stockholders may be
called by the board of directors or such persons authorized in the company's
certificate of incorporation or bylaws.
NEW JERSEY. Under New Jersey law, a special meeting of stockholders may be
called by the president or the board, or by such other officers, directors or
stockholders as provided in the bylaws. Notwithstanding the foregoing, upon the
application of not less than 10% of the stockholders entitled to vote, the
Superior Court may for good cause shown order a special meeting of stockholders.
ANNUAL MEETING OF STOCKHOLDERS
RICHMOND COUNTY. Each Richmond County annual meeting of stockholders shall
take place within 13 months of the prior annual meeting.
IRONBOUND. Each Ironbound annual meeting is required to be held on the
fourth Wednesday in April. In the event such date falls on a legal holiday,
then the annual meeting shall be held on the following business day.
ORGANIZATION
RICHMOND COUNTY. The Richmond County Board shall designate a person to
preside over the Richmond County annual meeting of stockholders. In the absence
of such a designation, the Chairman of the Richmond County Board shall preside
over the Richmond County annual meeting of stockholders. In the Chairman's
absence, the holders of a majority of shares of Richmond County Common Stock
present at the meeting shall choose who presides over the meeting.
IRONBOUND. The Chairman of the Ironbound Board shall preside over the
Ironbound annual meeting of stockholders. In the Chairman's absence, the Vice-
Chairman or the President and Chief Executive Officer will preside. In their
absence, the directors will select another member of the Ironbound Board to
preside.
CONDUCT OF BUSINESS
RICHMOND COUNTY. The Richmond County Bylaws require the chairman of the
meeting to determine the order of business and the procedures to be followed at
the meeting. The Richmond County Bylaws also require that the date and time of
the opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting be announced at the meeting. In order for business to
be brought before a meeting, the business must relate to a proper subject matter
for stockholder action and it must be timely delivered to Richmond County in
accordance with the notice requirements articulated in the Richmond County
Bylaws. To be timely, the notice must be delivered to Richmond County not less
than 90 days before the annual meeting if less than 100 days notice of the
meeting was furnished to stockholders, notice must be
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received not later than the close of business on the tenth day following the day
on which the notice was mailed, in order for it to be considered timely.
IRONBOUND. The Ironbound Bylaws do not require that the annual meeting's
chairman determine the order of business or the procedures to be followed at the
meeting. Moreover, the Ironbound Bylaws do not require that the date and time
of the opening and closing of the polls for each matter upon which the
stockholders will vote at the meeting must be announced. The Ironbound notice
requirements are similar to the Richmond County notice requirements, except that
notice must be delivered to Ironbound not less than 60 days nor more than
90 days prior to the date of the meeting.
LIST OF STOCKHOLDERS
RICHMOND COUNTY. In conformity with Delaware law, the Richmond County
Bylaws require that a stockholders' list be available for examination by
Richmond County stockholders during ordinary business hours for a period of at
least ten business days prior to, and at, the Richmond County stockholders'
meetings.
IRONBOUND. In conformity with New Jersey law, the Ironbound Bylaws require
that a complete stockholders' list be present and available for examination at
the Ironbound stockholders' meeting.
AMENDMENT TO BYLAWS
RICHMOND COUNTY. The Richmond County Certificate of Incorporation and
Bylaws provide that the bylaws may be amended by a majority vote of the Richmond
County Board or by at least 80% of the voting power of all the then-outstanding
shares of voting stock.
IRONBOUND. The Ironbound Bylaws provide that, subject to alteration or
repeal by the Ironbound stockholders at any meeting, the Ironbound Bylaws may be
amended by an affirmative vote of at least two-thirds of the members of the
Ironbound Board.
DELAWARE. Stockholders have power to make, alter or repeal a company's
bylaws. The company may also give that power to the board of directors by so
providing in its certificate of incorporation.
NEW JERSEY. The board of directors has the power to make, alter and repeal
a company's bylaws unless the certificate of incorporation reserves the power
for the stockholders.
MERGER OR BUSINESS COMBINATION
RICHMOND COUNTY. The Richmond County Certificate of Incorporation requires
that any merger or business combination of Richmond County or any of its
subsidiaries with an "Interested Stockholder" (as defined in the Certificate of
Incorporation) or any other corporation that is or would be an affiliate of an
Interested Stockholder, requires the affirmative vote of at
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least 80% of the voting power of the then-outstanding stock of Richmond County
entitled to vote.
IRONBOUND. Neither the Ironbound Certificate of Incorporation nor the
Ironbound Bylaws contains a corresponding provision.
DELAWARE. Delaware law prohibits a corporation from engaging in a merger
or consolidation with the corporation of an Interested Stockholder for three
years following the date that the person became an Interested Stockholder
unless:
(1) the board of directors approved either the disposition of assets or the
transaction that made the stockholder become an Interested Stockholder;
(2) the Interested Stockholder purchased at least 85% of the outstanding
voting shares in the transaction with which the Interested Stockholder
became an Interested Stockholder (the shares owned by persons who are
both officers and directors of the company and shares in employee stock
plans do not count towards the number of outstanding shares); or
(3) the disposition is approved by a two-thirds vote on disinterested
stockholders.
NEW JERSEY. New Jersey law prohibits a corporation from engaging in a
merger or consolidation with the corporation of an Interested Stockholder for
three years following the date that the person became an Interested Stockholder
unless:
(1) the board of directors approved either the disposition of assets prior
to the Stockholder becoming an Interested Stockholder;
(2) the disposition is approved by a two-thirds vote on disinterested
stockholders; or
(3) the disposition meets criteria certain pricing criteria.
87
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
The following statements set forth certain selected condensed financial
information for Richmond County, Bayonne and Ironbound, on an unaudited pro
forma condensed combined consolidated basis giving effect to the Bayonne Merger
and the Ironbound Merger applying the purchase method of accounting. The pro
forma condensed statements of income reflecting the Bayonne Merger and the
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 entity's most recent fiscal year end with Richmond County's
June 30 fiscal year end.
The unaudited pro forma condensed balance sheet presents the combined
financial position of Richmond County, Bayonne and Ironbound 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 expected cost savings or the revenue
enhancements that may or may not be achieved.
88
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
IRONBOUND BANKCORP, NJ
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/ ALL COMBINED
RICHMOND PRO FORMA BAYONNE PRO FORMA TRANSACTIONS
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND ADJUSTMENTS PRO FORMA
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks... $ 22,764 $ 3,042 $ (4,862)/(2)/ $ 25,025 $ 4,070 $(2,031)/(5)/ $ 27,064
4,081/(3)/
Federal funds sold........ 4,200 5 4,205 12,318 16,523
Securities
held-to-maturity......... -- 11,708 220/(3)/ 11,928 42,632 92/(6)/ 55,149
Securities available for
sale, net................ 831,670 324,457 1,156,127 11,216 1,166,845
Loans receivable:
Real estate mortgage
loans.................. 765,799 278,719 (804)/(3)/ 1,043,714 38,467 (250)/(6)/ 1,081,931
Other loans............. 16,679 33,105 49,784 3,335 53,119
Less allowance for loan
losses................. (7,920) (3,035) (10,955) (857) (11,812)
---------- -------- -------- ---------- -------- ------- ----------
Total loans receivable,
net...................... 774,558 308,789 (804) 1,082,543 40,945 (250) 1,123,238
Federal Home Loan Bank of
New York stock.......... 20,375 10,511 30,886 -- 30,886
Banking premises and
equipment, net........... 13,530 5,524 881/(3)/ 19,935 2,630 100/(6)/ 22,665
Accrued interest
receivable............... 11,514 3,901 15,415 785 16,200
Excess of cost over fair
value of net
assets acquired and
other intangibles...... -- -- 28,560/(4)/ 28,560 -- 16,130/(7)/ 44,690
Other real estate owned... 340 501 841 149 990
Other assets.............. 13,664 4,219 17,883 427 18,311
---------- -------- -------- ---------- -------- ------- ----------
Total assets............ $1,692,615 $672,657 $ 28,076 $2,393,348 $115,172 $14,041 $2,522,561
========== ======== ======== ========== ======== ======= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Liabilities:
Deposits................ $ 953,506 $420,749 $ (906)/(3)/ $1,373,349 $102,828 $ (69)/(6)/ $1,476,108
Borrowings.............. 400,000 146,750 1,832/(3)/ 548,582 -- 548,582
Accrued expenses and
other liabilities...... 9,283 10,006 (380)/(3)/ 18,675 815 4/(6)/ 19,494
(234)/(3)/
--
---------- -------- -------- ---------- -------- -------- ----------
Total liabilities...... 1,362,789 577,505 312 1,940,606 103,643 (65) 2,044,184
Stockholders' equity:
Preferred stock......... -- -- -- -- --
Common stock............ 264 91 (91)/(8)/ 360 5,213 (5,213)/(8)/ 374
96/(2)/ -- 14/(5)/
Additional
paid-in-capital........ 254,288 60,995 (60,995)/(8)/ 379,928 4,301 (4,301)/(8)/ 405,549
125,640/(2)/ 25,621/(5)/
Retained earnings-
substantially
restricted.......... 107,529 44,999 (44,999)/(8)/ 107,529 2,631 (2,631)/(8)/ 107,529
Unallocated common
stock held
by the ESOP........... (33,274) (4,081) 4,081/(8)/ (33,274) -- (33,274)
Unamortized Management
Retention Plan shares.. -- (2,987) 2,987/(8)/ (2,820) -- (2,820)
(2,820)/(3)/ -- --
Treasury stock.......... -- -- -- (672) 672/(8)/ --
Comprehensive income:
Unrealized gain (loss)
on securities
available-for-sale,
net of taxes.......... 1,019 (3,865) 3,865/(8)/ 1,019 56 (56)/(8)/ 1,019
---------- -------- --------- ---------- -------- -------- ----------
Total stockholders'
equity................ 329,826 95,152 27,764 452,742 11,529 14,106 478,377
Total liabilities and
stockholders'
equity................ $1,692,615 $672,657 $ 28,076 $2,393,348 $115,172 $ 14,041 $2,522,561
========== ======== ========= ========== ======== ======== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
89
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
IRONBOUND BANKCORP, NJ
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share amounts)
--------------------------------------------------------------------------------------------
RICHMOND
COUNTY/
BAYONNE ALL COMBINED
RICHMOND PRO FORMA PRO IRON- PRO FORMA TRANSACTIONS
COUNTY BAYONNE ADJUSTMENTS FORMA BOUND ADJUSTMENTS PRO FORMA
----------- ---------- --------------- --------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $ 27,662 $ 11,137 (2)/(9)/ $ 38,797 $ 1,950 $ (28)/(10)/ $ 40,719
Interest expense........... 12,599 6,735 58/(9)/ 19,392 697 (2)/(10)/ 20,087
----------- ---------- ------ ----------- ---------- ----- -----------
Net interest income........ 15,063 4,402 (60) 19,405 1,253 (26) 20,632
Provision for loan
losses................... 750 75 -- 825 -- -- 825
----------- ---------- ------ ----------- ---------- ----- -----------
Net interest income after
provision for loan
losses................... 14,313 4,327 (60) 18,580 1,253 (26) 19,807
Non-interest income........ 1,844 538 -- 2,382 172 -- 2,554
Non-interest expense....... 7,632 2,768 476/(4)(11)/ 10,876 902 269/(7)(11)/ 12,047
----------- ---------- ------ ----------- ---------- ----- -----------
Income before income
taxes.................... 8,525 2,097 (536) 10,086 523 (295) 10,314
Provision for income
taxes.................... 3,171 776 (18) 3,929/(12)/ 186 (178) 3,937/(12)/
----------- ---------- ------ ----------- ---------- ----- -----------
Net income................. $ 5,354 $ 1,321 $ (518) $ 6,157 $ 337 $(117) 6,377
=========== ========== ===== =========== ========== ===== ===========
Weighted average shares
outstanding:
Basic..................... $24,362,800 9,041,000 33,938,302 997,158 35,384,181
Diluted................... 24,362,800 9,174,637 34,078,621 1,031,527 35,558,869
Earnings per share:
Basic..................... $ 0.22 $ 0.15 $ 0.18 $ 0.34 $ 0.18
Diluted................... $ 0.22 $ 0.15 $ 0.18 $ 0.34 $ 0.18
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS."
90
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
IRONBOUND BANKCORP, NJ
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
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income....................... $ 86,754 $ 40,860 $ (9)/(9)/ $ 127,605
Interest expense...................... 37,512 24,872 229/(9)/ 62,613
---------- --------- --------- -----------
Net interest income................... 49,242 15,988 (238) 64,992
Provision for loan losses............. 2,200 180 -- 2,380
---------- --------- --------- -----------
Net interest income after
provision for loan losses............ 47,042 15,808 (238) 62,612
Non-interest income................... 3,601 1,343 -- 4,944
Contribution to the Foundation........ 19,558 -- -- 19,558
Non-interest expense.................. 24,488 10,170 1,904 36,562
---------- --------- --------- -----------
Income before income taxes............ 6,597 6,981 (2,142) 11,436
Provision (benefit) for income taxes.. 2,071 2,602 (484) 4,189/(12)/
---------- --------- --------- -----------
Net income............................ $ 4,526 $ 4,379 $ (1,658) $ 7,247
========== ========= ========= ===========
Weighted average shares outstanding:
Basic................................ 24,328,143 8,865,966 33,903,645
Diluted.............................. 24,328,143 8,963,512 34,006,069
Earnings (loss) per share:
Basic................................ $ (0.16) $ 0.49 $ 0.21
Diluted.............................. $ (0.16) $ 0.49 $ 0.21
<CAPTION>
------------------------------------------------------
ALL
COMBINED
PRO FORMA TRANSACTIONS
IRONBOUND ADJUSTMENTS PRO FORMA
--------- ------------ ------------
<S> <C> <C> <C>
Interest income....................... $ 7,695 $ (110)/(10)/ $ 135,190
Interest expense...................... 2,610 (9)/(10)/ 65,214
--------- ------------ ----------
Net interest income................... 5,085 (101) 69,976
Provision for loan losses............. -- -- 2,380
--------- ------------ ----------
Net interest income after
provision for loan losses............ 5,085 (101) 67,596
Non-interest income................... 723 -- 5,667
Contribution to the Foundation........ -- -- 19,558
Non-interest expense.................. 3,843 1,075 41,480
--------- ------------ ----------
Income before income taxes............ 1,965 (1,176) 12,225
Provision (benefit) for income taxes.. 704 (717) 4,177/(12)/
--------- ------------ ----------
Net income............................ $ 1,261 $ (459) $ 8,048
========= ============ ==========
Weighted average shares outstanding:
Basic................................ 1,035,461 35,349,524
Diluted.............................. 1,058,163 35,474,650
Earnings (loss) per share:
Basic................................ $ 1.22 $ 0.23
Diluted.............................. $ 1.19 $ 0.23
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS."
91
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
IRONBOUND BANKCORP, NJ
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
Ironbound Merger and 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 Ironbound Merger and the Bayonne 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, Ironbound and Bayonne after giving effect to the Ironbound
Merger and the Bayonne 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>
92
<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........................ 2,820
Management Retention Plan Trust
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>
93
<PAGE>
(7) Excess of cost over fair value of net assets acquired for the Ironbound
Merger was calculated as follows:
Total cost $ 27,666
--------
Net assets acquired (11,536)
--------
Total excess of cost over fair value of net assets acquired $ 16,130
generated from the Ironbound Merger ========
(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.
(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 calculated using
the same method as basic earning per common share, but reflects potential
dilution of common stock equivalents. Basic and diluted weighted average
number of common stock and common
94
<PAGE>
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 years indicated:
<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>
LEGAL MATTERS
The validity of the shares of Richmond County Common Stock which will be
issued in the Mergers 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 Ironbound Merger for
Richmond County. Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C.
will pass upon the tax-free nature of the Ironbound Merger for Ironbound.
EXPERTS
The consolidated financial statements of Richmond County Financial Corp. 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 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 Ironbound Bankcorp, NJ and Subsidiary
as of December 31, 1997 and 1996, and for each of the years in the two-year
period ended December 31, 1997, included in the Registration Statement of which
this Proxy Statement/Prospectus is a part, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority so incorporated by reference in reliance upon the report of
Deloitte & Touche LLP, independent public accountants and upon the authority of
said firm as experts in accounting and auditing.
95
<PAGE>
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, whether civil, criminal, administrative or investigative
(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 the
corporation, or is or was serving at the request of the corporation as 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 the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person 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 the person's 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.
Any such indemnification and advancement of expenses provided under Section
145 shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators.
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 Ironbound Merger Agreement, the Registrant has
agreed that, for a period of three years following the Ironbound Effective Time
of the Ironbound Merger, the Registrant will indemnify and hold harmless each
present and former director and officer of Ironbound or its direct or indirect
subsidiaries, and each officer or employee of Ironbound or its direct or
indirect subsidiaries who is serving or has served as a director or trustee of
another entity expressly at Ironbound's request or
II-1
<PAGE>
direction, with respect to matters existing or occurring prior to the Ironbound
Effective Time of the Ironbound Merger.
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 of any such 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, judgments, 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 [sic] "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 Sections 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
II-2
<PAGE>
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 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
II-3
<PAGE>
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.
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 Agreement and Plan of Merger, dated as of July 17, 1998, by and
between Richmond County Financial Corp. and Ironbound Bankcorp, NJ is
included as ANNEX A to the 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 Luse Lehman Gorman Pomerenk & Schick, P.C.
regarding tax matters.
10.1 Stock Option Agreement, dated as of July 17, 1998, by and between
Richmond County Financial Corp. and Ironbound Bankcorp, NJ is included
as ANNEX B to the 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).
II-4
<PAGE>
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 Luse Lehman Gorman Pomerenk & Schick, P.C. (included in
Exhibit 8.2 hereto).
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond County
Financial Corp.
23.5 Consent of Deloitte & Touche LLP, Independent Auditors for Ironbound
Bankcorp, NJ.
23.6 Consent of Ostrowski & Company, Inc.
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 Ostrowski & Company, Inc. (included as ANNEX C to the Proxy
Statement/Prospectus which is part of this Registration Statement).
99.2 Ironbound Bankcorp, NJ Proxy Card.
____________________
(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:
(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
II-5
<PAGE>
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; and
(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.
(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.
II-6
<PAGE>
(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 Securities
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 Registrant 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 Securities 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 Items 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 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, Richmond County
Financial Corp., the Registrant, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and 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 15, 1998.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
-----------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
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 15, 1998.
On December 15, 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-in-fact 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 SEC, said attorney-in-fact 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-in-fact and agent to any
and all such amendments and instruments.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated:
NAME TITLE
---- -----
/s/ Michael F. Manzulli Chairman of the Board and
- ---------------------------- Chief Executive Officer (principal
Michael F. Manzulli executive officer)
/s/ Anthony E. Burke President, Chief Operating Officer
- ---------------------------- and Director
Anthony E. Burke
II-8
<PAGE>
/s/ Thomas R. Cangemi Senior Vice President, Chief Financial
- ---------------------------- Officer, Treasurer and Secretary
Thomas R. Cangemi (principal financial and accounting officer)
/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
II-9
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of July 17, 1998, by and
between Richmond County Financial Corp. and Ironbound Bankcorp, NJ is
included as ANNEX A to the 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 Luse Lehman Gorman Pomerenk & Schick, P.C.
regarding tax matters.
10.1 Stock Option Agreement, dated as of July 17, 1998, by and between
Richmond County Financial Corp. and Ironbound Bankcorp, NJ is included
as ANNEX B to the 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 Luse Lehman Gorman Pomerenk & Schick, P.C. (included in
Exhibit 8.2 hereto).
<PAGE>
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond County
Financial Corp.
23.5 Consent of Deloitte & Touche LLP, Independent Auditors for Ironbound
Bankcorp, NJ.
23.6 Consent of Ostrowski & Company, Inc.
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 Ostrowski & Company, Inc. (included as ANNEX C to the Proxy
Statement/Prospectus which is part of this Registration Statement).
99.2 Ironbound Bankcorp, NJ Proxy Card.
____________________
(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.
2
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 17, 1998
BY AND BETWEEN
RICHMOND COUNTY FINANCIAL CORP.
AND
IRONBOUND BANKCORP, NJ
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Introductory Statement............................................................. 4
ARTICLE I
THE MERGER................................................................. 5
----------
Section 1.1. Structure of the Merger...................................... 5
-----------------------
Section 1.2. Effect on Outstanding Shares of Ironbound Common Stock....... 5
------------------------------------------------------
Section 1.3. Exchange Procedures.......................................... 6
-------------------
Section 1.4. Stock Options................................................ 8
-------------
Section 1.5. Bank Merger.................................................. 9
-----------
Section 1.6. Directors of RCFC after Effective Time....................... 9
--------------------------------------
Section 1.7. Alternative Structure........................................ 9
---------------------
Section 1.8. Dissenters' Rights........................................... 10
------------------
ARTICLE II
REPRESENTATIONS AND WARRANTIES............................................. 10
------------------------------
Section 2.1. Disclosure Letters........................................... 10
------------------
Section 2.2. Standards.................................................... 10
---------
Section 2.3. Representations and Warranties of Ironbound.................. 11
-------------------------------------------
Section 2.4. Representations and Warranties of RCFC....................... 25
--------------------------------------
ARTICLE III
CONDUCT PENDING THE MERGER................................................. 38
--------------------------
Section 3.1. Conduct of Ironbound's Business Prior to the Effective Time.. 38
-----------------------------------------------------------
Section 3.2. Forbearance by Ironbound..................................... 38
------------------------
Section 3.3. Conduct of RCFC's Business Prior to the Effective Time....... 42
------------------------------------------------------
ARTICLE IV
COVENANTS.................................................................. 42
---------
Section 4.1. Acquisition Proposals........................................ 42
---------------------
Section 4.2. Certain Policies of Ironbound................................ 43
-----------------------------
Section 4.3. Access and Information....................................... 44
----------------------
Section 4.4. Certain Filings, Consents and Arrangements................... 45
------------------------------------------
Section 4.5. Antitakeover Provisions...................................... 45
-----------------------
Section 4.6. Additional Agreements........................................ 46
---------------------
Section 4.7. Publicity.................................................... 46
---------
Section 4.8. Stockholders Meeting......................................... 46
--------------------
Section 4.9. Proxy Statements; Comfort Letters............................ 46
---------------------------------
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Section 4.10. Registration of RCFC Common Stock............................ 47
---------------------------------
Section 4.11. Affiliate Letters............................................ 47
-----------------
Section 4.12. Notification of Certain Matters.............................. 48
-------------------------------
Section 4.13. Employees, Directors and Officers............................ 48
---------------------------------
Section 4.14. Indemnification; Directors' and Officers' Insurance.......... 49
---------------------------------------------------
Section 4.15. Tax-Free Reorganization Treatment............................ 50
---------------------------------
Section 4.16. Savings and Loan Holding Company Structure................... 51
------------------------------------------
Section 4.17. Divisional Board............................................. 51
----------------
ARTICLE V
CONDITIONS TO CONSUMMATION................................................. 51
--------------------------
Section 5.1. Conditions to Each Party's Obligations....................... 51
--------------------------------------
Section 5.2. Conditions to the Obligations of RCFC and RCFC Bank.......... 52
---------------------------------------------------
Section 5.3. Conditions to the Obligations of Ironbound and
----------------------------------------------
Ironbound Bank............................................... 54
--------------
ARTICLE VI
TERMINATION................................................................ 56
-----------
Section 6.1. Termination.................................................. 56
-----------
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME................................. 58
------------------------------------------
Section 7.1. Effective Date and Effective Time............................ 58
---------------------------------
Section 7.2. Deliveries at the Closing.................................... 58
-------------------------
Section 7.3. Adjustment to the Exchange Ratio............................. 58
--------------------------------
ARTICLE VIII
CERTAIN OTHER MATTERS...................................................... 58
---------------------
Section 8.1. Certain Definitions; Interpretation.......................... 58
-----------------------------------
Section 8.2. Survival..................................................... 59
--------
Section 8.3. Waiver; Amendment............................................ 59
-----------------
Section 8.4. Counterparts................................................. 59
------------
Section 8.5. Governing Law................................................ 59
-------------
Section 8.6. Expenses..................................................... 59
--------
Section 8.7. Notices...................................................... 59
-------
Section 8.8. Entire Agreement; etc. ...................................... 61
---------------------
Section 8.9. Assignment................................................... 61
----------
</TABLE>
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 17th day of
July, 1998 ("Agreement"), by and between Richmond County Financial Corp., a
Delaware corporation ("RCFC"), and Ironbound Bankcorp, NJ, a New Jersey
corporation ("Ironbound").
INTRODUCTORY STATEMENT
The Board of Directors of each of RCFC and Ironbound (i) has
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of RCFC and
Ironbound, respectively, and in the best long-term interests of their respective
stockholders, (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with, and in furtherance of, its respective
business strategies and (iii) has approved, at meetings of each of such Boards
of Directors, this Agreement.
Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to RCFC's willingness to enter into this Agreement,
RCFC and Ironbound have entered into a stock option agreement (the "Option
Agreement"), pursuant to which Ironbound has granted to RCFC an option to
purchase shares of Ironbound's common stock, par value $5.00 per share
("Ironbound Common Stock"), upon the terms and conditions therein contained; and
certain officers and directors of Ironbound will each, within fourteen days of
the date of this Agreement, execute in favor of RCFC a Letter Agreement in the
form annexed as Exhibit A.
The parties hereto intend that the Merger shall qualify as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("Code"), for federal income tax purposes, and that the
Merger shall be accounted for as a pooling-of-interests for accounting purposes.
RCFC and Ironbound desire to make certain representations, warranties
and agreements in connection with the business combination and related
transactions provided for herein and to prescribe various conditions to such
transactions.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
A-4
<PAGE>
ARTICLE I
THE MERGER
----------
Section 1.1. Structure of the Merger. On the Effective Date (as
-----------------------
defined in Section 7.1), Ironbound will merge with and into RCFC ("Merger"),
with RCFC being the surviving entity, pursuant to the provisions of, and with
the effect provided in, the Delaware General Corporation Law. Upon consummation
of the Merger, the separate corporate existence of Ironbound shall cease. RCFC
shall continue to be governed by the laws of the State of Delaware and its name
and separate corporate existence, with all of its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
Section 1.2. Effect on Outstanding Shares of Ironbound Common Stock.
------------------------------------------------------
(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of Ironbound Common Stock issued and
outstanding at the Effective Time (as defined in Section 7.1), other than (i)
shares the holder of which (the "Dissenting Shareholders") 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"),
(ii) shares held directly or indirectly by RCFC (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted), and
(iii) shares held by Ironbound as treasury stock (such shares referred to in
clauses (i), (ii) and (iii) being referred to herein as the "Excluded Shares")
shall become and be converted into the right to receive 1.45 shares of RCFC
Common Stock (the "Exchange Ratio") (subject to Section 7.3); provided, however,
that, notwithstanding any other provision hereof, no fraction of a share of RCFC
Common Stock and no certificates or scrip therefor will be issued in the Merger;
instead, RCFC shall pay to each holder of Ironbound Common Stock who would
otherwise be entitled to a fraction of a share of RCFC Common Stock an amount in
cash, rounded to the nearest cent, determined by multiplying such fraction by
the RCFC Market Value (collectively, the "Merger Consideration").
(b) As used in Sections 1.2(a), 6.1(g) and 7.3, "RCFC Market Value"
shall be the average of the closing sales price on that day, as reported on the
National Market System of The Nasdaq Stock Market, Inc. ("Nasdaq National
Market"), for the 15 consecutive trading days immediately preceding the day that
is the latest of (i) the day of expiration of the last waiting period with
respect to any of the required regulatory approvals, as contemplated by Section
5.1(b), (ii) the day on which the last of the required regulatory approvals, as
contemplated by Section 5.1(b), is obtained and (iii) the day on which the last
of the required stockholder approvals have been obtained (such date being
referred to herein as the "Valuation Date").
(c) In the event that, between the date hereof and prior to the
Effective Time, the outstanding shares of RCFC Common Stock shall have been
increased, decreased or changed into or exchanged for a different number or kind
of shares or securities by reorganization,
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recapitalization, reclassification, stock split or other like changes in the
capitalization of RCFC, or if a stock dividend is declared on RCFC Common Stock
with a record date (as to a stock split, the pay date) within such period, then
an appropriate and proportionate adjustment shall be made in the number and kind
of shares of RCFC Common Stock to be thereafter delivered pursuant to this
Agreement, and the Exchange Ratio set forth in Section 1.2 of this Article I, so
that each stockholder of Ironbound shall be entitled to receive such number of
shares of RCFC Common Stock or other securities as such stockholder would have
received pursuant to such reorganization, recapitalization, reclassification,
stock split, exchange of shares or readjustment or other like changes in the
capitalization of RCFC, or as a result of a stock dividend on RCFC Common Stock,
had the record (or pay) date therefor been immediately following the Effective
Time.
(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be cancelled and retired and shall cease to exist, and
no exchange or payment shall be made with respect thereto. All shares of RCFC
Common Stock (as defined in Section 2.4(b)) that are held by Ironbound, if any,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, shall become treasury stock of RCFC.
Section 1.3. Exchange Procedures.
-------------------
(a) Appropriate transmittal materials ("Letter of Transmittal") in a
form satisfactory to RCFC and Ironbound, shall be mailed as soon as reasonably
practicable after the Effective Time, and in no event later than 5 business days
thereafter, to each holder of record of Ironbound Common Stock as of the
Effective Time. A Letter of Transmittal will be deemed properly completed only
if accompanied by certificates representing all shares of Ironbound Common Stock
to be converted thereby.
(b) At and after the Effective Time, each certificate ("Ironbound
Certificate") previously representing shares of Ironbound Common Stock (except
as specifically set forth in Section 1.2) shall represent only the right to
receive the Merger Consideration.
(c) Prior to the Effective Time, RCFC shall deposit, or shall cause to
be deposited, with such bank or trust company that is selected by RCFC and is
reasonably acceptable to Ironbound to act as exchange agent ("Exchange Agent"),
for the benefit of the holders of shares of Ironbound Common Stock, for exchange
in accordance with this Section 1.3, an estimated amount of cash sufficient to
pay the aggregate amount of cash in lieu of fractional shares to be paid
pursuant to Section 1.2, and RCFC shall reserve for issuance with its Transfer
Agent and Registrar a sufficient number of shares of RCFC Common Stock to
provide for payment of the Merger Consideration. On the Effective Time, RCFC
shall have granted the Exchange Agent the requisite power and authority to
effect for and on behalf of RCFC the issuance of the number of shares of RCFC
Common Stock issuable in the share exchange.
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(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Ironbound Certificates shall pass,
only upon delivery of the Ironbound Certificates to the Exchange Agent, (ii) be
in a form and contain any other provisions as RCFC may reasonably determine and
(iii) include instructions for use in effecting the surrender of the Ironbound
Certificates in exchange for the Merger Consideration. Upon the proper
surrender of the Ironbound Certificates to the Exchange Agent, together with a
properly completed and duly executed Letter of Transmittal, the holder of such
Ironbound Certificates shall be entitled to receive in exchange therefor (m) a
certificate representing that number of whole shares of RCFC Common Stock that
such holder has the right to receive pursuant to Section 1.2 and (n) a check in
the amount equal to the cash in lieu of fractional shares, if any, that such
holder has the right to receive pursuant to Section 1.2 and any dividends or
other distributions to which such holder is entitled pursuant to this Section
1.3. Ironbound Certificates so surrendered shall forthwith be cancelled. As
soon as practicable, but no later than five (5) business days following receipt
of the properly completed Letter of Transmittal and any necessary accompanying
documentation, the Exchange Agent shall distribute RCFC Common Stock and cash as
provided herein. The Exchange Agent shall not be entitled to vote or exercise
any rights of ownership with respect to the shares of RCFC Common Stock held by
it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect to such shares
for the account of the persons entitled thereto. If there is a transfer of
ownership of any shares of Ironbound Common Stock not registered in the transfer
records of Ironbound, the Merger Consideration shall be issued to the transferee
thereof if the Ironbound Certificates representing such Ironbound Common Stock
are presented to the Exchange Agent, accompanied by all documents required, in
the reasonable judgment of RCFC and the Exchange Agent, (x) to evidence and
effect such transfer and (y) to evidence that any applicable stock transfer
taxes have been paid.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to RCFC Common Stock shall be remitted to any person
entitled to receive shares of RCFC Common Stock hereunder until such person
surrenders his or her Ironbound Certificates in accordance with this Section
1.3. Upon the surrender of such person's Ironbound Certificates, such person
shall be entitled to receive any dividends or other distributions, without
interest thereon, which theretofore had become payable with respect to shares of
RCFC Common Stock represented by such person's Ironbound Certificates.
(f) From and after the Effective Time there shall be no transfers on
the stock transfer records of Ironbound of any shares of Ironbound Common Stock.
If, after the Effective Time, Ironbound Certificates are presented to RCFC, they
shall be cancelled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 1.3.
(g) Any portion of the aggregate amount of cash to be paid in lieu of
fractional shares pursuant to Section 1.2, any dividends or other distributions
to be paid pursuant to this Section 1.3 or any proceeds from any investments
thereof that remains unclaimed by the
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stockholders of Ironbound for six months after the Effective Time shall be
repaid by the Exchange Agent to RCFC upon the written request of RCFC. After
such request is made, any stockholders of Ironbound who have not theretofore
complied with this Section 1.3 shall look only to RCFC for the Merger
Consideration deliverable in respect of each share of Ironbound Common Stock
such stockholder holds, as determined pursuant to Section 1.2 of this Agreement,
without any interest thereon. If outstanding Ironbound Certificates are not
surrendered prior to the date on which such payments would otherwise escheat to
or become the property of any governmental unit or agency, the unclaimed items
shall, to the extent permitted by any abandoned property, escheat or other
applicable laws, become the property of RCFC (and, to the extent not in its
possession, shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
none of RCFC, RCFC Bank, the Exchange Agent or any other person shall be liable
to any former holder of Ironbound Common Stock for any amount delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(h) RCFC and the Exchange Agent shall be entitled to rely upon
Ironbound's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Ironbound Certificate, RCFC and the Exchange Agent
shall be entitled to deposit any Merger Consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(i) If any Ironbound Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Ironbound Certificate to be lost, stolen or destroyed and, if required by
the Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Ironbound Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Ironbound Certificate the
Merger Consideration deliverable in respect thereof pursuant to Section 1.2.
Section 1.4. Stock Options.
-------------
(a) Options to purchase shares of Ironbound Common Stock that have
been issued by Ironbound and are outstanding at the Effective Time (each, a
"Ironbound Option") pursuant to the Ironbound 1994 Stock Option Plan, the
Ironbound Bankcorp, NJ 1998 Stock Option Plan for Employees/Active Officers of
the Company's Wholly Owned Subsidiary, Ironbound Bank and the Ironbound
Bankcorp, NJ 1998 Stock Option Plan for Non-Employee Directors (collectively,
the "Ironbound Option Plans") shall be converted automatically into the right to
receive such number of shares (rounded to the nearest whole share) of RCFC
Common Stock as is equal in value (the RCFC Common Stock value shall be
determined as of the date hereof) to the amount equal to: the product of
(A) the Exchange Ratio and (B) the number of shares of Ironbound Common Stock
issuable upon exercise of the Ironbound Options
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immediately prior to the Effective Time multiplied by the spread between the
market price (as determined as of the date hereof) and the exercise price for
each Ironbound Option; provided however, that Section 1.4 shall be further
modified if and to the extent necessary to enable the Merger to qualify for
pooling-of-interests accounting treatment. Prior to the Effective Time, RCFC
shall take, or cause to be taken, all necessary action to effect the intent of
the provisions set forth in this Section 1.4. RCFC, or at the option of RCFC,
Ironbound, shall make such payment at the Effective Time to each individual
provided that the individual delivers to RCFC his written acceptance, in a form
acceptable to RCFC, of such payment as full and complete consideration for the
cancellation of each Ironbound option held by him.
(b) Ironbound shall agree that any grants of options to purchase Ironbound
Common Stock, automatic or otherwise, made under the Ironbound Option Plans
shall be null and void ab initio, following the payment of the Stock Options in
-- ------
accordance with 1.4(a) above.
Section 1.5. Bank Merger. Concurrently with or as soon as
-----------
practicable after the execution and delivery of this Agreement, Richmond County
Savings Bank ("RCFC Bank"), a wholly-owned subsidiary of RCFC, and Ironbound
Bank, a wholly-owned subsidiary of Ironbound, shall enter into the Plan of Bank
Merger, in the form attached hereto as Exhibit C, pursuant to which the Bank
Merger will be effected. The parties hereto intend that the Bank Merger shall
become effective on the Effective Date. The Plan of Bank Merger shall provide
that the directors of RCFC Bank as the surviving entity of the Bank Merger shall
be all of the directors of RCFC Bank serving immediately prior to the Bank
Merger and that it is the intent of RCFC Bank, subject to applicable statutes,
regulations or regulatory conditions, to operate the offices of Ironbound Bank
as a separate operational division of RCFC Bank.
Section 1.6. Directors of RCFC after Effective Time. At the
--------------------------------------
Effective Time, the directors of RCFC shall consist of the directors of RCFC
serving immediately prior to the Effective Time.
Section 1.7. Alternative Structure. RCFC may at any time prior to
---------------------
the Effective Time change the method of effecting the Merger and the Bank Merger
or any part thereof if and to the extent it deems such change to be necessary,
appropriate or desirable; provided, however, that no such change shall (i) alter
or change the Merger Consideration issued to holders of Ironbound Common stock
as provided for in the Agreement, (ii) adversely affect the tax treatment of
Ironbound's stockholders as a result of receiving the Merger Consideration or
the Company Merger qualifying for "pooling-of-interests" accounting treatment,
(iii) materially impeded or delay consummation of the Merger, (iv) result in any
representation or warranty of any party set forth in this Agreement becoming
incorrect in any material respect, or (v) diminish the benefits (including the
establishment of the Divisional Board) to be received by the directors, officers
or employees of Ironbound as set forth in the Agreement or in any other
agreements between the parties made in connection with this Agreement.
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Section 1.8. Dissenters' Rights.
------------------
(a) Any Dissenting Stockholder who shall be entitled to dissenters'
rights with respect to his or her Dissenters' Shares, as provided in Section
14A:11-1 of the New Jersey Statutes Annotated ("NJSA") shall not be entitled to
the Merger Consideration, unless and until the holder thereof shall have failed
to perfect or shall have effectively withdrawn or lost such holder's right to
dissent from the Merger under such law, and shall be entitled to receive only
the payment to the extent provided for therein with respect to such Dissenters'
Shares.
(b) Ironbound shall (i) give RCFC prompt written notice of the receipt
of any notice from a stockholder purporting to exercise any dissenters' rights,
(ii) not settle nor offer to settle any demand for payment without the prior
written consent of RCFC and (iii) not waive any failure to comply strictly with
any procedural requirements of the NJSA.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 2.1. Disclosure Letters. On or prior to the execution and
------------------
delivery of this Agreement, Ironbound and RCFC each shall have delivered to the
other a letter (each, its "Disclosure Letter") setting forth, among other
things, facts, circumstances and events the disclosure of which is required or
appropriate in relation to any or all of their respective representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate), other than Section 2.3(g) and Section 2.4(g); provided, that
(a) no such fact, circumstance or event is required to be set forth in the
Disclosure Letter as an exception to a representation or warranty if its absence
is not reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standards established by Section 2.2
and (b) the mere inclusion of a fact, circumstance or event in a Disclosure
Letter shall not be deemed an admission by a party that such item represents a
material exception or that such item is reasonably likely to result in a
Material Adverse Effect (as defined in Section 2.2(b)).
Section 2.2. Standards.
---------
(a) No representation or warranty of Ironbound or RCFC contained in
Sections 2.3 or 2.4, respectively, shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, on
account of the existence of any fact, circumstance or event unless, as a direct
or indirect consequence of such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Sections 2.3 or 2.4, as applicable, there is reasonably likely
to exist a Material Adverse Effect. Ironbound's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached as a result of effects arising solely from actions taken in compliance
with a written request of RCFC.
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(b) As used in this Agreement, the term "Material Adverse Effect"
means either (i) an effect which is material and adverse to the business,
financial condition or results of operations of Ironbound or RCFC, as the
context may dictate, and its Subsidiaries taken as a whole; provided, however,
that any such effect resulting from any (A) changes in laws, rules or
regulations or generally accepted accounting principles or interpretations
thereof that apply to both RCFC and RCFC Bank and Ironbound and Ironbound Bank,
as the case may be, 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 (ii) the failure of (x) a representation or warranty contained in
Section 2.3(a)(i) and (iv), Section 2.3(c), Section 2.3(d), 2.3(g)(iii),
2.4(a)(i) and (iv), Section 2.4(c), 2.4(g)(iii) or 2.4(l) to be true and correct
or (y) a representation or warranty contained in the last sentence of each of
Section 2.3(e) or 2.4(e), the second sentence of each of 2.3(f)(i) or 2.4(f)(i)
and the first two sentences of each of Section 2.3(aa) or 2.4(x) to be true and
correct in all material respects.
(c) For purposes of this Agreement, "knowledge" shall mean, with
respect to a party hereto, actual knowledge of the members of the Board of
Directors of that party, its counsel or any officer of that party with the title
ranking not less than senior vice president.
Section 2.3. Representations and Warranties of Ironbound. Subject
-------------------------------------------
to Sections 2.1 and 2.2, Ironbound represents and warrants to RCFC that, except
as disclosed in Ironbound's Disclosure Letter:
(a) Organization. (i) Ironbound is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of New Jersey
and is duly registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHCA"). Ironbound Bank is a stock commercial bank duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. Each Subsidiary (as defined below) of Ironbound Bank is a
corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of Ironbound and its Subsidiaries has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. As used in this Agreement, unless
the context requires otherwise, the term "Subsidiary" when used with respect to
any party means any corporation or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial reporting
purposes or which is controlled, directly or indirectly, by such party.
(ii) Each of Ironbound and its Subsidiaries has the requisite
corporate power and authority, and is duly qualified and is in good standing, to
do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iii) Ironbound's Disclosure Letter sets forth all of Ironbound's
Subsidiaries and all entities (whether corporations, partnerships or similar
organizations),
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including the corresponding percentage ownership, in which Ironbound owns,
directly or indirectly, 5% or more of the ownership interests as of the date of
this Agreement and indicates for each of Ironbound's Subsidiaries, as of such
date, its jurisdiction of organization and the jurisdiction(s) wherein it is
qualified to do business. All such Subsidiaries and ownership interests are in
compliance with all applicable laws, rules and regulations relating to direct
investments in equity ownership interests. Ironbound owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries.
No Subsidiary of Ironbound other than Ironbound Bank is an "insured depository
institution" as defined in the Federal Deposit Insurance Act, as amended
("FDIA"), and the applicable regulations thereunder. All of the shares of
capital stock of each of the Subsidiaries held by Ironbound or any of its other
Subsidiaries are fully paid, nonassessable and not subject to any preemptive
rights and are owned by Ironbound or a Subsidiary of Ironbound free and clear of
any claims, liens, encumbrances or restrictions (other than those imposed by
applicable federal and state securities laws), and there are no agreements or
understandings with respect to the voting or disposition of any such shares.
(iv) The deposits of Ironbound Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC") to
the extent provided in the FDIA.
(b) Capital Structure. (i) The authorized capital stock of
-----------------
Ironbound consists of 4,000,000 shares of Ironbound Common Stock, par value
$5.00 per share. As of the date of this Agreement: (A) 998,315 shares of
Ironbound Common Stock were issued and outstanding, (B) no shares of Ironbound
Common Stock were reserved for issuance, except that 117,908 shares of Ironbound
Common Stock were reserved for issuance pursuant to the Ironbound Option Plans
and (C) 45,505 shares of Ironbound Common Stock were held by Ironbound in its
treasury or by its Subsidiaries. The authorized capital stock of Ironbound Bank
consists of 4,000,000 shares of common stock, par value $5.00 per share. As of
the date of the Agreement, 100 shares of such common stock were outstanding, no
shares of preferred stock were outstanding and all outstanding shares of such
common stock were, and as of the Effective Time will be, owned by Ironbound.
All outstanding shares of capital stock of Ironbound and Ironbound Bank are duly
authorized and validly issued, fully paid and nonassessable and not subject to
any preemptive rights and, with respect to shares held by Ironbound in its
treasury or by its Subsidiaries, are free and clear of all liens, claims,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares. Ironbound's Disclosure
Letter sets forth a complete and accurate list of all options to purchase
Ironbound Common Stock that have been granted pursuant to the Ironbound Option
Plans and all restricted stock grants under the Ironbound RRP, including the
dates of grant, exercise prices, dates of vesting, dates of termination and
shares subject to each grant.
(ii) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which stockholders may vote ("Voting Debt") of
Ironbound are issued or outstanding.
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(iii) As of the date of this Agreement, except for this Agreement
and the Ironbound Option Plans, neither Ironbound nor any of its Subsidiaries
has or is bound by any outstanding options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating Ironbound or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional shares of capital stock of Ironbound or any of
its Subsidiaries or obligating Ironbound or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of Ironbound or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Ironbound
or any of its Subsidiaries.
(c) Authority. Each of Ironbound and Ironbound Bank has all requisite
---------
corporate power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively, and, subject to approval of this Agreement by the
requisite vote of Ironbound's stockholders and receipt of all required
regulatory or governmental approvals, as contemplated by Section 5.1(b) of this
Agreement, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, and, subject to the approval of this Agreement
by Ironbound's stockholders, the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate actions on the part
of Ironbound and Ironbound Bank. This Agreement has been duly executed and
delivered by Ironbound and constitutes a valid and binding obligation of
Ironbound, enforceable in accordance with its terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity,
whether applied in a court of law or a court of equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative vote of a
--------------------------------------
majority of the votes cast by holders of Ironbound Common Stock entitled to vote
on this Agreement is the only vote of the stockholders of Ironbound required for
approval of this Agreement and the consummation of the Merger and the related
transactions contemplated hereby. Ironbound has received the written opinion of
Ostrowski & Company, Inc. to the effect that, as of the date hereof, the
Exchange Ratio to be received by Ironbound's stockholders is fair, from a
financial point of view, to such stockholders.
(e) No Violations. The execution, delivery and performance of this
-------------
Agreement and Option Agreement by Ironbound do not, and the consummation of the
transactions contemplated hereby will not, constitute (i) assuming receipt of
all Requisite Regulatory Approvals (as defined below) and requisite stockholder
approvals, a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Ironbound or any of its Subsidiaries, or
to which Ironbound or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under, the
certificate of incorporation or bylaws of Ironbound or the similar
organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due
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notice or lapse of time or both, would constitute a default under), or result in
the termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Ironbound or any of its Subsidiaries,
under, any of the terms, conditions or provisions of any note, bond, indenture,
deed of trust, loan agreement or other agreement, instrument or obligation to
which Ironbound or any of its Subsidiaries is a party, or to which any of their
respective properties or assets may be subject; and the consummation of the
transactions (including the Bank Merger) contemplated hereby (exclusive of the
effect of any changes effected pursuant to Section 1.7) will not require any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or waiver
of any other party to any such agreement, indenture or instrument, other than
(x) the approval of the holders of a majority of the votes cast by holders of
Ironbound Common Stock entitled to vote, (y) the approval of the Banking Board
of the State of New York ("Banking Board") under Section 143-b of the Banking
Law of the State of New York ("Banking Law"), the approval of the Superintendent
of Banks of the State of New York ("Superintendent") under Section 601 of the
Banking Law and any other requirement of the Banking Board or the
Superintendent, the approval of the Board of Governors of the Federal Reserve
System ("FRB") under the BHCA, if necessary (or the receipt of a waiver of such
requirement), the approval of the Office of Thrift Supervision ("OTS") under the
Home Owners' Loan Act, as amended ("HOLA"), the approval of the New Jersey
Department of Banking (the "NJBD") and the approval of the appropriate
regulatory authority under Section 18(c) of the FDIA (collectively, the
"Requisite Regulatory Approvals"), and (z) such approvals, consents or waivers
as are required under the federal and state securities or "blue sky" laws in
connection with the transactions contemplated by this Agreement. As of the date
hereof, the executive officers of Ironbound know of no reason pertaining to
Ironbound why any of the approvals referred to in this Section 2.3(e) should not
be obtained without the imposition of any material condition or restriction
described in the proviso to Section 5.1(b).
(f) Reports. (i) As of their respective dates, none of the reports
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or other statements filed by Ironbound or Ironbound Bank on or subsequent to
December 31, 1997 with the FRB, the FDIC (collectively, "Ironbound's Reports"),
contained, or will contain, any untrue statement of a material fact or omitted
or will omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. Each of the financial statements of Ironbound
included in Ironbound's Reports complied as to form, as of their respective
dates of filing with the FDIC, in all material respects with applicable
accounting requirements and with the published rules and regulations of the FDIC
with respect thereto and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP")(except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements, as permitted by the FDIC or the
FRB). Each of the consolidated statements of condition contained or
incorporated by reference in Ironbound's Reports (including in each case any
related notes and schedules) fairly presented, or will fairly present, as the
case may be (A) the financial position of the entity or entities to which it
relates as of its date and each of the consolidated statements of operations,
consolidated statements of cash flows and
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consolidated statements of changes in stockholders' equity, contained or
incorporated by reference in Ironbound's Reports (including in each case any
related notes and schedules), and (B) the results of operations, stockholders'
equity and cash flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not material
in amount or effect), in each case in accordance with GAAP, except as may be
noted therein. Ironbound has made available to RCFC a true and complete copy of
each of Ironbound's Report filed with the FRB and FDIC since December 31, 1997.
(ii) Ironbound and each of its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1993 with (A) the NJBD, (B) the FDIC and (C) the FRB, and have paid
all fees and assessments due and payable in connection therewith.
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Ironbound's Reports filed on or prior to the date of this Agreement, since
December 31, 1997, (i) Ironbound and its Subsidiaries have not incurred any
liability, except in the ordinary course of their business consistent with past
practice, (ii) Ironbound and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of such businesses and (iii)
there has not been any Material Adverse Effect with respect to Ironbound.
(h) Absence of Claims. Except as set forth in Ironbound's Disclosure
-----------------
Letter, no litigation, proceeding, controversy, claim or action before any court
or governmental agency is pending against Ironbound or any of its Subsidiaries
and, to the best of Ironbound's knowledge, no such litigation, proceeding,
controversy, claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither Ironbound nor any of its
-----------------------------
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from any federal or
state governmental authority charged with the supervision or regulation of
depository institutions or depository institution holding companies or engaged
in the insurance of bank and/or savings and loan deposits ("Government
Regulators"), or has adopted any board resolutions at the request of any
Government Regulators, nor has it been advised by any Government Regulator that
it is contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
(j) Taxes. All federal, state, local and foreign tax returns required
-----
to be filed by or on behalf of Ironbound or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have
A-15
<PAGE>
expired, and all such filed returns are complete and accurate in all material
respects. All taxes shown on such returns, all taxes required to be shown on
returns for which extensions have been granted and all other taxes required to
be paid by Ironbound or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such taxes on Ironbound's balance sheet
(in accordance with GAAP). For purposes of this Section 2.3(j), the term "taxes"
shall include all income, franchise, gross receipts, real and personal property,
real property transfer and gains, wage and employment taxes. As of the date of
this Agreement, there is no audit examination, deficiency assessment, tax
investigation or refund litigation with respect to any taxes of Ironbound or any
of its Subsidiaries, and no claim has been made by any authority in a
jurisdiction where Ironbound or any of its Subsidiaries do not file tax returns
that Ironbound or any such Subsidiary is subject to taxation in that
jurisdiction. All taxes, interest, additions and penalties due with respect to
completed and settled examinations or concluded litigation relating to Ironbound
or any of its Subsidiaries have been paid in full or adequate provision has been
made for any such taxes on Ironbound's balance sheet (in accordance with GAAP).
Except as set forth in Ironbound's Disclosure Letter, Ironbound and its
Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Ironbound and each of its Subsidiaries has withheld and
paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and Ironbound and each of its Subsidiaries has
timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Code and similar applicable state
and local information reporting requirements. Neither Ironbound nor any of its
Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii) has
issued or assumed any obligation under Section 279 of the Code, any high yield
discount obligation as described in Section 163(i) of the Code or any
registration-required obligation within the meaning of Section 163(f)(2) of the
Code that is not in registered form or (iii) is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(k) Agreements. (i) Except for the Option Agreement and
----------
arrangements made in the ordinary course of business, and except as set forth in
Ironbound's Disclosure Letter, Ironbound and its Subsidiaries are not bound by
any material contract (as defined in Item 601(b)(10) of Regulation S-K) to be
performed after the date hereof that has not been filed with or incorporated by
reference in Ironbound's Reports. Except as disclosed in Ironbound's Disclosure
Letter, neither Ironbound nor any of its Subsidiaries is a party to an oral or
written (A) consulting agreement (other than data processing, software
programming and licensing contracts entered into in the ordinary course of
business) not terminable on 60 days' or less notice, (B) agreement with any
executive officer or other key employee of Ironbound or any of its Subsidiaries
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving Ironbound or any of its
Subsidiaries of the nature contemplated by this Agreement or the Option
Agreement, (C) agreement with respect to any employee or director of Ironbound
or any of its Subsidiaries providing any term of employment or compensation
guarantee extending for a period longer than 60 days or for the payment of in
excess of $30,000 per annum, (D) agreement or plan, including any stock option
plan, phantom
A-16
<PAGE>
stock or stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting or payment
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the Option Agreement or the value
of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the Option Agreement or (E)
agreement containing covenants that limit the ability of Ironbound or any of its
Subsidiaries to compete in any line of business or with any person, or that
involve any restriction on the geographic area in which, or method by which,
Ironbound (including any successor thereof) or any of its Subsidiaries may carry
on its business (other than as may be required by law or any regulatory agency).
(ii) Neither Ironbound nor any of its Subsidiaries is in default under
or in violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement, lease or other agreement to which it is a party or by
which it is bound or to which any of its respective properties or assets is
subject.
(iii) Ironbound and each of its Subsidiaries owns or possesses valid
and binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses, and neither Ironbound nor any of its Subsidiaries has received any
notice of conflict with respect thereto that asserts the right of others. Each
of Ironbound and its Subsidiaries has performed all the obligations required to
be performed by it and are not in default under any contact, agreement,
arrangement or commitment relating to any of the foregoing.
(l) Labor Matters. Neither Ironbound nor any of its Subsidiaries is
-------------
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is Ironbound or
any of its Subsidiaries the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it or any such
Subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike, other labor dispute or organizational
effort involving Ironbound or any of its Subsidiaries pending or, to Ironbound's
knowledge, threatened. Ironbound and its Subsidiaries are in compliance with
applicable laws regarding employment of employees and retention of independent
contractors and are in compliance with applicable employment tax laws.
(m) Employee Benefit Plans. Ironbound's Disclosure Letter contains a
----------------------
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto with respect to any present or former directors, officers or
other employees of Ironbound or any of its
A-17
<PAGE>
Subsidiaries (hereinafter collectively referred to as the "Ironbound Employee
Plans"). Neither Ironbound nor any affiliate with which it would be aggregated
by reason of Section 414 of the Code, maintains, sponsors or participates in, or
has ever maintained, sponsored, or participated in, an "employee stock ownership
plan" (within the meaning of Section 407(d)(6) of ERISA and Sections 409 and
4975(e)(7) of the Code or employee pension benefit plan (other than the
[Ironbound 401(k) Plan] that is or was subject to any provision of ERISA or the
Code. All of the Ironbound Employee Plans comply in all material respects with
all applicable requirements of ERISA, the Code and other applicable laws; there
has occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) which is likely to result in the imposition of any
penalties or taxes under Section 502(i) of ERISA or Section 4975 of the Code
upon Ironbound or any of its Subsidiaries. Neither Ironbound nor any of its
Subsidiaries has provided, or is required to provide, security to any Ironbound
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code. Neither Ironbound, its Subsidiaries, nor any
ERISA Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980. Each Ironbound Employee
Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to be qualified under Section 401(a) of the Code (a
"Ironbound Qualified Plan") has received a favorable determination letter from
the Internal Revenue Service ("IRS"), and Ironbound and its Subsidiaries are not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to Ironbound's knowledge,
threatened litigation, administrative action or proceeding relating to any
Ironbound Employee Plan. There has been no announcement or commitment by
Ironbound or any of its Subsidiaries to create an additional Ironbound Employee
Plan, or to amend any Ironbound Employee Plan, except for amendments required by
applicable law which do not materially increase the cost of such Ironbound
Employee Plan; and, except as specifically identified in Ironbound's Disclosure
Letter, Ironbound and its Subsidiaries do not have any obligations for post-
retirement or post-employment benefits under any Ironbound Employee Plan that
cannot be amended or terminated upon 60 days' notice or less without incurring
any liability thereunder, except for coverage required by Part 6 of Title I of
ERISA or Section 4980B of the Code, or similar state laws, the cost of which is
borne by the insured individuals. With respect to Ironbound or any of its
Subsidiaries, for the Employee Plans listed in Ironbound's Disclosure Letter,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or series of
payments by Ironbound or any of its Subsidiaries to any person which is an
"excess parachute payment" (as defined in Section 280G of the Code), increase or
secure (by way of a trust or other vehicle) any benefits payable under any
Ironbound Employee Plan or accelerate the time of payment or vesting of any such
benefit. With respect to each Ironbound Employee Plan, Ironbound has supplied to
RCFC a true and correct copy of (A) the annual report on the applicable form of
the Form 5500 series filed with the IRS for the most recent three plan years, if
required to be filed, (B) such Ironbound Employee Plan, including amendments
thereto, (C) each trust agreement, insurance contract or other funding
arrangement relating to such Ironbound Employee Plan, including amendments
thereto, (D) the most recent summary plan description and summary of material
modifications thereto for such Ironbound Employee Plan, if the Ironbound
Employee Plan is subject to Title I
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<PAGE>
of ERISA, and (E) the most recent determination letter issued by the IRS if such
Employee Plan is a Qualified Plan.
(n) Title to Assets. Ironbound and each of its Subsidiaries has good
---------------
and marketable title to its properties and assets (including any intellectual
property asset such as any trademark, service mark, tradename or copyright) and
property acquired in a judicial foreclosure proceeding or by way of a deed in
lieu of foreclosure or similar transfer, other than property as to which it is
lessee, in which case the related lease is valid and in full force and effect.
Each lease pursuant to which Ironbound or any of its Subsidiaries is lessor is
valid and in full force and effect and no lessee under any such lease is in
default or in violation of any provisions of any such lease. All material
tangible properties of Ironbound and each of its Subsidiaries are in a good
state of maintenance and repair, conform with all applicable ordinances,
regulations and zoning laws and are considered by Ironbound to be adequate for
the current business of Ironbound and its Subsidiaries.
(o) Compliance with Laws. Ironbound and each of its Subsidiaries has
--------------------
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, all federal, state,
local and foreign governmental or regulatory bodies that are required in order
to permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the best knowledge of Ironbound, no suspension or
cancellation of any of them is threatened. Since the date of its incorporation,
the corporate affairs of Ironbound have not been conducted in violation of any
law, ordinance, regulation, order, writ, rule, decree or approval of any federal
or state regulatory authority having jurisdiction over insured depositary
institutions or their holding companies, the Securities and Exchange Commission
(the "SEC"), the NASD or any other SRO (each, a "Governmental Entity"). The
businesses of Ironbound and its Subsidiaries are not being conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
condition to approval of any Governmental Entity.
(p) Fees. Other than financial advisory services performed for
----
Ironbound by Ostrowski & Company, Inc. pursuant to an agreement dated June 19,
1998, a true and complete copy of which has been previously delivered to RCFC,
neither Ironbound nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Ironbound or any of its Subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
(q) Environmental Matters. (i) With respect to Ironbound and each
---------------------
of its Subsidiaries:
(A) Each of Ironbound and its Subsidiaries, the Participation
Facilities (as defined herein), and, to Ironbound's knowledge, the Loan
Properties (as defined herein) are,
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<PAGE>
and have been, in substantial compliance with, and are not liable under, all
Environmental Laws (as defined herein);
(B) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
Ironbound's knowledge, threatened, before any court, governmental agency or
board or other forum against it or any of its Subsidiaries or any Participation
Facility (x) for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence of or
release (as defined herein) into the environment of any Hazardous Material (as
defined herein), whether or not occurring at or on a site owned, leased or
operated by it or any of its Subsidiaries or any Participation Facility;
(C) To Ironbound's knowledge, there is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum relating to or against any Loan Property (or Ironbound or any of its
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(D) To Ironbound's knowledge, the properties currently owned or
operated by Ironbound or any of its Subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(E) Neither Ironbound nor any of its Subsidiaries has received any
notice, demand letter, executive or administrative order, directive or request
for information from any federal, state, local or foreign governmental entity or
any third party indicating that it may be in violation of, or liable under, any
Environmental Law;
(F) To Ironbound's knowledge, there are no underground storage tanks
on, in or under any properties owned or operated by Ironbound or any of its
Subsidiaries or any Participation Facility, and no underground storage tanks
have been closed or removed from any properties owned or operated by Ironbound
or any of its Subsidiaries or any Participation Facility; and
(G) To Ironbound's knowledge, during the period of (l) Ironbound's or
any of its Subsidiaries' ownership or operation of any of their respective
current properties or (m) Ironbound's or any of its Subsidiaries' participation
in the management of any Participation Facility, there has been no contamination
by or release of Hazardous Materials in, on, under or affecting such properties.
To Ironbound's knowledge, prior to the period of (x) Ironbound's or
A-20
<PAGE>
any of its Subsidiaries' ownership or operation of any of their respective
current properties or (y) Ironbound's or any of its Subsidiaries' participation
in the management of any Participation Facility, there was no contamination by
or release of Hazardous Material in, on, under or affecting such properties.
(ii) The following definitions apply for purposes of this Section
2.3(r) and Section 2.4(r): (w) "Loan Property" means any property in which the
applicable party (or a Subsidiary of it) holds a security interest, and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property; (x) "Participation Facility" means any
facility in which the applicable party (or a Subsidiary of it) participates in
the management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (y) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
legal requirement or agreement with any governmental entity relating to (A) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety as it relates to
Hazardous Materials, or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as amended
and as now in effect. The term Environmental Law includes all federal, state
and local laws, rules, regulations or requirements relating to the protection of
the environment or health and safety, including, without limitation, (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including, but not limited to, the Hazardous and Solid Waste Amendments thereto
and Subtitle I relating to underground storage tanks), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970 as it relates to Hazardous Materials, the Federal Hazardous Substances
Transportation Act, the Emergency Planning and Community Right-To-Know Act, the
Safe Drinking Water Act, the Endangered Species Act, the National Environmental
Policy Act, the Rivers and Harbors Appropriation Act or any so-called
"Superfund" or "Superlien" law, each as amended and as now or hereafter in
effect, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Material; and (z) "Hazardous Material" means any
substance (whether solid, liquid or gas) which is or could be detrimental to
human health or safety or to the environment, currently or hereafter listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any substance containing any
A-21
<PAGE>
such substance as a component. Hazardous Material includes, without limitation,
any toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
(r) Loan Portfolio; Allowance; Asset Quality. (i) With respect to
----------------------------------------
each loan owned by Ironbound or its Subsidiaries in whole or in part (each, a
"Loan"), to the best knowledge of Ironbound:
(A) the note and the related security documents are each legal, valid
and binding obligations of the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms;
(B) neither Ironbound nor any of its Subsidiaries, nor any prior
holder of a Loan, has modified the note or any of the related security documents
in any material respect or satisfied, canceled or subordinated the note or any
of the related security documents except as otherwise disclosed by documents in
the applicable Loan file;
(C) Ironbound or a Subsidiary is the sole holder of legal and
beneficial title to each Loan (or Ironbound's applicable participation interest,
as applicable), except as otherwise referenced on the books and records of
Ironbound;
(D) the note and the related security documents, copies of which are
included in the Loan files, are true and correct copies of the documents they
purport to be and have not been suspended, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the applicable
Loan file;
(E) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a Loan,
except as otherwise referenced on the books and records of Ironbound;
(F) there is no litigation or proceeding pending or threatened
relating to the property that serves as security for a Loan that would have a
Material Adverse Effect upon the related Loan; and
(G) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable.
(ii) The allowance for possible losses reflected in Ironbound's
audited statement of condition at December 31, 1997 was, and the allowance for
possible losses shown on the balance sheets in Ironbound's Reports for periods
ending after December 31, 1997 will be,
A-22
<PAGE>
adequate, as of the dates thereof, under generally accepted accounting
principles applicable to stock banks consistently applied.
(iii) Ironbound's Disclosure Letter sets forth by category the
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of Ironbound and its
Subsidiaries that have been classified (whether regulatory or internal) as
"Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import,
and Ironbound and its Subsidiaries shall promptly after the end of any month
inform RCFC of any such classification arrived at any time after the date
hereof. The other real estate owned ("OREO") included in any non-performing
assets of Ironbound or any of its Subsidiaries is carried net of reserves at the
lower of cost or fair value, less estimated selling costs, based on current
independent appraisals or evaluations or current management appraisals or
evaluations; provided, however, that "current" shall mean within the past 12
months.
(s) Deposits. None of the deposits of Ironbound or any of its
--------
Subsidiaries is a "brokered" deposit.
(t) Accounting Matters. Neither Ironbound nor any of its Subsidiaries
------------------
or, to the best of its knowledge, any of its other affiliates has, through the
date hereof, taken or agreed to take any action that would prevent RCFC from
accounting for the business combination to be effected by the Merger as a
pooling-of-interests, and Ironbound has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(u) Antitakeover Provisions Inapplicable. Ironbound and its
------------------------------------
Subsidiaries have taken all actions required to exempt Ironbound, the Agreement,
the Merger and the Option Agreement from any provisions of an antitakeover
nature in their organization certificates and bylaws, and the provisions of any
federal or state "antitakeover," "fair price," "moratorium," "control share
acquisition" or similar laws or regulations.
(v) Material Interests of Certain Persons. Except as disclosed in
-------------------------------------
Ironbound's Proxy Statement for its 1998 Annual Meeting of Stockholders or in
Ironbound's Disclosure Letter, no officer or director of Ironbound, or any
"associate" (as such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended ("Exchange Act")) of any such officer or director, has
any material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Ironbound or
any of its Subsidiaries. No such interest has been created or modified since
the date of the last regulatory examination of Ironbound or its Subsidiaries.
(w) Insurance. Ironbound and its Subsidiaries are presently insured,
---------
and since December 31, 1995, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by Ironbound and its Subsidiaries are in full force and effect,
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<PAGE>
Ironbound and its Subsidiaries are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion.
(x) Investment Securities; Borrowings. (i) None of the investments
---------------------------------
reflected in the consolidated balance sheet of Ironbound for the year ended
December 31, 1997, and none of the investment securities held by it or any of
its Subsidiaries since December 31, 1997, is subject to any restriction
(contractual or statutory) that would materially impair the ability of the
entity holding such investment freely to dispose of such investment at any time.
(ii) Except as set forth in Ironbound's Disclosure Letter, neither
Ironbound nor any Subsidiary is a party to or has agreed to enter into an
exchange-traded or over-the-counter equity, interest rate, foreign exchange or
other swap, forward, future, option, cap, floor or collar or any other contract
that is a derivative contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that (A) are referred to generically
as "structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (B) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(iii) Set forth in Ironbound's Disclosure Letter is a true
and complete list of Ironbound's borrowed funds (excluding deposit accounts) as
of the date hereof.
(y) Indemnification. Except as provided in Ironbound's Disclosure
---------------
Letter, applicable New Jersey law, Ironbound's Employment Agreements or the
organization certificate or bylaws of Ironbound and its Subsidiaries, neither
Ironbound nor any Subsidiary is a party to any indemnification agreement with
any of its present or future directors, officers, employees, agents or other
persons who serve or served in any other capacity with any other enterprise at
the request of Ironbound (a "Covered Person"), and, except as set forth in
Ironbound's Disclosure Letter, to the best knowledge of Ironbound, there are no
claims for which any Covered Person would be entitled to indemnification under
the organization certificate or bylaws of Ironbound or any of its Subsidiaries,
under any applicable law or regulation or under any indemnification agreement.
(z) Books and Records. The books and records of Ironbound and its
-----------------
Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(aa) Corporate Documents. Ironbound has delivered to RCFC true and
-------------------
complete copies of its certificate of incorporation and bylaws and of Ironbound
Bank's organization certificate and bylaws. The minute books of Ironbound and
Ironbound Bank constitute a complete and correct record of all actions taken by
their respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of
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<PAGE>
Ironbound's Subsidiaries constitutes a complete and correct record of all
actions taken by the respective boards of directors (and each committee thereof)
and the stockholders of each such Subsidiary.
(bb) Tax Treatment of the Merger. As of the date hereof, Ironbound
---------------------------
has no knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
(cc) Beneficial Ownership of RCFC Common Stock. As of the date
-----------------------------------------
hereof, Ironbound beneficially owns no shares of RCFC Common Stock and does not
have any option, warrant or right of any kind to acquire the beneficial
ownership of any shares of RCFC Common Stock.
(dd) Year 2000 Matters. Ironbound has completed a review of its
-----------------
computer systems to identify systems that could be affected by the "Year 2000"
issue and reasonably believes it has identified all such Year 2000 problems.
Ironbound's management has developed and commenced implementation of a plan to
respond to this issue which is designed to complete any required initial changes
to its computer systems and to complete testing of those changes by December 31,
1998. Between the date of this Agreement and the Effective Time, Ironbound
shall use commercially practicable efforts to implement and/or continue to
undertake such plan. Year 2000 issues have not had, and are not reasonably
expected to have, a Material Adverse Effect on Ironbound or its Subsidiaries.
(ee) Registration Statement. The information regarding Ironbound to
----------------------
be supplied by Ironbound for inclusion in (i) the Registration Statement on Form
S-4 and/or such other form(s) as may be appropriate to be filed under the
Securities Act of 1933, as amended ("Securities Act"), with the SEC by RCFC for
the purpose of, among other things, registering the RCFC Common Stock to be
issued to Ironbound's stockholders in the Merger (as amended or supplemented
from time to time, the "Registration Statement"), or (ii) the proxy statement to
be distributed by Ironbound in connection with Ironbound's meeting of
stockholders to vote upon this Agreement (as amended or supplemented from time
to time, the "Proxy Statement," and together with the prospectus included in the
Registration Statement, as amended or supplemented from time to time, the "Proxy
Statement-Prospectus") will not, at the time such Registration Statement becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 2.4. Representations and Warranties of RCFC. Subject to
--------------------------------------
Sections 2.1 and 2.2, RCFC represents and warrants to Ironbound that, except as
specifically disclosed in RCFC's Disclosure Letter:
(a) Organization. (i) RCFC is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and is duly registered as a
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<PAGE>
savings and loan holding company under HOLA. RCFC Bank is a stock savings bank
duly organized, validly existing and in good standing under the laws of the
State of New York. Each Subsidiary of RCFC Bank is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of RCFC and its Subsidiaries has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
(ii) RCFC and each of its Subsidiaries has the requisite corporate
power and authority, and is duly qualified and is in good standing, to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iii) RCFC's Disclosure Letter sets forth all of RCFC's
Subsidiaries and all entities (whether corporations, partnerships or similar
organizations), including the corresponding percentage ownership, in which RCFC
owns, directly or indirectly, 5% or more of the ownership interests as of the
date of this Agreement and indicates for each Subsidiary, as of the such date,
its jurisdiction of organization and the jurisdiction(s) wherein it is qualified
to do business. All such Subsidiaries and ownership interests are in compliance
with all applicable laws, rules and regulations relating to direct investments
in equity ownership interests. RCFC owns, either directly or indirectly, all of
the outstanding capital stock of each of its Subsidiaries. No Subsidiary of RCFC
other than RCFC Bank is an "insured depository institution" as defined in the
FDIA and the applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by RCFC or any of its other Subsidiaries
are fully paid, nonassessable and not subject to any preemptive rights and are
owned by RCFC or a Subsidiary of RCFC free and clear of any claims, liens,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares.
(iv) The deposits of RCFC Bank are insured by the BIF and the Savings
Association Insurance Fund of the FDIC to the extent provided in the FDIA.
(b) Capital Structure. (i) The authorized capital stock of RCFC
-----------------
consists of 75,000,000 shares of RCFC Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share ("RCFC Preferred Stock"). As of the
date of this Agreement, (A) 26,423,600 shares of RCFC Common Stock were issued
and outstanding, (B) no shares of RCFC Preferred Stock were outstanding, (C) no
shares of RCFC Common Stock were reserved for issuance, except that 2,642,360
shares of RCFC Common Stock were reserved for issuance pursuant to the RCFC 1998
Stock-Based Incentive Plan and (D) no shares of RCFC Common Stock were held by
RCFC in its treasury or by its Subsidiaries. The authorized capital stock of
RCFC Bank consists of 75,000,000 shares of common stock, par value $.01 per
share, and 5,000,000 shares of preferred stock, par value $.01 per share. As of
the date of this Agreement, 1,000 shares of such common stock were outstanding,
no shares of such preferred stock were outstanding and all
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<PAGE>
outstanding shares of such common stock were, and as of the Effective Time will
be, owned by RCFC. All outstanding shares of capital stock of RCFC and RCFC Bank
are validly issued, fully paid and nonassessable and not subject to any
preemptive rights and, with respect to shares held by RCFC in its treasury or by
its Subsidiaries, are free and clear of all liens, encumbrances or restrictions
(other than those imposed by applicable federal or state securities laws) and
there are no agreements or understandings with respect to the voting or
disposition of any such shares.
(ii) No Voting Debt of RCFC is issued or outstanding.
(iii) As of the date of this Agreement, except for this
Agreement and the Option Agreement and as set forth in RCFC's Disclosure Letter,
neither RCFC nor any of its Subsidiaries has or is bound by any outstanding
options, warrants, calls, rights, convertible securities, commitments or
agreements of any character obligating RCFC or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any additional shares
of capital stock of RCFC or any of its Subsidiaries or obligating RCFC or any of
its Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, convertible security, commitment or agreement. As of the date hereof,
there are no outstanding contractual obligations of RCFC or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of RCFC or any of its Subsidiaries.
(c) Authority. Each of RCFC and RCFC Bank has the requisite
---------
corporate power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively, and subject to the receipt of all required regulatory or
governmental approvals, as contemplated by Section 5.1(b) of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and, subject to the approval of this Agreement by RCFC's
stockholders, the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate actions on the part of RCFC and
RCFC Bank. This Agreement has been duly executed and delivered by RCFC and
constitutes a valid and binding obligation of RCFC, enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, whether applied in a court of
law or a court of equity.
(d) Fairness Opinion. RCFC has received the opinion of Sandler
----------------
O'Neill & Partner, L.P., to the effect that, as of the date hereof, the Exchange
Ratio is fair, from a financial point of view, to RCFC's stockholders.
(e) No Violations. The execution, delivery and performance of this
-------------
Agreement by RCFC does not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all Requisite
Regulatory Approvals and requisite stockholder approvals, a breach or violation
of, or a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
RCFC or any of its Subsidiaries, or to which RCFC or any of its Subsidiaries (or
any of their respective properties) is subject, (ii) a breach or violation of,
or a default under, the
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<PAGE>
certificate of incorporation or bylaws of RCFC or the similar organizational
documents of any of its Subsidiaries or (iii) a breach or violation of, or a
default under (or an event which, with due notice or lapse of time or both,
would constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of RCFC or any of its Subsidiaries, under, any of the terms, conditions
or provisions of any note, bond, indenture, deed of trust, loan agreement or
other agreement, instrument or obligation to which RCFC or any of its
Subsidiaries is a party, or to which any of their respective properties or
assets may be subject; and the consummation of the transactions (including the
Bank Merger) contemplated hereby (exclusive of the effect of any changes
effected pursuant to Section 1.7) will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (x) the
approval of the holders of a majority of the outstanding shares of RCFC Common
Stock, (y) the Requisite Regulatory Approvals and (z) such approvals, consents
or waivers as are required under the federal and state securities or "blue sky"
laws in connection with the transactions contemplated by this Agreement. As of
the date hereof, the executive officers of RCFC know of no reason pertaining to
RCFC why any of the approvals referred to in this Section 2.4(e) should not be
obtained without the imposition of any material condition or restriction
described in the proviso to Section 5.1(b).
(f) Reports. (i) As of their respective dates, none of the reports
-------
or other statements filed by RCFC or RCFC Bank on or subsequent to December 31,
1997, with the SEC, the Superintendent, the FDIC and the OTS (collectively,
"RCFC's Reports"), contained, or will contain, any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each of the financial
statements of RCFC included in RCFC's Report complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by Form 10-Q of the SEC). Each of the
consolidated statements of condition contained or incorporated by reference in
RCFC's Reports (including in each case any related notes and schedules) fairly
presented, or will fairly present, as the case may be, (A) the financial
position of the entity or entities to which it relates as of its date and each
of the statements of operations, consolidated statements of cash flows and
consolidated statements of changes in stockholders' equity, contained or
incorporated by reference in RCFC's Reports (including in each case any related
notes and schedules), and (B) the results of operations, stockholders' equity
and cash flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not material
in amount or effect), in each case in accordance with GAAP, except as may be
noted therein. RCFC has made available to Ironbound a true and complete copy of
each of RCFC's Report filed with the SEC since December 31, 1997.
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<PAGE>
(ii) RCFC and each of its Subsidiaries have each timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1993 with (A) the OTS, (B) the SEC, (C) the NASD and (D) any other
SRO, and have paid all fees and assessments due and payable in connection
therewith.
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
RCFC's Reports filed on or prior to the date of this Agreement, since December
31, 1997, (i) RCFC and its Subsidiaries have not incurred any liability, except
in the ordinary course of their business consistent with past practice, (ii)
RCFC and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses and (iii) there has not been any
Material Adverse Effect with respect to RCFC.
(h) Absence of Claims. Except as set forth in RCFC's Disclosure
-----------------
Letter, no litigation, proceeding, controversy, claim or action before any court
or governmental agency is pending against RCFC or any of its Subsidiaries, and,
to the best of RCFC's knowledge, no such litigation, proceeding, controversy,
claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither RCFC nor any of its
-----------------------------
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar written
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from any Government
Regulator, or has adopted any board resolutions at the request of any Government
Regulator, nor has it been advised by any Governmental Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns required
-----
to be filed by or on behalf of RCFC or any of its Subsidiaries have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such
returns, all taxes required to be shown on returns for which extensions have
been granted and all other taxes required to be paid by RCFC or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on RCFC's balance sheet (in accordance with GAAP). For purposes of
this Section 2.4(j), the term "taxes" shall include all income, franchise, gross
receipts, real and personal property, real property transfer and gains, wage and
employment taxes. As of the date of this Agreement, there is no audit
examination, deficiency assessment, tax investigation or refund litigation with
respect to any taxes of RCFC or any of its Subsidiaries, and no claim has been
made by any authority in a jurisdiction where RCFC or any of its Subsidiaries do
not file tax returns that RCFC or any such Subsidiary is subject to taxation in
that jurisdiction. All taxes, interest, additions and penalties due with
A-29
<PAGE>
respect to completed and settled examinations or concluded litigation relating
to RCFC or any of its Subsidiaries have been paid in full or adequate provision
has been made for any such taxes on RCFC's balance sheet (in accordance with
GAAP). Except as set forth in RCFC's Disclosure Letter, RCFC and its
Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. RCFC and each of its Subsidiaries has withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party, and RCFC and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements. Neither RCFC nor any of its Subsidiaries (i) has made an
election under Section 341(f) of the Code, (ii) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount obligation as
described in Section 163(i) of the Code or any registration-required obligation
within the meaning of Section 163(f)(2) of the Code that is not in registered
form or (iii) is or has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
(k) Agreements. (i) Except for arrangements made in the ordinary
----------
course of business, and except as set forth in RCFC's Disclosure Letter, RCFC
and its Subsidiaries are not bound by any material contract (as defined in Item
601(b)(10) of Regulation S-K) to be performed after the date hereof that has not
been filed with or incorporated by reference in RCFC's Report. Except as
disclosed in RCFC's Report filed prior to the date of this Agreement, neither
RCFC nor any of its Subsidiaries is a party to an oral or written (A) consulting
agreement (other than data processing, software programming and licensing
contracts entered into in the ordinary course of business) not terminable on 60
days' or less notice, (B) agreement with any executive officer or other key
employee of RCFC or any of its Subsidiaries the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving RCFC or any of its Subsidiaries of the nature
contemplated by this Agreement, (C) agreement with respect to any employee or
director of RCFC or any of its Subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than 60 days or for the
payment of in excess of $100,000 per annum, (D) agreement or plan, including any
stock option plan, phantom stock or stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting or payment of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement or (E) agreement
containing covenants that limit the ability of RCFC or any of its Subsidiaries
to compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, RCFC (including
any successor thereof) or any of its Subsidiaries may carry on its business
(other than as may be required by law or any regulatory agency).
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<PAGE>
(ii) Except as set forth in RCFC's Disclosure Letter, neither RCFC nor
any of its Subsidiaries is in default under or in violation of any provision of
any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject.
(iii) RCFC and each of its Subsidiaries owns or possesses valid and
binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses, and neither RCFC nor any of its Subsidiaries has received any notice
of conflict with respect thereto that asserts the right of others. Each of RCFC
and its Subsidiaries has performed all the obligations required to be performed
by it and are not in default under any contract, agreement, arrangement or
commitment relating to any of the foregoing.
(l) RCFC Common Stock. The shares of RCFC Common Stock to be issued
-----------------
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and non-
assessable and subject to no preemptive rights.
(m) Labor Matters. Neither RCFC nor any of its Subsidiaries is or has
-------------
ever been a party to, or is or has ever been bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization with respect to its employees, nor is RCFC or any of its
Subsidiaries the subject of any proceeding asserting that it has committed an
unfair labor practice or seeking to compel RCFC or any of its Subsidiaries to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike, other labor dispute or organizational effort involving
RCFC or any of its Subsidiaries pending or, to RCFC's knowledge, threatened.
RCFC and its Subsidiaries are in compliance with applicable laws regarding
employment of employees and retention of independent contractors and are in
compliance with applicable employment tax laws.
(n) Employee Benefit Plans. RCFC's Disclosure Letter contains a
----------------------
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of ERISA,
incentive and welfare policies, contracts, plans and arrangements and all trust
agreements related thereto with respect to any present or former directors,
officers or other employees of RCFC or any of its Subsidiaries (hereinafter
referred to collectively as the "RCFC Employee Plans"). All of the RCFC
Employee Plans comply in all material respects with all applicable requirements
of ERISA, the Code and other applicable laws; there has occurred no "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
which is likely to result in the imposition of any penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code upon RCFC or any of its
Subsidiaries. No liability to the PBGC has been or is expected by RCFC or any
of its Subsidiaries to be incurred with respect to any RCFC Employee Plan which
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<PAGE>
is subject to Title IV of ERISA ("RCFC Pension Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by RCFC or any entity which is considered one employer with
RCFC under Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). No RCFC Pension Plan had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, as of the last day of
the end of the most recent plan year ending prior to the date hereof; the fair
market value of the assets of each RCFC Pension Plan exceeds the present value
of the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under
such RCFC Pension Plan as of the end of the most recent plan year with respect
to the respective RCFC Pension Plan ending prior to the date hereof, calculated
on the basis of the actuarial assumptions used in the most recent actuarial
valuation for such RCFC Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
RCFC Pension Plan within the 12-month period ending on the date hereof. Neither
RCFC nor any of its Subsidiaries has provided, or is required to provide,
security to any RCFC Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code. Neither RCFC, its
Subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980.
Each RCFC Employee Plan that is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) and which is intended to be qualified under Section
401(a) of the Code (an "RCFC Qualified Plan") has received a favorable
determination letter from the IRS, and RCFC and its Subsidiaries are not aware
of any circumstances likely to result in revocation of any such favorable
determination letter. Each RCFC Qualified Plan that is an "employee stock
ownership plan" (as defined in Section 4975(e)(7) of the Code) has satisfied all
of the applicable requirements of Sections 409 and 4975(e)(7) of the Code and
the regulations thereunder in all respects and any assets of any such RCFC
Qualified Plan that are not allocated to participants' individual accounts are
pledged as security for, and may be applied to satisfy, any securities
acquisition indebtedness. There is no pending or, to RCFC's knowledge,
threatened litigation, administrative action or proceeding relating to any RCFC
Employee Plan. There has been no announcement or commitment by RCFC or any of
its Subsidiaries to create an additional RCFC Employee Plan, or to amend any
RCFC Employee Plan, except for amendments required by applicable law which do
not materially increase the cost of such RCFC Employee Plan; and, except as
specifically identified in RCFC's Disclosure Letter, RCFC and its Subsidiaries
do not have any obligations for post-retirement or post-employment benefits
under any RCFC Employee Plan that cannot be amended or terminated upon 60 days'
notice or less without incurring any liability thereunder, except for coverage
required by Part 6 of Title I of ERISA or Section 4980B of the Code, or similar
state laws, the cost of which is borne by the insured individuals. With respect
to RCFC or any of its Subsidiaries, for the Employee Plans listed in RCFC's
Disclosure Letter, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
payment or series of payments by RCFC or any of its Subsidiaries to any person
which is an "excess parachute payment" (as defined in Section 280G of the Code),
increase or secure (by way of a trust or other vehicle) any benefits payable
under any RCFC Employee Plan or accelerate the time of payment or vesting of any
such benefit. With
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respect to each RCFC Employee Plan, RCFC has supplied to Ironbound a true and
correct copy of (A) the annual report on the applicable form of the Form 5500
series filed with the IRS for the most recent three plan years, if required to
be filed, (B) such RCFC Employee Plan, including amendments thereto, (C) each
trust agreement, insurance contract or other funding arrangement relating to
such RCFC Employee Plan, including amendments thereto, (D) the most recent
summary plan description and summary of material modifications thereto for such
RCFC Employee Plan, if the RCFC Employee Plan is subject to Title I of ERISA,
(E) the most recent actuarial report or valuation if such RCFC Employee Plan is
an RCFC Pension Plan and any subsequent changes to the actuarial assumptions
contained therein and (F) the most recent determination letter issued by the IRS
if such RCFC Employee Plan is a Qualified Plan.
(o) Title to Assets. RCFC and each of its Subsidiaries has good and
---------------
marketable title to its properties and assets (including any intellectual
property asset such as any trademark, service mark, tradename or copyright) and
property acquired in a judicial foreclosure proceeding or by way of a deed in
lieu of foreclosure or similar transfer, other than property as to which it is
lessee, in which case the related lease is valid and in full force and effect.
Each lease pursuant to which RCFC or any of its Subsidiaries is lessor is valid
and in full force and effect and no lessee under any such lease is in default or
in violation of any provisions of any such lease. All material tangible
properties of RCFC and each of its Subsidiaries are in a good state of
maintenance and repair, conform with all applicable ordinances, regulations and
zoning laws and are considered by RCFC to be adequate for the current business
of RCFC and its Subsidiaries.
(p) Compliance with Laws. RCFC and each of its Subsidiaries has all
--------------------
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, all federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the best knowledge of RCFC, no suspension or
cancellation of any of them is threatened. Since the date of its incorporation,
the corporate affairs of RCFC have not been conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or approval of any Governmental
Entity. The businesses of RCFC and its Subsidiaries are not being conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
condition to approval of any Governmental Entity.
(q) Fees. Other than the financial advisory services performed for
----
RCFC by Sandler O'Neill & Partners, L.P. pursuant to an agreement dated July 10,
1998, a true and complete copy of which has been previously delivered to
Ironbound, neither RCFC nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for RCFC or any of its Subsidiaries in connection with this Agreement
or the transactions contemplated hereby.
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<PAGE>
(r) Environmental Matters. With respect to RCFC and each of its
---------------------
Subsidiaries:
(i) Each of RCFC and its Subsidiaries, the Participation Facilities
and, to RCFC's knowledge, the Loan Properties are, and have been, in substantial
compliance with, and are not liable under, all Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
RCFC's knowledge, threatened, before any court, governmental agency or board or
other forum against it or any of its Subsidiaries or any Participation Facility
(x) for alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or release into
the environment of any Hazardous Material, whether or not occurring at or on a
site owned, leased or operated by it or any of its Subsidiaries or any
Participation Facility;
(iii) To RCFC's knowledge, there is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum relating to or against any Loan Property (or RCFC or any of its
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(iv) To RCFC's knowledge, the properties currently owned or operated
by RCFC or any of its Subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(v) Neither RCFC nor any of its Subsidiaries has received any notice,
demand letter, executive or administrative order, directive or request for
information from any federal, state, local or foreign governmental entity or any
third party indicating that it may be in violation of, or liable under, any
Environmental Law;
(vi) To RCFC's knowledge, there are no underground storage tanks on,
in or under any properties owned or operated by RCFC or any of its Subsidiaries
or any Participation Facility, and no underground storage tanks have been closed
or removed from any properties owned or operated by RCFC or any of its
Subsidiaries or any Participation Facility; and
(vii) To RCFC's knowledge, during the period of (l) RCFC's or any of
its Subsidiaries' ownership or operation of any of their respective current
properties or (m) RCFC's or any of its Subsidiaries' participation in the
management of any Participation Facility,
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<PAGE>
there has been no contamination by or release of Hazardous Materials in, on,
under or affecting such properties. To RCFC's knowledge, prior to the period of
(x) RCFC's or any of its Subsidiaries' ownership or operation of any of their
respective current properties or (y) RCFC's or any of its Subsidiaries'
participation in the management of any Participation Facility, there was no
contamination by or release of Hazardous Material in, on, under or affecting
such property, Participation Facility or Loan Property.
(s) Loan Portfolio; Allowance; Asset Quality. (i) With respect to
----------------------------------------
each Loan owned by RCFC or its Subsidiaries in whole or in part, to the best
knowledge of RCFC:
(A) the note and the related security documents are each legal, valid
and binding obligations of the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms;
(B) neither RCFC nor any of its Subsidiaries nor any prior holder of a
Loan has modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) RCFC or a Subsidiary is the sole holder of legal and beneficial
title to each Loan (or RCFC Bank's applicable participation interest, as
applicable); except as otherwise referenced on the books and records of RCFC;
(D) the note and the related security documents, copies of which are
included in the Loan files, are true and correct copies of the documents they
purport to be and have not been suspended, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the applicable
Loan file;
(E) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a Loan;
except as otherwise referenced on the books and records of RCFC;
(F) there is no litigation or proceeding pending or threatened,
relating to the property that serves as security for a Loan that would have a
Material Adverse Effect upon the related Loan; and
(G) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable.
(ii) The allowance for possible losses reflected in RCFC Bank's
audited statement of condition at June 30, 1997 was, and the allowance for
possible losses shown on the balance sheets in RCFC's Reports for periods ending
after June 30, 1998 will be adequate,
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<PAGE>
as of the dates thereof, under generally accepted accounting principles
applicable to stock savings banks consistently applied.
(iii) RCFC's Disclosure Letter sets forth by category the
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of RCFC and its Subsidiaries
that have been classified (whether regulatory or internal) as "Other Loans
Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss,"
"Classified," "Criticized," "Credit Risk Assets," "Concerned Loans" (in the
latter two cases, to the extent available) or words of similar import, and RCFC
and its Subsidiaries shall promptly after the end of any month inform Ironbound
of any such classification arrived at any time after the date hereof. The OREO
included in any non-performing assets of RCFC or any of its Subsidiaries is
carried net of reserves at the lower of cost or fair value, less estimated
selling costs, based on current independent appraisals or evaluations or current
management appraisals or evaluations; provided, however, that "current" shall
mean within the past 12 months.
(t) Accounting Matters. Neither RCFC nor any of its Subsidiaries or,
------------------
to the best of its knowledge, any of its other affiliates has, through the date
hereof, taken or agreed to take any action that would prevent RCFC from
accounting for the business combination to be effected by the Merger as a
pooling-of-interests, and RCFC has no knowledge of any fact or circumstance that
would prevent such accounting treatment.
(u) Investment Securities; Borrowing. (i) Except for investments in
--------------------------------
FHLB Stock and pledges to secure FHLB borrowings and reverse repurchase
agreements entered into in arms-length transactions pursuant to normal
commercial terms and conditions and entered into in the ordinary course of
business and restrictions that exist for securities to be classified as "held to
maturity," none of the investments reflected in the balance sheet of RCFC Bank
for the year ended June 30, 1997, and none of the investment securities held by
RCFC or any of its Subsidiaries since June 30, 1997 is subject to any
restriction (contractual or statutory) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
(ii) Except as set forth in RCFC's Disclosure Letter, neither RCFC nor
any Subsidiary is a party to or has agreed to enter into any Derivatives
Contract or owns securities that (A) are referred to generically as "structured
notes," "high risk mortgage derivatives," "capped floating rate notes" or
"capped floating rate mortgage derivatives" or (B) are likely to have changes in
value as a result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes,
except for those Derivatives Contracts and other instruments legally purchased
or entered into in the ordinary course of business, consistent with safe and
sound banking practices and regulatory guidance, and listed (as of the date
hereof) in RCFC's Disclosure Letter or disclosed in RCFC's Report filed on or
prior to the date hereof.
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<PAGE>
(iii) Set forth in RCFC's Disclosure Letter is a true and complete
list of RCFC's borrowed funds (excluding deposit accounts) as of the date
hereof.
(v) Registration Statement. The information regarding RCFC to be
----------------------
supplied by RCFC for inclusion in (i) the Registration Statement or (ii) the
Proxy Statement will not, at the time such Registration Statement becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(w) Books and Records. The books and records of RCFC and its
-----------------
Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(x) Corporate Documents. RCFC has delivered to Ironbound true and
-------------------
complete copies of its organization certificate and bylaws and of RCFC Bank's
organization certificate and bylaws. The minute books of RCFC and RCFC Bank
constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of RCFC's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards of
directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(y) Beneficial Ownership of Ironbound Common Stock. As of the date
----------------------------------------------
hereof, RCFC beneficially owns no shares of Ironbound Common Stock and, other
than as contemplated by the Option Agreement, does not have any option, warrant
or right of any kind to acquire the beneficial ownership of any shares of
Ironbound Common Stock.
(z) Tax Treatment of the Merger. As of the date hereof, RCFC has no
---------------------------
knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
(aa) Year 2000 Matters. RCFC has completed a review of its computer
-----------------
systems to identify systems that could be affected by the "Year 2000" issue and
reasonably believes it has identified all Year 2000 problems. RCFC's management
has developed and commenced implementation of a plan which is designed to
complete any required initial changes to its computer systems and to complete
testing of those changes by December 31, 1998. Between the date of this
Agreement and the Effective Time, RCFC shall use commercially practicable
efforts to implement and/or continue to undertake such plan. Year 2000 issues
have not had, and are not reasonably expected to have, a Material Adverse Effect
on RCFC or its Subsidiaries.
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<PAGE>
(bb) Deposits. None of the deposits of RCFC or any of its Subsidiaries is a
--------
"brokered deposit."
ARTICLE III
CONDUCT PENDING THE MERGER
--------------------------
Section 3.1. Conduct of Ironbound's Business Prior to the Effective
------------------------------------------------------
Time. Except as expressly provided in this Agreement, during the period from the
- ----
date of this Agreement to the Effective Time, Ironbound shall, and shall cause
its Subsidiaries to, use commercially reasonable efforts to (i) conduct its
business in the regular, ordinary and usual course consistent with past
practice; (ii) maintain and preserve intact its business organization,
properties, leases, employees and advantageous business relationships and retain
the services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of Ironbound or RCFC to perform their
respective covenants and agreements on a timely basis under this Agreement, (iv)
take no action which would adversely affect or delay the ability of Ironbound,
Ironbound Bank, RCFC or RCFC Bank to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transactions contemplated
hereby or which would reasonably be expected to result in any such approvals,
consents or waivers containing any material condition or restriction, and (v)
take no action that results in or is reasonably likely to have a Material
Adverse Effect on Ironbound or Ironbound Bank.
Section 3.2. Forbearance by Ironbound. Without limiting the
------------------------
covenants set forth in Section 3.1 hereof, except as otherwise provided in this
Agreement and except to the extent required by law or regulation or any
Government Regulators, during the period from the date of this Agreement to the
Effective Time, Ironbound shall not, and shall not permit any of its
Subsidiaries to, without the prior consent of RCFC, which consent shall not be
unreasonably withheld:
(a) change any provisions of the certificate of incorporation or
bylaws of Ironbound or the similar governing documents of its Subsidiaries;
(b) 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
Ironbound except pursuant to the exercise of stock options or warrants
outstanding as of the date of this Agreement in the ordinary course of business
and consistent with past practice;
(c) 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, other than
the $0.05 regular quarterly cash dividend payable by Ironbound. As promptly as
practicable following the date of this Agreement, the Board of Directors of
Ironbound shall cause its regular quarterly dividend record dates and payment
dates to be the
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<PAGE>
same as RCFC's regular quarterly dividend record dates and payments dates for
RCFC Common Stock, and Ironbound shall not thereafter change its regular
dividend payment dates and record dates. Nothing contained in this Section
3.2(c) or in any other Section of this Agreement shall be construed to permit
holders of shares of Ironbound Common Stock to receive two dividends from either
Ironbound or from Ironbound and RCFC in any one quarter. Subject to applicable
regulatory restrictions, if any, Ironbound Bank may pay a cash dividend that is,
in the aggregate, sufficient to fund any dividend by Ironbound permitted
hereunder;
(d) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect, 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 Ironbound or cancel, release or assign any
indebtedness of any such individual, corporation or other entity, except
pursuant to contracts or agreements in force at the date of this Agreement and
which have been disclosed to RCFC;
(e) except to the extent required by law or as disclosed in Section
3.2(e) of Ironbound's Disclosure Letter or specifically provided for elsewhere
herein, 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 that do not cause the annualized compensation of any of Ironbound's
non-officer employees following such increase to exceed by more than 5% the
total annual compensation expenses of Ironbound with respect to such person for
the twelve month period ended March 31, 1998 and other than promotions of non-
officer employees as a result of enhanced job classification and duties, made in
the ordinary course of business which results in an increase in the compensation
thereof so long as such increase does not cause the annual rate of such
individual's compensation to increase by more than 10% of such person's
compensation at March 31, 1998; pay, unless approved in advance by RCFC, 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 Ironbound Employee Plan (as defined in Section 2.3(m)) with or
for the benefit of any employee or director; voluntarily accelerate the vesting
of any stock options or other compensation or benefit; make any discretionary
continuation to any Employee Plan; hire any employee with an annual total
compensation payment in excess of $35,000 or enter into any employment contract;
terminate or increase the costs to Ironbound or any Subsidiary of any Employee
Plan;
(f) except as contemplated by Section 4.2, change its method of
accounting as in effect at June 30, 1997, except as required by changes in GAAP
as concurred in by Ironbound's independent auditors;
(g) settle any claim, action or proceeding involving any liability of
Ironbound or any of its Subsidiaries for money damages in excess of $25,000 or
impose material restrictions upon the operations of Ironbound or any of its
Subsidiaries;
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<PAGE>
(h) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, in each case which are material,
individually or in the aggregate, to Ironbound, except in satisfaction of debts
previously contracted;
(i) except pursuant to commitments existing at the date hereof which
have previously been disclosed to RCFC, 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;
(j) 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 disclosed in the Ironbound Disclosure Schedule;
(k) take any action that would prevent or impede the Merger from
qualifying (A) for pooling-of-interests accounting treatment, or (B) as a tax-
free reorganization under the Code;
(l) 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 Ironbound's portfolio made in accordance with Section 3.2(m), 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;
(m) 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 FHLB, in each case that are purchased in the ordinary
course of business consistent with past practice;
(n) 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 covered by Section 3.2(o);
(o) settle any claim, action or proceeding involving any liability of
Ironbound or any of its Subsidiaries for money damages in excess of $25,000 or
material restrictions upon the operations of Ironbound or any of its
Subsidiaries;
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<PAGE>
(p) make, grant or purchase any loan or commitment to lend in excess
of $500,000 to any individual borrower, unless such loan is fully secured by
real estate or liquid collateral and conforms in all material respects with the
Bank's existing loan policy. The Bank is also permitted to renew currently
outstanding loans or amounts above $500,000 provided the loan has a satisfactory
payment history and the renewal is not in excess of the original loan principal
amount.
(q) incur any additional borrowings beyond those set forth in the
Ironbound Disclosures Schedule 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 Ironbound or any Subsidiary in effect at
the date hereof or in connection with borrowings or reverse repurchase
agreements permitted hereunder. Deposits shall not be deemed to be borrowings
within the meaning of this paragraph;
(r) make any capital expenditures in excess of $50,000 per expenditure
from the date of this Agreement until the Effective Date other than pursuant to
binding commitments existing on the date hereof disclosed in the Ironbound
Disclosure Schedule, other than expenditures necessary to maintain existing
assets in good repair or to make payment of necessary taxes;
(s) organize, capitalize, lend to or otherwise invest in any
Subsidiary, or invest in or acquire any equity or voting interest in any firm,
corporation or business enterprise (other than securities of the FHLB that are
purchased in the ordinary course of business consistent with past practice);
(t) elect to the Board of Directors of Ironbound or, except as
disclosed in Ironbound's Disclosure Letter, to any office any person who is not
a member of the Board of Directors of Ironbound or an officer of Ironbound as of
the date of this Agreement;
(u) accept any proposed deposits by any municipality or government
agency the terms of which exceed 90 days; or
(v) agree or make any commitment to take any action that is prohibited
by this Section 3.2.
In the event that RCFC does not respond in writing to Ironbound within
three business days of receipt by RCFC of a written request for Ironbound to
engage in any of the actions for which RCFC's prior written consent is required
pursuant to this Section 3.2, RCFC shall be deemed to have consented to such
action. Any request by Ironbound or response thereto by RCFC shall be made in
accordance with the notice provisions of Section 8.7, shall note that it is a
request pursuant to this Section 3.2 and shall state that a failure to respond
within three business days shall constitute consent.
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<PAGE>
Section 3.3. Conduct of RCFC's Business Prior to the Effective Time.
------------------------------------------------------
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, RCFC shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to (i) conduct its
business in the regular, ordinary and usual course consistent with past
practice; (ii) maintain and preserve intact its business organization,
properties, leases, employees and advantageous business relationships and retain
the services of its officers and key employees, (iii) take no action which would
materially adversely affect or delay the ability of Ironbound or RCFC to perform
their respective covenants and agreements on a timely basis under this
Agreement, (iv) take no action which would adversely affect or delay the ability
of Ironbound, RCFC, Ironbound Bank or RCFC Bank to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or which would reasonably be expected to result
in any such approvals, consents or waivers containing any material condition or
restriction, and (v) take no action that results in or is reasonably likely to
have a Material Adverse Effect on RCFC.
ARTICLE IV
COVENANTS
---------
Section 4.1. Acquisition Proposals. From and after the date hereof
---------------------
until the termination of this Agreement, neither Ironbound or Ironbound Bank,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates (including, without limitation, any investment banker,
attorney or accountant retained by Ironbound or any of its subsidiaries), will,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to 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, and
Ironbound shall notify RCFC 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 or any such officer,
director, employee, investment banker, financial advisor, attorney, accountant
or other representative may receive relating to any of such matters and if such
inquiry or proposal is in writing, Ironbound shall deliver to RCFC a copy of
such inquiry or proposal promptly; provided, however, that nothing contained in
this Section 4.1 shall prohibit the Board of Directors of Ironbound from (i)
furnishing information to, or entering into discussions or negotiations with any
person or entity that makes an unsolicited written, bona fide proposal, to
acquire Ironbound 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 Board of Directors of Ironbound receives a written
opinion from its independent financial advisor that such proposal may be
superior to the Merger from a
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<PAGE>
financial point-of-view to Ironbound's stockholders, (B) the Board of Directors
of Ironbound, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for the Board of Directors of Ironbound 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, Ironbound (x) provides reasonable notice to RCFC to
the effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity and (y) receives from such person or
entity an executed confidentiality agreement in reasonably customary form, (ii)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer or (iii) failing to make or withdrawing or modifying
its recommendation and entering into a Superior Proposal if there exists a
Superior Proposal and the Board of Directors of Ironbound, after consultation
with and based upon the written advice of independent legal counsel, determines
in good faith that such action is necessary for the Board of Directors of
Ironbound to comply with its fiduciary duties to stockholders under applicable
law. For purposes of this Agreement, "Acquisition Proposal" shall mean any of
the following (other than the transactions contemplated hereunder) involving
Ironbound or any of its subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more
of the assets of Ironbound or Ironbound Bank, taken as a whole, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for 10% or more of the outstanding shares of capital stock of Ironbound or the
filing of a registration statement under the Securities Act in connection
therewith; or (iv) 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.
Section 4.2. Certain Policies of Ironbound.
-----------------------------
(a) At the request of RCFC, Ironbound shall cause Ironbound Bank to
modify and change its loan, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) and investment
and asset/liability management policies and practices after the date on which
all Requisite Regulatory Approvals and stockholder approvals are received, and
after receipt of written confirmation from RCFC that it is not aware of any fact
or circumstance that would prevent completion of the Merger, and prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of RCFC Bank; provided, however, that Ironbound shall not be required to
take such action more than five business days prior to the Effective Date; and
provided, further, that such policies and procedures are not prohibited by GAAP
or any applicable laws and regulations.
(b) Ironbound's representations, warranties and covenants contained in
this Agreement shall not be deemed to be untrue or breached in any respect for
any purpose as a consequence of any modifications or changes undertaken solely
on account of this Section 4.2. RCFC agrees to hold harmless, indemnify and
defend Ironbound and its Subsidiaries, and their
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<PAGE>
respective directors, officers and employees, for any loss, claim, liability or
other damage caused by or resulting from compliance with this Section 4.2.
Section 4.3. Access and Information.
----------------------
(a) Upon reasonable notice, Ironbound and RCFC shall (and shall cause
their respective Subsidiaries to) afford to the other and their respective
representatives (including, without limitation, directors, officers and
employees of such party and its affiliates and counsel, accountants and other
professionals retained by such party) such reasonable access during normal
business hours throughout the period prior to the Effective Time to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
either party may reasonably request; provided, however, that no investigation
pursuant to this Section 4.3 shall affect or be deemed to modify any
representation or warranty made herein. In furtherance, and not in limitation
of the foregoing, Ironbound shall make available to RCFC all information
necessary or appropriate for the preparation and filing of all real property and
real estate transfer tax returns and reports required by reason of the Merger or
the Bank Merger. RCFC and Ironbound will not, and will cause their respective
representatives not to, use any information obtained pursuant to this Section
4.3 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of applicable law,
each of RCFC and Ironbound will keep confidential, and will cause their
respective representatives to keep confidential, all information and documents
obtained pursuant to this Section 4.3 unless such information (i) was already
known to such party or an affiliate of such party, other than pursuant to a
confidentiality agreement or other confidential relationship, (ii) becomes
available to such party or an affiliate of such party from other sources not
known by such party to be bound by a confidentiality agreement or other
obligation of secrecy, (iii) is disclosed with the prior written approval of the
other party or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto (or an
affiliate of any party hereto) to be returned to the party that furnished the
same.
(b) During the period of time beginning on the day application
materials for the Bank Merger are initially filed with the OTS, the FDIC, the
NYBD and the NJBD (but in no event earlier than 30 days prior to the Effective
Time) and continuing to the Effective Time, including weekends and holidays,
Ironbound shall cause Ironbound Bank to provide RCFC, RCFC Bank and their
authorized agents and representatives full access to Ironbound Bank's offices
after normal business hours for the purpose of installing necessary wiring and
equipment (at RCFC's expense) to be utilized by RCFC Bank after the Effective
Time; provided, that:
(i) reasonable advance notice of each entry shall be given to
Ironbound Bank and Ironbound Bank approves of each entry, which approval shall
not be unreasonably withheld;
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<PAGE>
(ii) Ironbound Bank shall have the right to have its employees or
contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be done in a
manner that will not interfere with Ironbound Bank's business conducted at any
affected branch offices;
(iv) all such work shall be done in compliance with all applicable
laws and government regulations, and RCFC Bank shall be responsible for the
procurement, at RCFC Bank's expense, of all required governmental or
administrative permits and approvals;
(v) RCFC Bank shall maintain appropriate insurance satisfactory to
Ironbound Bank in connection with any work done by RCFC Bank's agents and
representatives pursuant to this Section 4.3;
(vi) RCFC Bank shall reimburse Ironbound Bank for any material out-of-
pocket costs or expenses incurred by Ironbound Bank in connection with this
undertaking; and
(vii) in the event this Agreement is terminated in accordance
with Article VI hereof, RCFC Bank, within a reasonable time period and at its
sole cost and expense, will restore such offices to their condition prior to the
commencement of any such installation.
Section 4.4. Certain Filings, Consents and Arrangements. RCFC and
------------------------------------------
Ironbound shall (a) as soon as practicable (and in any event within 45 days
after the date hereof) make, or cause to be made, any filings and applications
and provide any notices required to be filed or provided in order to obtain all
approvals, consents and waivers of governmental authorities and third parties
necessary or appropriate for the consummation of the transactions contemplated
hereby; (b) cooperate with one another in promptly (i) determining what filings
and notices are required to be made or approvals, consents or waivers are
required to be obtained under any relevant federal or state law or regulation or
under any relevant agreement or other document and (ii) making any such filings
and notices, furnishing information required in connection therewith and seeking
timely to obtain any such approvals, consents or waivers; and (c) deliver to the
other copies of the publicly available portions of all such filings, notices and
applications promptly after they are filed.
Section 4.5. Antitakeover Provisions. Ironbound and its
-----------------------
Subsidiaries shall take all steps required by any relevant federal or state law
or regulation or under any relevant agreement or other document (i) to exempt or
continue to exempt RCFC, the Agreement, the Merger, the Bank Merger and the
Option Agreement from any provisions of an antitakeover nature in Ironbound's or
its Subsidiaries' organization certificates and bylaws and the provisions of any
federal or state antitakeover laws, and (ii) upon the request of RCFC, to assist
in any challenge to the applicability to the Agreement, the Merger, the Bank
Merger or the Option Agreement of any federal or state antitakeover laws.
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<PAGE>
Section 4.6. Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including the Bank
Merger, as expeditiously as possible, including using efforts to obtain all
necessary actions or non-actions, extensions, waivers, consents and approvals
from all applicable governmental entities, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release announcing this
---------
Agreement shall be a joint press release and thereafter Ironbound and RCFC shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the Merger and any other transaction contemplated
hereby and in making any filings with any governmental entity or with any
national securities exchange with respect thereto.
Section 4.8. Stockholders Meeting. Ironbound shall take all action
--------------------
necessary, in accordance with applicable law and its corporate documents, to
convene a meeting of its stockholders (the "Stockholder Meeting") as promptly as
practicable for the purpose of considering and voting on approval and adoption
of the transactions provided for in this Agreement. Except to the extent
legally required for the discharge by the Board of Directors of its fiduciary
duties as advised in writing by such Board's counsel, the Board of Directors of
Ironbound shall (a) recommend at its Stockholder Meeting that the stockholders
vote in favor of and approve the transactions provided for in this Agreement and
(b) use its best efforts to solicit such approvals.
Section 4.9. Proxy Statements; Comfort Letters. (i) As soon as
---------------------------------
practicable after the date hereof, RCFC and Ironbound shall cooperate with
respect to the preparation of a Proxy Statement-Prospectus for the purpose of
taking stockholder action on the Merger and this Agreement and file the Proxy
Statement-Prospectus with the SEC and the FDIC, respond to comments of the staff
of the SEC and the FDIC and, promptly after the Registration Statement is
declared effective by the SEC and the FDIC, mail the Proxy Statement-Prospectus
to the respective holders of record (as of the applicable record date) of shares
of voting stock of each of Ironbound and RCFC. RCFC and Ironbound each
represents and covenants to the other that the Proxy Statement-Prospectus, and
any amendment or supplement thereto, with respect to the information pertaining
to it or its Subsidiaries at the date of mailing to its stockholders and the
date of its Stockholder Meeting will be in compliance with the Exchange Act and
all relevant rules and regulations of the SEC and the FDIC and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
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(ii) RCFC shall cause Ernst & Young LLP, its independent public
accounting firm, to deliver to Ironbound, and Ironbound shall cause Deloitte &
Touche LLP, its independent public accounting firm, to deliver to RCFC and to
its officers and directors who sign the Registration Statement for this
transaction, a "comfort letter" or "agreed upon procedures" letter, in the form
customarily issued by such accountants at such time in transactions of this
type, dated (a) the date of the mailing of the Proxy Statement-Prospectus for
the Stockholders Meeting of Ironbound and the date of mailing of the Proxy
Statement for the Stockholders meeting of RCFC, respectively, and (b) a date not
earlier than five business days preceding the date of the Closing (as defined in
Section 7.1).
Section 4.10. Registration of RCFC Common Stock.
---------------------------------
(a) RCFC shall, as promptly as practicable following the preparation
thereof, file the Registration Statement (including any pre-effective or post-
effective amendments or supplements thereto) with the SEC under the Securities
Act in connection with the transactions contemplated by this Agreement, and RCFC
and Ironbound shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing. RCFC will advise Ironbound promptly after RCFC receives
notice of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the shares of capital stock issuable pursuant
to the Registration Statement, or the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information. RCFC will provide
Ironbound with as many copies of such Registration Statement and all amendments
thereto promptly upon the filing thereof as Ironbound may reasonably request.
(b) RCFC shall use its best efforts to obtain, prior to the effective
date of the Registration Statement, all necessary state securities laws or "blue
sky" permits and approvals required to carry out the transactions contemplated
by this Agreement.
(c) RCFC shall use its best efforts to list, prior to the Effective
Time, on the Nasdaq National Market, or on such other exchange as RCFC Common
Stock shall then be trading, subject only to official notice of issuance, the
shares of RCFC Common Stock to be issued by RCFC in exchange for the shares of
Ironbound Common Stock.
Section 4.11. Affiliate Letters. Promptly, but in any event within
-----------------
two weeks after the execution and delivery of this Agreement, Ironbound shall
deliver to RCFC a letter identifying all persons who, to the knowledge of
Ironbound, may be deemed to be "affiliates" of Ironbound under Rule 145 of the
Securities Act and the pooling-of-interests accounting rules, including, without
limitation, all directors and executive officers of Ironbound. Within two weeks
after delivery of such letter, Ironbound shall deliver executed letter
agreements, each substantially in the form attached hereto as Exhibit A,
executed by each such person so identified as an affiliate of Ironbound agreeing
(i) to comply with Rule 145, (ii) to refrain from transferring
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shares as required by the pooling-of-interests accounting rules and (iii) to be
present in person or by proxy and vote in favor of the Merger at Ironbound
Stockholders Meeting. Within two weeks after the date hereof, RCFC shall cause
its directors and executive officers to enter into letter agreements, in the
form attached hereto as Exhibit C, with RCFC concerning the pooling-of-interests
accounting rules.
Section 4.12. Notification of Certain Matters. Each party shall
-------------------------------
give prompt notice to the others of: (a) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Event. Each of Ironbound and
RCFC shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with any of the transactions contemplated by
this Agreement.
Section 4.13. Employees, Directors and Officers.
---------------------------------
(a) All persons who are employees of Ironbound Bank immediately prior
to the Effective Time (Ironbound's Employees) and whose employment is not
specifically terminated at or prior to the Effective Time (a "Continuing
Employee") shall, at the Effective Time, become employees of RCFC or RCFC Bank,
respectively; provided, however, that in no event shall any of Ironbound's
Employees be officers of RCFC or RCFC Bank, or have or exercise any power or
duty conferred upon such an officer, unless and until duly elected or appointed
to such position in accordance with the bylaws of RCFC or RCFC Bank. All of
Ironbound's Employees who remain following the Effective Date shall be employed
at the will of RCFC or RCFC Bank. No contractual right to employment shall
inure to such employees because of this Agreement. Subject to paragraph (e) of
this Section 4.13, no employee of Ironbound will become a contractual employee
of RCFC or RCFC Bank unless such contract is in writing and executed by the
President or Chief Executive Officer of RCFC or RCFC Bank.
(b) Except as provided in paragraph (c) of this Section 4.13,
appropriate steps shall be taken to terminate all Ironbound Employee Plans as of
the Effective Time or as promptly as practical thereafter. Except as provided
in paragraph (c) of this Section 4.13, immediately following the Effective Time,
each Continuing Employee shall be eligible to participate in RCFC Employee
Plans, on the same basis as and subject as are applicable to any newly-hired
employee of RCFC or RCFC Bank (it being understood that inclusion of Continuing
Employee in RCFC Employee Plans may occur at different times with respect to
different plans); provided, however, that with respect to each RCFC Employee
Plan, other than the Richmond County Savings Bank Employee Stock Ownership Plan
(the "RCFC Bank ESOP") and the Retirement Plan of
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Richmond County Savings Bank in RSI Trust (the "RCFC Bank Retirement Plan"), for
purposes of determining eligibility to participate, vesting, and entitlement to
benefits, service with Ironbound or Ironbound Bank shall be treated as service
with RCFC or RCFC Bank; provided further however, that such service shall not be
recognized to the extent such recognition would result in a duplication of
benefits. Such service shall also apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the application of any
preexisting condition limitation with respect to any RCFC or RCFC Bank welfare
benefit plan. For purposes of determining eligibility to participate, vesting,
and entitlement to benefits (including accrual of benefits) under the RCFC Bank
ESOP or RCFC Bank Retirement Plan, Continuing Employees shall be treated as
newly-hired employees of RCFC or RCFC Bank as of the Effective Date and credit
for service shall begin accruing as of that date.
(c) As of the Effective Time, each Ironbound Employee who is a
participant in the Ironbound 401(k) Plan (the "Ironbound 401(k) Plan") shall
become fully vested in his or her account balance in the Ironbound 401(k) Plan
and the Ironbound 401(k) Plan will either be merged into the Richmond County
Savings Bank 401(k) Savings Plan (the "RCFC Bank 401(k) Plan") effective as of a
date following the Effective Time selected by RCFC Bank or, if so elected by
RCFC Bank, terminated immediately prior to, on, or after the Effective Time.
The determination as to whether the Ironbound Savings Plan shall be terminated
or merged into the RCFC Bank 401(k) Plan shall be made by RCFC Bank. Effective
as of the date of the merger of the Ironbound 401(k) Plan into the RCFC 401(k)
Plan or the termination of the Ironbound 401(k) Plan (or the Effective Time, if
subsequent to such termination), Ironbound Employees who are then participating
in the Ironbound 401(k) Plan shall become participants in the RCFC Bank 401(k)
Plan.
(d) RCFC agrees to honor existing employment agreements, including the
change in control provisions of such agreements, between Ironbound and Ironbound
Bank and certain employees, stock option plans and restricted stock plans, and
other benefit plans as described in Section 4.13 (collectively "Employment
Agreements") and to the payment of benefits by Ironbound as of the Effective
Time or earlier as agreed to by Ironbound and RCFC under such agreements and
plans as such amounts are calculated and disclosed on Disclosure Schedule
4.13(d). Payments under the Employment Agreements shall be made by Ironbound,
as set forth in the Ironbound Disclosure Letter, immediately prior to the
Effective Time .
(e) At the Effective Time, RCFC Bank shall enter into an employment
agreement with Michael J. Gagliardi and Thomas Lupo, substantially in the form
attached hereto as Exhibit D.
Section 4.14. Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) From and after the Effective Time through the third anniversary of
the Effective Date, RCFC agrees to indemnify and hold harmless each present and
former director and officer of Ironbound and its Subsidiaries and each officer
or employee of Ironbound and its
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Subsidiaries that is serving or has served as a director or trustee of another
entity expressly at Ironbound's request or direction (each, an "Indemnified
Party"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement), whether asserted or
claimed prior to, at or after the Effective Time, and to advance any such Costs
to each Indemnified Party as they are from time to time incurred, in each case
to the fullest extent such Indemnified Party would have been indemnified as a
director, officer or employee of Ironbound and its Subsidiaries and as then
permitted under applicable law.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.14(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify RCFC thereof, but the failure to so notify
shall not relieve RCFC of any liability it may have hereunder to such
Indemnified Party if such failure does not materially and substantially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation, (i) RCFC shall have the right to assume the defense
thereof with counsel reasonably acceptable to the Indemnified Party and RCFC
shall not be liable to such Indemnified Party for any legal expenses of other
counsel subsequently incurred by such Indemnified Party in connection with the
defense thereof, except that if RCFC does not elect to assume such defense
within a reasonable time or counsel for the Indemnified Party at any time
advises that there are issues which raise conflicts of interest between RCFC and
the Indemnified Party (and counsel for RCFC does not disagree), the Indemnified
Party may retain counsel satisfactory to such Indemnified Party, and RCFC shall
remain responsible for the reasonable fees and expenses of such counsel as set
forth above, to be paid promptly as statements therefor are received; provided,
however, that RCFC shall be obligated pursuant to this paragraph (b) to pay for
only one firm of counsel for all Indemnified Parties in any one jurisdiction
with respect to any given claim, action, suit, proceeding or investigation
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest; (ii) the Indemnified Party will reasonably
cooperate in the defense of any such matter; and (iii) RCFC shall not be liable
for any settlement effected by an Indemnified Party without its prior written
consent, which consent may not be withheld unless such settlement is
unreasonable in light of such claims, actions, suits, proceedings or
investigations against, or defenses available to, such Indemnified Party.
(c) RCFC shall pay all reasonable Costs, including attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 4.14 to the fullest
extent permitted under applicable law. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such Indemnified Party may
have under applicable law.
Section 4.15. Tax-Free Reorganization Treatment. Prior to the
---------------------------------
Effective Time, neither RCFC nor Ironbound shall intentionally take, fail to
take, or cause to be taken or not
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taken, or cause or permit any of their respective Subsidiaries to take, fail to
take, or cause to be taken or not taken, any action within its control that
would disqualify the Merger as a reorganization within the meaning of Section
368(a) of the Code. Subsequent to the Effective Time, RCFC shall not take any
action within its control that would disqualify the Merger as a pooling-of-
interests for accounting purposes or as a reorganization under the Code.
Section 4.16. Savings and Loan Holding Company Structure. If
------------------------------------------
requested by RCFC in order to facilitate the transactions contemplated in this
Agreement and assuming all other material conditions have been met, Ironbound
will take such steps as are necessary to become a savings and loan holding
company pursuant to HOLA, assuming Ironbound so qualifies.
Section 4.17. Divisional Board. RCFC shall, promptly following the
----------------
Effective Time, cause all of the members of Ironbound's Board of Directors as of
the date of this Agreement, who are willing to so serve, to be elected to or
appointed as members of Ironbound's divisional board ("Divisional Board"), the
function of which shall be to advise RCFC with respect to deposit and lending
activities in Ironbound's market area and to maintain and develop customer
relationships. The members of the Board who are willing to so serve shall be
elected to serve a term of three years. Beginning immediately after the
Effective Time, each non-employee member of the Divisional Board (except the
Chairman of the Divisional Board) shall receive an annual retainer fee of
$5,000, plus an attendance fee of $750 for each Divisional Board meeting
attended, and the Chairman of the Divisional Board shall receive an annual
retainer fee of $10,000 plus an attendance fee of $750 for each Divisional Board
meeting attended, and each non-employee member of the Divisional Board shall be
prohibited from competing directly with RCFC for the duration of the term for
which they were elected or appointed. Such Divisional Board annual retainer fee
shall be payable in quarterly installments or in one lump sum at any time in
advance at the option of RCFC.
ARTICLE V
CONDITIONS TO CONSUMMATION
--------------------------
Section 5.1. Conditions to Each Party's Obligations. The respective
-------------- --------------------------------------
obligations of each party to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be subject to the satisfaction
of the following conditions:
(a) this Agreement shall have been approved by the requisite vote of
Ironbound's stockholders in accordance with applicable laws and regulations;
(b) the Requisite Regulatory Approvals and any necessary regulatory
consents and waivers with respect to this Agreement and the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect, and all statutory waiting periods shall
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have expired; and all other consents, waivers and approvals of any third parties
which are necessary to permit the consummation of the Merger and the other
transactions contemplated hereby shall have been obtained or made except for
those the failure to obtain would not have a Material Adverse Effect (i) on
Ironbound and its Subsidiaries taken as a whole or (ii) on RCFC and its
Subsidiaries taken as a whole. None of the approvals or waivers referred to
herein shall contain any term or condition which would have a Material Adverse
Effect on (x) Ironbound and its Subsidiaries taken as a whole or (y) RCFC and
its Subsidiaries taken as a whole;
(c) no party hereto 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 Merger, the Bank Merger or any other
transactions contemplated by this Agreement;
(d) no statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits. restricts or makes illegal consummation of the Merger, the Bank
Merger or any other transactions contemplated by this Agreement;
(e) 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; all required approvals by state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained;
(f) [Reserved]
(g) RCFC shall have received the letter agreement referred to in
Section 4.11 from each affiliate of Ironbound; and
(h) RCFC shall have caused to be listed on the Nasdaq National Market,
or on such other market on which shares of RCFC Common Stock shall then be
trading, subject only to official notice of issuance, the shares of RCFC Common
Stock to be issued by RCFC in exchange for the shares of Ironbound Common Stock.
Section 5.2. Conditions to the Obligations of RCFC and RCFC Bank.
---------------------------------------------------
The obligations of RCFC and RCFC Bank to effect the Merger, the Bank Merger and
any other transactions contemplated by this Agreement shall be further subject
to the satisfaction of the following additional conditions, any one or more of
which may be waived by RCFC:
(a) each of the obligations of Ironbound and Ironbound Bank,
respectively, required to be performed by it at or prior to the Closing pursuant
to the terms of this Agreement shall have been duly performed and complied with
in all material respects and the representations and warranties of Ironbound and
Ironbound Bank contained in this Agreement shall be true and correct, subject to
Sections 2.1 and 2.2, as of the date of this Agreement and as of the Effective
Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date). RCFC
shall have received a certificate to the
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foregoing effect signed by the chief executive officer and the chief financial
or principal accounting officer of Ironbound;
(b) all action required to be taken by, or on the part of, Ironbound
and Ironbound Bank to authorize the execution, delivery and performance of this
Agreement and the consummation by Ironbound and Ironbound Bank of the
transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors and stockholders of Ironbound or Ironbound Bank, as the case
may be, and RCFC shall have received certified copies of the resolutions
evidencing such authorization;
(c) Ironbound shall have obtained the consent or approval of each
person (other than the governmental approvals or consents referred to in Section
5. 1 (b)) whose consent or approval shall be required in order to permit the
succession by the surviving corporation pursuant to the Merger to any
obligation, right or interest of Ironbound or its Subsidiaries under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument to which Ironbound 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
RCFC (after giving effect to the consummation of the transactions contemplated
hereby) or upon the consummation of the transactions contemplated hereby.
(d) RCFC shall have received certificates (such certificates to be
dated as of a day as close as practicable to the Closing Date) from appropriate
authorities as to the corporate existence and good standing of Ironbound and its
Subsidiaries;
(e) RCFC shall have received an opinion of Muldoon, Murphy & Faucette.
counsel to RCFC, dated as of the Effective Date, in form and substance customary
in transactions of the type contemplated hereby, and reasonably satisfactory to
RCFC, 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 at the Effective Time, the 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:
(i) No gain or loss will be recognized by RCFC, RCFC Bank,
Ironbound or Ironbound Bank as a result of the Merger;
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in RCFC Common Stock, no gain or loss will be
recognized by the stockholders of Ironbound who exchange their Ironbound
Common Stock for RCFC Common Stock pursuant to the Merger;
(iii) The tax basis of RCFC Common Stock received by
stockholders who exchange their Ironbound Common Stock for RCFC Common Stock
in the Merger will
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be the same as the tax basis of Ironbound Common Stock surrendered pursuant to
the 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
(iv) The holding period of RCFC Common Stock received by each
stockholder in the Merger will include the holding period of Ironbound Common
Stock exchanged therefor, provided that such stockholder held such Ironbound
Common Stock as a capital asset on the Effective Date.
Such opinion may be based on, in addition to the review of such
matters of fact and law as Muldoon, Murphy & Faucette considers appropriate, (x)
representations made at the request of Muldoon, Murphy & Faucette by RCFC, RCFC
Bank, Ironbound, Ironbound Bank, stockholders of RCFC or Ironbound, or any
combination of such persons and (y) certificates provided at the request of
Muldoon, Murphy & Faucette by officers of RCFC, RCFC Bank. Ironbound, Ironbound
Bank and other appropriate persons.
(f) The consummation of the sale of Ironbound's executive office is
completed subject to terms disclosed in Ironbound's Disclosure Letter.
Section 5.3. Conditions to the Obligations of Ironbound and
----------------------------------------------
Ironbound Bank. The obligations of Ironbound and Ironbound Bank to effect the
- --------------
Merger, the Bank Merger and any other transactions contemplated by this
Agreement shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by Ironbound:
(a) each of the obligations of RCFC and RCFC Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of RCFC and RCFC Bank
contained in this Agreement shall be true and correct, subject to Sections 2.1
and 2.2, as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty which specifically relates to an earlier date). Ironbound shall have
received a certificate to the foregoing effect signed by the chief executive
officer and the chief financial or principal accounting officer of RCFC;
(b) all action required to be taken by, or on the part of, RCFC and
RCFC Bank to authorize the execution, delivery and performance of this Agreement
and the consummation by RCFC and RCFC Bank of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors and
stockholders of RCFC or RCFC Bank, as the case may be, and Ironbound shall have
received certified copies of the resolutions evidencing such authorization;
(c) RCFC shall have obtained the consent or approval of each person
(other than the governmental approvals or consents referred to in Section
5.1(b)) whose consent or
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approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument to which RCFC 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 RCFC (after giving effect to the transactions
contemplated hereby) or upon the consummation of the transactions contemplated
hereby.
(d) Ironbound shall have received certificates (such certificates to
be dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of RCFC
and its Subsidiaries;
(e) Ironbound shall have received an opinion of Luse Lehman Gorman
Pomerenk & Schick, P.C., counsel to Ironbound, dated as of the Effective Date,
in form and substance customary in transactions of the type contemplated hereby,
and reasonably satisfactory to Ironbound, 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 at the Effective
Time, the 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:
(i) No gain or loss will be recognized by RCFC, RCFC Bank,
Ironbound or Ironbound Bank as a result of the Merger;
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in RCFC Common Stock, no gain or loss will be
recognized by the stockholders of Ironbound who exchange their Ironbound
Common Stock for RCFC Common Stock pursuant to the Merger;
(iii) The tax basis of RCFC Common Stock received by
stockholders who exchange their Ironbound Common Stock for RCFC Common Stock in
the Merger will be the same as the tax basis of Ironbound Common Stock
surrendered pursuant to the 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
(iv) The holding period of RCFC Common Stock received by each
stockholder in the Merger will include the holding period of Ironbound Common
Stock exchanged therefor, provided that such stockholder held such Ironbound
Common Stock as a capital asset on the Effective Date.
Such opinion may be based on, in addition to the review of such
matters of fact and law as Luse Lehman Gorman Pomerenk & Schick, P.C. considers
appropriate, (x) representations made at the request of Luse Lehman Gorman
Pomerenk & Schick, P.C. by RCFC, RCFC Bank, Ironbound, Ironbound Bank,
stockholders of RCFC or Ironbound, or any combination of such persons and (y)
certificates provided at the request of
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Luse Lehman Gorman Pomerenk & Schick, P.C. by officers of RCFC, RCFC Bank,
Ironbound and other appropriate persons.
ARTICLE VI
TERMINATION
-----------
Section 6.1. Termination. This Agreement may be terminated, and
-----------
the Merger abandoned, at or prior to the Effective Date, either before or after
its approval by the stockholders of Ironbound.
(a) by the mutual consent of RCFC and Ironbound in a written
instrument, if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board;
(b) by RCFC or Ironbound, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event of the
failure of the stockholders of Ironbound to approve the Agreement at its
Stockholder Meeting called to consider such approval;
(c) by RCFC or Ironbound, by written notice to the other party, if
either (i) any approval, consent or waiver of a governmental agency required to
permit consummation of the transactions contemplated hereby shall have been
denied or (ii) any governmental authority of competent jurisdiction shall have
issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement;
(d) by RCFC or Ironbound, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event that the
Merger is not consummated by April 30, 1999 ("Initial Termination Date"); unless
the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate; or
(e) by RCFC, if the Board of Directors of Ironbound does not publicly
recommend in the Proxy Statement that Ironbound's stockholders approve and adopt
this Agreement or if, after recommending in the Proxy that stockholders approve
and adopt this Agreement, the Board of Directors of Ironbound shall have
withdrawn, modified or amended such recommendation in any respect materially
adverse to RCFC; or
(f) by RCFC by written notice to Ironbound, or by Ironbound by written
notice to RCFC in the event that there has occurred since the date of this
Agreement 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 Ironbound or RCFC, as the case
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may be; provided that one party shall have given the other thirty (30) calendar
days prior written notice of such termination, and the breaching party shall not
have remedied such event, condition, change or occurrence by the end of such
thirty-day period;
(g) by Ironbound, if its board of directors so determines by the
requisite vote of members of its entire board, at any time during the five-day
period commencing with the Valuation Date, in accordance with (i) below:
(i) if RCFC Market Value is less than $14.00, adjusted as
indicated in the last sentence of this Section 6.1(g).
If RCFC declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the date of this Agreement and the Valuation Date, the
prices for the common stock of such company shall be appropriately adjusted, in
the manner specified in Section 1.2(c) of this Agreement, for the purposes of
applying this Section 6.1(g); or
(h) by RCFC or Ironbound (provided that the party seeking termination
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein), in the event of (i) a failure to perform or
comply by the other party with any covenant or agreement of such other party
contained in this Agreement, which failure or non-compliance is material in the
context of the transactions contemplated by this Agreement, or (ii) subject to
Sections 2.2(a) and (b), any inaccuracies, omissions or breach in the
representations, warranties, covenants or agreements of the other party
contained in this 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.
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
------------------------------------------
Section 7.1. Effective Date and Effective Time. The closing of the
---------------------------------
transactions contemplated hereby ("Closing") shall take place at the offices of
Richmond County Financial Corp., 1214 Castleton Avenue, Staten Island, New York
10310, unless another place is agreed to by RCFC and Ironbound, on a date
("Closing Date") that is no later than five business days following the date on
which the expiration of the last applicable waiting period in connection with
notices to and approvals of governmental authorities shall occur and all
conditions to the consummation of this Agreement are satisfied or waived, or on
such other date as may be agreed to by the parties. Prior to the Closing Date,
RCFC and Ironbound shall execute a Certificate of Merger in accordance with all
appropriate legal requirements, which shall be filed as required by
A-57
<PAGE>
law on the Closing Date, and the Merger provided for therein shall become
effective upon such filing or on such date as may be specified in such
Certificate of Merger. The date of such filing or such later effective date as
specified in the Certificate of Merger is herein referred to as the "Effective
Date." The "Effective Time" of the Merger shall be as set forth in the
Certificate of Merger.
Section 7.2. Deliveries at the Closing. Subject to the provisions
-------------------------
of Articles V and VI, on the Closing Date there shall be delivered to RCFC and
Ironbound the documents and instruments required to be delivered under Article
V.
Section 7.3. Adjustment of Exchange Ratio. If RCFC Market Value is
----------------------------
less than $15.945, but equal to or greater than $14.00, adjusted as indicated in
the last sentence of Section 6.1(g), the Exchange Ratio shall be adjusted such
that the value of the consideration (valued at the Valuation Date) to be paid in
respect of each share of Ironbound Common Stock to be converted into RCFC Common
Stock and cash in lieu of fractional shares upon consummation of the Merger is
$23.12.
ARTICLE VIII
CERTAIN OTHER MATTERS
---------------------
Section 8.1. Certain Definitions; Interpretation. As used in this
-----------------------------------
Agreement, the following terms shall have the meanings indicated:
"material" means material to RCFC or Ironbound (as the case may be)
and its respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to include any other
gender.
Section 8.2. Survival. Only those agreements and covenants of the
--------
parties that are by their terms applicable in whole or in part after the
Effective Time, including Sections 4.3(a), 4.13, 4.14, 4.16, 4.17, 4.19 and 8.6
of this Agreement, shall survive the Effective Time.
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<PAGE>
All other representations, warranties, agreements and covenants shall be deemed
to be conditions of the Agreement and shall not survive the Effective Time. If
the Agreement shall be terminated, the agreements of the parties in the last
three sentences of Section 4.3(a) and Section 8.6 shall survive such
termination.
Section 8.3. Waiver; Amendment. Prior to the Effective Time, any
-----------------
provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of Ironbound or RCFC, no
amendment or modification may be made that would reduce the Merger Consideration
or contravene any provision of the Delaware General Corporation Law or the
federal banking laws, rules and regulations.
Section 8.4. Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed by,
-------------
and interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses
--------
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
Section 8.7. Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice to the other party hereto.
A-59
<PAGE>
If to Ironbound, to:
Ironbound Bankcorp
36 Pacific Street
Newark, New Jersey 07105
Facsimile: (973) 589-7686
Attention: Edward Cruz
Chairman of the Board
and
Michael J. Gagliardi
President and Chief Executive Officer
and
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
John J. Gorman, Esq.
Alan Schick, Esq.
Facsimile: (202) 362-2902
If to RCFC, to:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Facsimile: (718) 273-8078
Attention: Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
A-60
<PAGE>
With copies to:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Facsimile: (718) 390-0224
Attention: Thomas R. Cangemi
Senior Vice President, Chief Financial
Officer and Secretary
and
Douglas P. Faucette, Esq.
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
Section 8.8. Entire Agreement; etc. This Agreement, together with
---------------------
the Plan of Bank Merger, Option Agreement and the Disclosure Letters, represents
the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. All terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Except for Section 4.13 and 4.14,
which confer rights on the parties described therein, nothing in this Agreement
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 8.9. Assignment. This Agreement may not be assigned by
----------
either party hereto without the written consent of the other party.
A-61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the 17th day of July, 1998.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
---------------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
IRONBOUND BANKCORP, NJ
By: /s/ Edward Cruz
---------------------------
Edward Cruz
Chairman of the Board
A-62
<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 17, 1998, between IRONBOUND
BANKCORP, NJ, a New Jersey corporation ("Issuer"), and RICHMOND COUNTY
FINANCIAL CORP., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 198,664
fully paid and nonassessable shares of Issuer's Common Stock, par value $5.00
per share ("Common Stock"), at a price of $20.00 per share; provided, however,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding common shares. The number
of shares of Common Stock that may be received upon the exercise of the Option
and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date hereof (or any treasury shares held
by Issuer have been or are sold after July 16, 1998) (other than pursuant to
this Agreement or as set forth in the Merger Agreement), the number of shares of
Common Stock subject to the Option shall be increased so that, after such
issuance, its equals 19.9% of the number of shares of Common Stock then issued
and outstanding without giving effect to any shares subject to or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer to breach any provision of
the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, a Triggering Event (as
hereinafter defined) has occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 30 days following such Triggering Event. Each of the
following shall be an Exercise Termination Event: (i) the Effective Time of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of a
Triggering Event; or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of
<PAGE>
a Triggering Event; or (iv) the passage of 12 months after termination of the
Merger Agreement, if such termination is pursuant to Sections 6.1(e) or 6.1(h)
and a Triggering Event shall not have occurred during such time. The "Last
Triggering Event" shall mean the last Triggering Event to occur. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Triggering Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) (a) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or (b) the Board of Directors of Issuer shall have recommended
that the stockholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Merger Agreement. For
purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer or
any of its subsidiaries ("Issuer Subsidiary"), (y) a purchase, lease or
other acquisition representing 15% or more of the consolidated assets of
Issuer and its subsidiaries, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any of
Issuer Subsidiary;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have withdrawn or modified, or publicly announced
its interest to withdraw or modify, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement, followed by the acquisition by any person of beneficial
ownership of 25% or more of the then outstanding common stock of the
Issuer;
(iii) Any person, other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity, shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 15% or
more of the outstanding shares of Common Stock; (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder) and the Issuer's shareholders shall not approve the Merger, or
the Issuer shall not have called a meeting of shareholders, or Issuer shall
not have held a meeting of shareholders to vote on the Merger no later than
January 31, 1999, or the Issuer shall have called a meeting of shareholders
or shall have distributed a proxy statement or other solicitation materials
in connection with an Acquisition Transaction,
B-2
<PAGE>
followed by the acquisition by any person of beneficial ownership of 25% or
more of the then outstanding common stock of the Issuer;
(iv) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which the Grantee has given its
prior written consent, shall have made a bona fide proposal to Issuer or
its stockholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an Acquisition
Transaction, followed by the acquisition by any person of beneficial
ownership of 25% or more of the then outstanding common stock of the
Issuer;
(v) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
willfully breached any representation, warranty, covenant or obligation
contained in the Merger Agreement and such breach (x) would entitle Grantee
to terminate the Merger Agreement and (y) shall not have been cured prior
to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board of Governors ("FRB"), the Federal Deposit Insurance
Corporation (the "FDIC"), or other federal or state bank regulatory
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction, followed by the
acquisition by any person of beneficial ownership of 25% or more of the
then outstanding common stock of the Issuer.
(vii) The holders of Issuer Common Stock shall not have approved the
Merger Agreement and the transactions contemplated thereby, at the meeting
of such stockholders held for the purpose of voting on such agreement, or
such meeting shall not have been held or shall have been cancelled prior to
termination of the Merger Agreement, in each case after it shall have been
publicly announced that any person (other than Grantee or any affiliate of
Grantee or any person acting in concert in any respect with Grantee) shall
have made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, followed by the acquisition by any person of
beneficial ownership of 25% or more of the then outstanding common stock of
the Issuer; or
(viii) Issuer's Board of Directors shall not have recommended to the
stockholders of Issuer that such stockholders vote in favor of the approval
of the Merger Agreement and the transactions contemplated thereby or shall
have withdrawn or modified such recommendation in a manner adverse to
Grantee, followed by the acquisition by any person of beneficial ownership
of 25% or more of the then outstanding common stock of the Issuer.
B-3
<PAGE>
(c) Issuer shall notify Grantee promptly in writing of the occurrence of a
Triggering Event, it being understood that the giving of such notice by Issuer
shall not be a condition to the right of the Holder to exercise the Option.
(d) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if the
closing of the purchase and sale pursuant to the Option (the "Closing") cannot
be consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of the OTS or
any other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto. Notwithstanding this subsection (e), in no event shall any
Closing Date be more than 18 months after the related Notice Date, and if the
Closing Date shall not have occurred within 18 months after the related Notice
Date due to the failure to obtain any such required approval, the exercise of
the Option effected on the Notice Date shall be deemed to have expired. In the
event (i) Grantee receives official notice that an approval of the FRB, FDIC or
any other regulatory authority required for the purchase of Option Shares (as
hereinafter defined) would not be issued or granted, (ii) a Closing Date shall
not have occurred within 18 months after the related Notice Date due to the
failure to obtain any such required approval or (iii) Holder shall have the
right pursuant to the last sentence of Section 7 to exercise the Option, Grantee
shall nevertheless be entitled to exercise its right as set forth in Section 7
and, Grantee or Holder shall be entitled to exercise the Option in connection
with the resale of Issuer Common Stock or other securities pursuant to a
registration statement as provided in Section 6.
(e) At the Closing referred to in subsection (d) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(f) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (e) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver
B-4
<PAGE>
to Issuer a copy of this Agreement and a letter agreeing that the Holder will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (d) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder or the Issuer
shall have failed or refused to designate the bank account described in
subsection (e) of this Section 2. Issuer shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
(i) Notwithstanding anything to the contrary contained in this Agreement,
the Issuer shall not be obligated to issue shares of common stock upon the
exercise of the Option (i) in the absence of any required governmental or
regulatory approval or consent necessary for the Issuer to issue shares or for
the Grantee to exercise the Option, (ii) in the event the Grantee is in material
breach of its representations, warranties, covenants or obligations under the
Merger Agreement or (iii) so long as any injunction or decree or ruling issued
by a court of competent jurisdiction is in effect which prohibits the sale or
delivery of the common stock.
B-5
<PAGE>
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock (or
such other securities) after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock (or such other
securities); (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. 18a and regulations
promulgated thereunder and (y) in the event that under the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior approval of or
notice to the FRB or FDIC, or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to the FRB
or FDIC, or such state regulatory authority as they may require) in order to
permit the Holder to exercise the Option and the Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option shall be subject to adjustment from time to time as provided in this
Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted so that Grantee shall receive upon exercise of the
Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property that Grantee would have
received in respect of Common Stock if the Option had been exercised in
full immediately prior to such event, or the record date therefor, as
applicable.
B-6
<PAGE>
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. (a) Upon the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event (or as otherwise provided in the last sentence of
Section 2(e)), Issuer shall, at the request of Grantee delivered within 30 days
after such Triggering Event (or such trigger date as is provided in the last
sentence of Section 2(e)) (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
shelf registration statement under the Securities Act covering any shares issued
and issuable pursuant to this Option and shall use its best efforts to cause
such registration statement to become effective and remain current in order to
permit the sale or other disposition of any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance with
any plan of disposition requested by Grantee. Issuer will use its best efforts
to cause such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. Holder shall not be obligated to pay, liable for or otherwise
bear any payments, fees or expenses associated with the first registration
contemplated by this Section 6, all of which such payments, fees or expenses
shall be borne by the Issuer. The foregoing notwithstanding, if, at the time of
any request by Grantee for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; and provided,
however, that after any such required reduction in the number of Option Shares
to be included in such offering for the account of the Holder shall constitute
at least 25% of the total number of shares to be sold by the Holder and Issuer
in the aggregate; and provided further, however, that if such reduction occurs,
then the Issuer shall file a registration statement for the balance as promptly
as practical and no reduction shall thereafter occur (and such registration
shall not be charged against the Holder). Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to
B-7
<PAGE>
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
(b) The Issuer will indemnify and hold harmless Grantee, any
underwriter (as defined in the Securities Act) for Grantee, and each person, if
any, who controls Grantee or such underwriter (within the meaning of the
Securities Act) from and against any and all loss, damage, liability, cost and
expense to which Grantee or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses arise out of or are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus or preliminary prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that the Issuer will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by Grantee, such underwriter or
such controlling person in writing specifically for use in the preparation
thereof.
7. (a) Upon the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event, (i) at the request of the Holder, delivered within
30 days after such occurrence (or such later period as provided in Section 8 or
the last sentence of Section 2(e)), Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered within 30 days after such
occurrence (or such later period as provided in Section 8), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated. The
term "market/offer price" shall mean the highest of (i) the highest price per
share of Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the highest price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the average of the
Closing Price of the Common Stock of Issuer for the ten days preceding the
Triggering Event. In determining the market/offer price, the value of
consideration other than cash, to the extent consideration other than cash is
accepted by the Holder or the Owner, shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the case
may be.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
B-8
<PAGE>
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto. Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30 day period.
8. The 30-day period for exercise of certain rights under Sections 2, 6,
7, and 11 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods provided such approvals are obtained within 9
months of the submission of an application by the Holder or Grantee; and (ii) to
the extent necessary to avoid liability under Section 16(b) of the Exchange Act
by reason of such exercise.
B-9
<PAGE>
9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer, enforceable against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation pursuant to any provisions of the Certificate of
Incorporation or by-laws of Issuer or any Subsidiary of Issuer or, subject to
obtaining any approvals or consents contemplated hereby, result in any violation
of any loan or credit agreement, note, mortgage, indenture, lease, Plan or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Issuer or any Subsidiary of Issuer or their respective properties or assets
which Violation would have a Material Adverse Effect on Issuer.
(d) Issuer reaffirms with respect to this Agreement and the transactions
contemplated hereby the representations and warranties contained in Section 2.3
of the Merger Agreement.
10. Grantee hereby represents and warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter
into this Option Agreement and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part
of the Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being and any shares or other securities
acquired by Grantee upon exercise of the Option will not be
acquired with a view to
B-10
<PAGE>
the public distribution thereof and will not be transferred or
otherwise disposed of except in compliance with the Securities
Act.
11. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 30 days
following such Triggering Event (or such later period as provided in Section 8).
12. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the OTS for approval to
acquire the shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems appropriate to do
so.
13. Notwithstanding anything to the contrary herein, in the event that the
Holder or Owner or any Related Person thereof is a person making without the
prior written consent of Issuer an offer or proposal to engage in an Acquisition
Transaction (other than the transaction contemplated by the Merger Agreement),
then (i) in the case of a Holder or any Related Person thereof, the Option held
by it shall immediately terminate and be of no further force or effect, and (ii)
in the case of an Owner or any Related Person thereof, the Option Shares held by
it shall be immediately repurchasable by Issuer at the Option Price. A Related
Person of a Holder or Owner means any Affiliate (as defined in Rule 12b-2 of the
rules and regulations under the Exchange Act) of the Holder or Owner and any
person that is the beneficial owner of 20% or more of the voting power of the
Holder or Owner, as the case may be.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through specific performance, injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
B-11
<PAGE>
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein or in the Merger
Agreement, each party shall bear and pay all costs and expenses incurred by it
or on their behalf in connection with the transactions contemplated hereunder,
including fees and expenses of their own financial consultants, investment
bankers, accountants and counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
21. In the event of any exercise of the Option by Grantee, Issuer and
Grantee shall execute and deliver all other documents and instruments and take
all other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
B-12
<PAGE>
IN WITNESS WHEREOF, Richmond County Financial Corp. and Ironbound Bankcorp,
NJ have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
------------------------------------
Michael F. Manzulli
Chairman and Chief Executive Officer
IRONBOUND BANKCORP, NJ
By: /s/ Edward Cruz
------------------------------------
Edward Cruz
Chairman of the Board
B-13
<PAGE>
ANNEX C
______________, 1998
Board of Directors
Ironbound Bankcorp, NJ
36 Pacific Street
Newark, NJ 06105
Members of the Board:
You have requested an update of our opinion as to the fairness, from a
financial point of view, of the terms of an Agreement and Plan of Merger dated
July 17, 1998 (the " Merger Agreement"), by and among Richmond County Financial
Corp ("Richmond") and its principal subsidiary Richmond County Savings Bank, and
Ironbound Bankcorp, NJ ("Ironbound") and its principal subsidiary Ironbound
Bank, to the holders of Ironbound Common Stock, $5.00 par value, ("Ironbound
Common Stock").
Pursuant to the terms of the Merger Agreement, Ironbound will be acquired
by Richmond through the merger of Ironbound with and into Richmond (the
"Merger"). The Merger Agreement provides that each outstanding share of
Ironbound Common Stock shall become and be converted into the right to receive
1.45 shares of Richmond common stock (the "Exchange Ratio") provided, however,
that, notwithstanding any other provision of the Merger Agreement, no fraction
of a share of Richmond common stock and no certificates or scrip therefor will
be issued in the Merger; instead Richmond shall pay each holder of Ironbound
Common Stock who would otherwise be entitled to a fraction of a share of
Richmond common stock an amount in cash, rounded to the nearest cent, determined
by multiplying such fraction by Richmond's Market Value as defined in the Merger
Agreement. The Exchange Ratio is subject to adjustment if Richmond's Market
Value is less than $15.945 but greater than or equal to $14.00, such adjustment
is equal to the number of shares of Richmond common stock obtained by dividing
(A) $23.12 per share by (B) the Richmond Market Value. In the event that the
Richmond Market Value is less than $14.00, Ironbound may elect to terminate the
Merger Agreement.
In connection with executing the Merger Agreement, Ironbound entered into
an Option Agreement (the "Option Agreement"), pursuant to which Ironbound has
granted Richmond an option to acquire up to 198,664 shares of Ironbound Common
Stock at a price of $20.00 per share; provided further that in no event shall
the number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Ironbound's issued and outstanding shares of common stock after
giving effect to any shares subject to or issued pursuant to the Option.
Richmond may exercise this Option upon the occurrence of certain events
specified in the Option Agreement.
Ostrowski & Company, Inc., as part of its bank and thrift advisory
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
purposes. We are familiar with Ironbound and have received and will receive fees
from Ironbound for issuing our opinion as to the fairness, from a financial
point of view, of the terms of the proposed transaction as set forth in the
Merger Agreement.
In connection with providing this opinion, we have examined and relied
upon, among other things: the Merger Agreement; the Option Agreement; annual
reports to shareholders, proxy statements and related audited financial
statements for Ironbound for each of the three fiscal years ended December 31,
1995, 1996 and 1997; certain unaudited interim financial reports for Ironbound
for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998;
certain other financial information for Ironbound, including pro forma financial
statements and management's estimates relating to, among other things, earnings,
asset quality, loan delinquencies and capital; audited financial statements for
<PAGE>
Board of Directors
___________, 1998
Page Number 2
Richmond County Savings Bank for each of the fiscal years ended June 30 1996 and
1997 and for Richmond for the fiscal year ended June 30, 1998; the Richmond
Prospectus dated December 16, 1997; a draft of the Form S-4 Registration
Statement dated November 18, 1998 prepared in connection with the proposed
transaction; certain unaudited interim financial reports for Richmond for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; certain
other financial information for Richmond, including proforma financial
statements and management's estimates relating to, among other things, earnings,
asset quality, loan delinquencies and capital. We have conducted discussions
with executive management of Ironbound and Richmond concerning historical
financial performance and condition, market area economic conditions, future
business prospects and financial forecasts. We have reviewed comparable
financial, operating and market data for the banking industry and selected peer
groups; compared the terms of the Merger Agreement with other bank and thrift
merger and acquisition transactions; and have considered such additional
financial and other information deemed relevant.
In preparing our opinion, we have relied upon the accuracy, completeness
and fair presentation of all information supplied or otherwise made available to
us by, or on behalf of, Ironbound and Richmond. We have not independently
verified such information or undertaken an independent evaluation or appraisal
of the assets or liabilities of Ironbound or Richmond, nor have we been
furnished any such evaluations or appraisals. With respect to forecasts of
expected future financial performance, we have been advised that they reflect
the best currently available estimates and judgement of the executive
management. This opinion is necessarily based upon the information available to
us and the market, economic and other conditions, as they exist and can be
evaluated, as of the date of this letter.
This opinion is directed solely to the fairness, from a financial point of
view, of the terms of the Merger Agreement to the holders of Ironbound Common
Stock ("Ironbound Shareholders") and does not constitute a recommendation to any
Ironbound Shareholder as to how such Ironbound Shareholder should vote with
respect to the Merger Agreement.
In reliance upon and subject to the foregoing, it is our opinion that as of
the date hereof, the terms of the Merger Agreement are fair, from a financial
point of view, to Ironbound Shareholders.
Very truly yours,
OSTROWSKI & COMPANY, INC.
<PAGE>
ANNEX D
FINANCIAL INFORMATION
REGARDING
IRONBOUND BANKCORP, NJ
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
Stockholders' equity increased to $11,529,511 at September 30, 1998, an
increase of $685,148 or 6.31% from $10,844,363 at December 31, 1997. The
increase in stockholders' equity was primarily due to, net income for the first
nine months of 1998 of $983,207, less three quarterly cash dividends, each at
five cents a share, totaling $149,538 and less the acquisition of 8,985 shares
of treasury stock, during the nine month period, at a cost of $134,775. At
September 30, 1998 Ironbound Bankcorp, NJ's tangible and tier one risk based
capital ratios were 9.92% and 20.78% respectively.
Total assets increased by $2,959,438 or 2.64% during the first nine months
of 1998 to $115,302,049 at September 30, 1998, from $115,172,606 at December 31,
1997. Net loans increased by $3,072,558 or 8.11% from $37,872,726 at
December 31, 1997 to $40,945,284 at September 30,1998. Securities investments
decreased by $2,154,501, or 3.85% to $53,848,152 at September 30, 1998, from
$56,002,653 at December 31, 1997 while federal funds and money market
investments increased by $314,541 to $12,318,177 at September 30, 1998. Premises
and equipment increased by $954,743 to $2,629,966 at September 30, 1998 from
$1,675,223 at December 31, 1997. Almost all of this increase was due to the
acquisition of two vacant lots, which will be used as future branch sites. One
of these sites is in the town of Union, New Jersey, and the other in the borough
of Garwood, New Jersey, near its border with the town of Westfield. The spacious
size of these sites will permit the future construction of major branch
facilities at each of these locations. In October 1998 Ironbound Bank's main
office complex, which was previously leased, was purchased at a cost of
$1,850,000.
Total deposits increased by $2,117,331 or 2.10% during the first nine
months of 1998 to $102,828,170 at September 30, 1998, from $100,710,839 at
December 31, 1997. Most of the increase was in non-interest bearing demand
deposits which totaled $19,344,963 at September 30, 1998, an increase of
$1,597,805 or 9.00%, from $17,747,158 at December 31, 1997. Other real estate
owned increased to $148,500 at September 30, 1998. There was no balance in other
real estate owned at December 31, 1997.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND 1997
NET INCOME. Net income for the nine months ended September 30, 1998 was a
record setting $983,207, representing basic net income per share of $0.99. This
compares with $955,681 or $0.92 per share for the nine months ended September
30,1997. Annualized returns on average assets and equity were 1.17% and 11.77%
respectively, for the first nine months of 1998, compared to 1.16% and 11.91%
respectively, for the nine months ended September 30, 1997.
INTEREST INCOME. Interest income for the nine months ended September 30,
1998 was $5,784,561, a modest increase of $15,009 over $5,769,552 for the first
nine months of 1997. Average earnings assets for the first nine months of 1998
of $106,225,400 were $1,884,675 higher than the average of $104,340,725 for the
same nine month period of 1997. The tax equivalent yield on average earning
assets declined to 7.31% for the first nine months of 1998 from 7.42% for the
comparable period of 1997. An increase in average loan volume of $3,159,159,
from an average of $37,427,746 for the first nine months of 1997 to $40,586,905
for the nine months ended September 30, 1998 had a positive effect on 1998's
interest income. The aforementioned reduction in the yield on earning assets of
eleven basis points had a negative effect on 1998's
D-1
<PAGE>
interest income and was primarily attributable to a decline in the yields on the
loan and investment securities portfolios. The average yield on loans declined
to 9.23% for the nine months ended September 30, 1998, compared with 9.53% for
the first nine months of 1997, while the tax equivalent average yield on
investment securities declined to 6.26% from 6.41% for the same respective nine
month periods.
INTEREST EXPENSE. Interest expense for the nine months ended September 30,
1998, was $2,069,775, and is $133,254 higher than the $1,936,521 reported for
the first nine months of 1997. This increase was primarily due to an increase
in the average rate paid on interest bearing deposits, to 3.38% for the nine
months ended September 30, 1998, from 3.15% for the first nine months of 1997.
NET INTEREST INCOME. As a result of the aforementioned increases in
interest income of $15,009 and interest expense of $133,254, net interest income
decreased by $118,245, to $3,714,786 for the nine months ended September 30,
1998, from $3,833,031 for the first nine months of 1997. The tax equivalent
average net interest rate spread (including non-interest bearing demand
deposits) was 4.55% for the nine months ended September 30,1998, compared with
4.79% for first nine months of 1997. A rather substantial increase in the
average volume of non-interest bearing demand deposits of $2,115,066 or 13.00%,
from an average balance of $16,257,472 for the nine months ended September 30,
1997, to $18,372,538 for the first nine months of 1998 had a beneficial effect
on 1998's net interest income spread.
PROVISION (CREDIT) FOR LOAN LOSSES. For the nine months ended
September 30,1998 an income credit was realized in the provision for loan
losses. There were no charges or credits to the provision for loan losses for
the nine months ended September 30, 1997. The credit to the 1998's provision
resulted from a recovery of a previously charged off loan in the amount of
$201,000, which was credited to the allowance for loan losses account. This
recovery caused an excess balance in the allowance account and $190,000
subsequently was charged to the allowance account and credited (recognized as
income) to the provision for loan loss account in March of 1998.
NON-INTEREST INCOME. Non-interest income for the first nine months of 1998
totaled $507,837, compared with $560,809 for the nine months ended
September 30,1997, a decrease of $52,972. Service charges on deposit accounts
decreased by $38,951 and other fees and income increased by the modest amount of
$1,661. Gains on the sale of investment securities in the amount of $15,682 also
were recorded during the first nine months of 1997. No security gains were
recorded in the first nine months of 1998.
NON-INTEREST EXPENSES. Total non-interest expenses were $2,888,496 and
$2,897,967 for the nine months ended September 30, 1998 and 1997 respectively, a
reduction of $9,471. Reductions in combined salary and benefits expenses of
$34,206, professional fees of $68,978, other operating expenses of $39,523,
amortization of branch acquisition premium (which became fully amortized in
1998) of $22,947, and advertising and marketing expenses of $13,999, were
partially off set by increases in combined occupancy and equipment expenses of
$17,821, and accrual for merger related expenses of $150,000.
INCOME BEFORE TAXES AND INCOME TAX EXPENSE. Income before taxes increased
modestly to $1,524,127 for the first nine months of 1998, from $1,495,873 for
the nine months ended September 30, 1997, an increase of $28,254. Income tax
expense remained relatively unchanged at $540,920 for the first nine months of
1998 compared with $540,192 for the comparable nine month period of 1997.
D-2
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
------------- -------------
1998 1997
<S> <C> <C>
ASSETS:
Cash and due from banks...................................... $ 4,070,155 $ 3,322,032
Federal funds and money market investments................... 12,318,177 12,003,636
Total cash and cash equivalents........................... 16,388,332 15,325,668
Investment securities held to maturity
(market value of $43,162,000 in 1998 and
$42,184,510 in 1997)...................................... 42,632,360 42,092,640
Investment securities available for sale
(amortized cost of $11,122,871 in 1998 and
$13,780,909 in 1997)...................................... 11,215,792 13,910,013
Loans (less allowance for possible loan losses
of $857,007 in 1998 and $903,013 in 1997)................. 40,945,284 37,872,726
Premises and equipment, net.................................. 2,629,966 1,675,223
Accrued interest receivable.................................. 785,143 841,934
Real estate owned............................................ 148,500 --
Prepaid expenses and other assets............................ 427,229 494,964
------------- ------------
Total assets.............................................. $115,172,606 $112,213,168
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-interest bearing demand deposits...................... $ 19,344,963 $ 17,747,158
Interest bearing demand deposits.......................... 18,334,962 20,512,718
Savings deposits.......................................... 35,279,704 33,957,997
Time deposits under $100,000.............................. 23,486,773 22,403,437
Time deposits $100,000 and over........................... 6,381,768 6,089,529
Total deposits......................................... 102,828,170 100,710,839
Accrued interest payable..................................... 110,022 105,955
Accrued expenses and other liabilities....................... 704,903 552,011
------------- ------------
Total liabilities...................................... 103,643,095 101,368,805
============= ============
STOCKHOLDERS' EQUITY:
Capital stock ($5 par value, 4,000,000 shares authorized,
1,042,663 issued in 1998 and 1,041,663 in 1997)........... 5,213,315 5,208,315
Paid-in capital............................................... 4,301,362 4,298,362
Retained earnings............................................. 2,631,170 1,797,537
Treasury stock, at cost (45,505 shares in 1998 and
36,520 shares in 1997).................................... (672,089) (537,314)
Net unrealized gain on securities available for sale.......... 55,753 77,463
------------- ------------
Total stockholders' equity.................................. 11,529,511 10,844,363
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $115,172,606 $112,213,168
============= ============
</TABLE>
D-3
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Loans........................................ $2,801,774 $2,663,964
Investments securities....................... 2,563,898 2,725,665
Federal funds sold and money market funds.... 418,889 379,923
---------- ---------
Total interest income...................... 5,784,561 5,769,552
INTEREST EXPENSE:
Demand deposits.............................. 303,089 296,885
Savings deposits............................. 621,420 627,445
Time deposit................................. 1,145,266 1,012,191
---------- ---------
Total interest expense..................... 2,069,775 1,936,521
Net interest income............................ 3,714,786 3,833,031
Provision (credit) for possible loan losses.... (190,000) --
---------- ---------
Net interest income after provision (credit)
for possible loan losses..................... 3,904,786 3,833,031
NON-INTEREST INCOME:
Service fees on deposits..................... 417,597 456,548
Other income................................. 90,240 88,579
Gain on sales of securities.................. -- 15,682
---------- ---------
Total non-interest income.................. 507,837 560,809
NON-INTEREST EXPENSES:
Salaries..................................... 1,135,174 1,121,963
Employee benefits............................ 237,792 285,209
Occupancy.................................... 379,687 370,793
Equipment.................................... 177,549 168,622
Professional fees............................ 46,235 115,213
Data processing and service charges.......... 194,394 192,540
Amortization of branch acquisition
premium.................................... 78,643 101,590
Deposit insurance............................ 8,916 8,409
Advertising and marketing.................... 45,326 59,325
Other operating expenses..................... 434,780 474,303
Merger related expenses...................... 150,000 --
---------- ---------
Total non-interest expenses................ 2,888,496 2,897,967
Income before income taxes..................... 1,524,127 1,495,873
Provision for income taxes..................... 540,920 540,192
---------- ---------
Net income..................................... $ 983,207 $ 955,681
========== ==========
Basic net income per share..................... $0.99 $0.92
========== ==========
Net income per share - assuming dilution....... $0.95 $0.90
========== ==========
Weighted average shares outstanding............ 996,953 1,039,708
Weighted average shares outstanding - assuming
dilution..................................... 1,039,831 1,062,410
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
D-4
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES:
<S> <C>
Net income............................................................................... $ 983,207
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation............................................................................ 205,867
Amortization of securities premium, net................................................. 16,986
Amortization of purchased deposits premium.............................................. 78,643
Provision (credit) for possible loan losses............................................. (190,000)
Decrease in deferred loan fees.......................................................... (841)
Increase in deferred income tax assets.................................................. (102,184)
Decrease in accrued interest receivable prepaid expenses and other assets............... 148,067
Increase in accrued interest payable, income taxes payable and other accrued
expenses and liabilities.............................................................. 160,221
Other increases......................................................................... 14,473
------------
Net cash provided by operating activities............................................ $ 1,314,439
------------
INVESTING ACTIVITIES:
Purchase of investment securities....................................................... (22,953,531)
Maturities of investment securities..................................................... 25,054,863
Net increase in loans................................................................... (2,881,717)
Purchase of equipment................................................................... (1,160,610)
Increase in real estate owned........................................................... (148,500)
Purchase of treasury stock.............................................................. (134,775)
Dividends paid.......................................................................... (149,574)
------------
Net cash (used) in investing activities.............................................. 2,373,844
------------
FINANCING ACTIVITIES:
Net increase in deposits................................................................ 2,117,331
Principal payments on capital leases.................................................... (3,262)
Capital stock issued.................................................................... 8,000
------------
Net cash provided by financing activities............................................ 2,122,069
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................................................ 1,062,664
CASH AND EQUIVALENTS BEGINNING OF YEAR................................................... 15,325,668
------------
CASH AND CASH EQUIVALENTS END OF PERIOD.............................................. $ 16,388,332
------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest................................................ $ 2,065,708
------------
Cash paid during the period for income taxes............................................ $ 428,351
------------
SUPPLEMENTAL DISCLOSURE FOR NON-CASH TRANSACTIONS:
Adjustment to equity for unrealized gains (losses) on securities available for sale
(net of income tax effect).......................................................... $ (21,710)
------------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
D-5
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Ironbound
Bankcorp, NJ (the "Company"), established in 1997, its wholly owned
subsidiary, Ironbound Bank (the "Bank"), and the Bank's wholly owned
subsidiary Ironbound Investment Company, Inc. which was established in
1996. Intercompany transactions and balances are eliminated in
consolidation.
The consolidated statement of financial condition as of September 30, 1998,
and the related consolidated statements of income for the nine-month
periods ended September 30, 1998 and 1997 and the consolidated statement
of cash flows for the nine-month period ended September 30, 1998 are
unaudited but, in the opinion of management, reflect all adjustments
(consisting only of normal and recurring accruals) necessary for a fair
presentation of financial condition, results of operations, and cash flows.
The December 31, 1997 consolidated statement of financial condition was
derived from the Company's December 31, 1997 audited consolidated financial
statements.
B. EARNINGS PER SHARE ("EPS")
Basic EPS excludes dilution and is computed by dividing income attributable
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if options other than contracts to issue common stock were
exercised or converted into common stock.
Information used to calculate EPS was as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS
-------------------------------------
<S> <C> <C> <C>
Basic EPS:
Income attributable to common
shareholders.................. $983,207 996,953 $ .99
Diluted EPS:
Effect of dilutive securities:
Stock options................. -- 42,878 (0.04)
-------- ---------- ------
Income attributable to common
shareholders and assumed
conversions....................... $983,207 1,039,831 $ .95
</TABLE> ======== ========== ======
C. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income," effective January 1, 1998. The
standard requires that comprehensive income and its components be disclosed
in the financial statements. The Company's comprehensive income includes
all items which comprise net income plus the unrealized holding gains on
available-for-sale securities. For the nine months ended September 30,
1998, the Company's comprehensive income was as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
Net income.................................. $983,207
Other comprehensive income.................. (21,710)
--------
Total comprehensive income............... $961,497
========
</TABLE>
D. RICHMOND COUNTY FINANCIAL CORP. "RICHMOND" MERGER
On July 17, 1998, Richmond County Financial Corp. and the Company announced
the signing of a definitive merger agreement. The merger was approved by
the shareholders of both companies.
The merger will be accounted for as a purchase transaction. Each share of
the Company's common stock will be converted into the right to receive
1.45 shares of common stock with cash paid in lieu of fractional shares.
D-6
<PAGE>
4. IMPACT OF RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," was issued in June 1997 and redefined how operating segments
are determined. SFAS No. 131 requires disclosure of certain financial and
descriptive information about a company's operating segments. This
statement was adopted by the Company on January 1, 1998. Provisions of
this statement require annual disclosure in the year of adoption and
interim reporting for periods thereafter. This statement does not affect
the results of operations or financial position of the Company.
SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," was issued in February 1998 and standardizes the
annual disclosure requirements for pensions and other postretirement
benefits. This statement does not affect the results of operations or
financial position of the Company. SFAS No. 132 was adopted by the Company
as of January 1, 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and establishes accounting reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement is effective for all fiscal years beginning after June 15, 1999.
This statement is not expected to have a material impact on the results of
operations or financial position of the Company.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," was issued in October 1998. Prior to issuance of SFAS No. 134,
when a mortgage banking company securitized loans held for sale but did not
sell the security in the secondary market, the security was classified as
trading. SFAS No. 134 requires that the security be classified in
accordance with SFAS No. 115 as either trading, available for sale or held
to maturity according to the Company's intent unless the Company has
already committed to sell the security before or during the securitization
process. The statement is not expected to have a material impact on the
results of operations or financial position of the Company.
D-7
<PAGE>
IRONBOUND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview of Consolidated Financial Performance for the Years Ended
December 31, 1997 and 1996.
The following comparative schedule shows condensed operating results for
the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
INCREASE
1997 1996 (DECREASE)
<S> <C> <C> <C>
Net interest income......................................... $5,084,952 $4,715,427 $369,525
Provision for possible loan losses.......................... -- -- --
---------- ---------- --------
Net interest income after provision for possible
loan losses.............................................. 5,084,952 4,715,427 369,525
Non-interest income......................................... 707,360 692,235 15,125
---------- ---------- --------
Income before non-interest expenses......................... 5,792,312 5,407,662 384,650
Non-interest expenses....................................... 3,842,625 3,924,098 (81,473)
---------- ---------- --------
Income before securities gains (losses)
and income taxes......................................... 1,949,687 1,483,564 466,123
Securities gains (losses)................................... 15,682 (3,321) 19,003
---------- ---------- --------
Income before income taxes.................................. 1,965,369 1,480,243 485,126
Provision for income taxes.................................. 704,637 633,620 71,017
---------- ---------- --------
Net income.................................................. $1,260,732 $ 846,623 $414,109
========== ========== ========
Basic earnings per share (based on 1,035,461 and 1,041,663
issued and outstanding shares in 1997 and 1996).......... $ 1.22 $ 0.81 $ 0.41
========== ========== ========
Return on average assets.................................... 1.14% 0.85% 0.29%
========== ========== ========
Return on average equity.................................... 11.68% 8.50% 3.18%
========== ========== ========
</TABLE>
D-8
<PAGE>
GENERAL
Net income for 1997 of $1,260,732 is $414,109 or 49% higher than the
$846,623 earned in 1996. Record returns on average assets and equity of 1.14%
and 11.68%, respectively, were also realized in 1997.
Total assets ended the 1997 year at $112,213,168, an increase of
$5,856,274, or 5.5%. Gross loans increased by $3,008,319 or 8.4% for the 1997
year, while the securities investment portfolio decreased by $3,119,642 or 5.3%.
The overall increase was primarily due to the increase in Federal Funds Sold and
Money Market Funds which increased $5,770,000. Past due (90 day and over) and
non-performing loans decreased to $176,986 or 0.45% of the gross loan portfolio
at December 31, 1997, from $208,456 or 0.59% of the loan portfolio at the end of
1996.
Deposits rose above the $100 million threshold and closed 1997 at
$100,710,839, an increase of $5,472,614 or 5.7% for the year. Stockholders'
equity increased by $555,726 during 1997 and totaled $10,844,363 at December 31,
1997. This increase was achieved despite the payment of $537,314 in acquisition
costs of treasury stock and the distribution of cash dividends to shareholders
in the amount of $205,652.
NET INTEREST INCOME
Net interest income is the principal source of the Company's earnings. It
represents the amount by which interest income on earning assets exceeds the
interest expense on deposits. Interest rate fluctuations as well as the mix and
volume of interest-earning assets and interest-bearing liabilities combine to
affect net interest income.
Tax adjusted net interest income (see note below) for 1997 was $5,121,686,
an increase of $395,455 or 8.4% above the $4,726,231 reported in 1996 (see
Rate/Volume Analysis below). The overall yield on earning assets decreased
slightly from 7.43% in 1996 to 7.40% in 1997. Interest expense increased
16 basis points to 3.18%. Accordingly, the Bank's net interest spread was down
19 basis points from 4.41% in 1996 to 4.22% in 1997.
Interest earned on investments, tax exempt securities, money market funds
and federal funds sold of $4,165,847 increased $332,200 or 8.67% over the
$3,833,647 reported a year ago. Interest on loans increased by $436,210 or
13.94%, to $3,566,221 for 1997. Total interest income of $7,732,068 was up
$768,410 or 11.03%, from $6,963,658 reported in 1996.
Total interest expense on deposits of $2,610,382 was up $372,955 from
$2,237,427 in 1996. This increase was primarily attributable to an increase
in time deposit balances.
D-9
<PAGE>
<TABLE>
<CAPTION>
RATES AND AMOUNTS EARNED/PAID ON INTEREST-EARNING ASSETS
AND INTEREST-BEARING LIABILITIES TAX ADJUSTED BASIS
FOR THE YEARS 1997 AND 1996(2)
----------------------------------------------------------------
1997 1996
------------------------------- -------------------------------
INTEREST INTEREST
AVERAGE EARNED OR AVERAGE EARNED OR
BALANCE RATE PAID BALANCE RATE PAID
------------- ---- --------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans/ (3)/.................................... $ 37,678,846 9.46% $3,566,221 $31,695,856 9.88% $3,130,011
Investments.................................... 55,216,295 6.39 3,525,712 55,420,445 6.29 3,483,962
Tax-exempt securities and preferred stock
(See Note below).............................. 1,822,119 6.56 119,524 455,683 8.66 39,489
Federal funds sold............................. 7,827,164 5.44 425,539 5,074,055 5.29 268,215
Money Market Funds............................. 1,915,769 4.96 95,072 1,045,385 4.02 41,981
------------ ---- ---------- ----------- ---- ----------
Total interest-earning assets................ $104,460,193 7.40% $7,732,068 $93,691,424 7.43% $6,963,658
------------ ---- ---------- ----------- ---- ----------
INTEREST-BEARING LIABILITIES:
NOW and money-market accounts/ (1)/............ $ 20,128,964 1.96% $ 394,707 $17,284,404 1.90% $ 328,080
Savings accounts/ (1)/......................... 34,551,803 2.41 833,240 35,829,046 2.42 866,543
Time deposits/ (1)/............................ 27,445,690 5.04 1,382,435 21,048,499 4.95 1,042,804
------------ ---- ---------- ----------- ---- ----------
Total interest-bearing liabilities/ (1)/..... $ 82,126,457 3.18% $2,610,382 $74,161,949 3.02% $2,237,427
============ ===========
Net interest income............................ $5,121,686 $4,726,231
========== ==========
Net interest spread............................ 4.22% 4.41%
==== ====
Net interest margin............................ 4.90% 5.05%
==== ====
</TABLE>
- -------------------------
(1) Total interest expense on deposits of $2,610,382 was up $372,955 from
$2,237,427 in 1996. This increase was primarily attributable to an increase
in time deposit balances.
(2) Interest income has been increased by $36,734 for 1997 and $10,804
for 1996 to show the income tax effect of municipal securities and preferred
stock investments.
(3) The average balance for loans includes nonaccrual loans. Interest earned on
loans includes loan fees.
D-10
<PAGE>
An analysis showing the effects of changes in rates and volumes (balances)
on the increase in tax adjusted net interest income, for the 1997 and 1996 years
of $395,455 and $423,333, respectively, is as follows:
<TABLE>
<CAPTION>
RATES/VOLUME ANALYSIS FOR THE YEARS 1997 AND 1996
------------------------------------------------------------------------------
1997 1996
-------------------------------------- --------------------------------------
CHANGE DUE TO INCREASE (DECREASE) IN: CHANGE DUE TO INCREASE (DECREASE) IN:
RATE VOLUME TOTAL RATE VOLUME TOTAL
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans.......................... $(142,343) $578,553 $436,210 $ 57,207 $360,891 $418,098
Investments.................... 54,685 (12,935) 41,750 54,280 221,419 275,699
Tax-exempt securities and
preferred stock............... (26,088) 106,123 80,035 19,745 19,745 39,490
Federal funds sold............. 9,720 147,604 157,324 (17,493) 160,327 142,834
Money Market Funds............. 14,018 39,073 53,091 (9,079) 15,461 6,382
--------- -------- -------- -------- -------- --------
Total interest-earning
assets...................... (90,008) 858,418 768,410 104,660 777,843 882,503
--------- -------- -------- -------- -------- --------
INTEREST-BEARING LIABILITIES:
NOW and money-market
accounts...................... $ 11,741 $ 54,886 $ 66,627 $ 3,179 $(22,931) $(19,752)
Savings accounts............... (2,457) (30,846) (33,303) (32,077) (14,952) (47,029)
Time deposits.................. 20,051 319,580 339,631 8,001 518,050 526,051
--------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities................. 29,335 343,620 372,955 (20,897) 480,167 459,270
--------- -------- -------- -------- -------- --------
Net interest income............ $(119,343) $514,798 $395,455 $125,557 $297,676 $423,233
========= ======== ======== ======== ======== ========
</TABLE>
- -----------
The change attributable to both the change in rate and change in volume has been
allocated evenly between the above change attributable to rate and change
attributable to volume.
PROVISION AND ALLOWANCE FOR LOAN LOSS
As a result of the Company's success in recovering previously charged off
loans and reducing delinquent loans, no provision for loan losses was charged to
operations in 1997 or 1996. The allowance for loan losses of $903,013 at
December 31, 1997 equates to 2.38% of net loans and significantly exceeds the
balance of past due and non-accrual loans at year end of $176,986. Management
believes that the balance in the allowance account at December 31, 1997 is
adequate to absorb any possible loss that may occur due to the uncollectibility
of loans in the existing portfolio. In reaching this conclusion management has
given consideration to its detailed evaluation of the collectibility of such
loans, the risk characteristics of the loan portfolio, historical loan loss
experience, current and projected economic conditions and the dynamics of the
banking and regulatory environment.
NON-INTEREST INCOME
A significant portion of the Company's income is derived from non-interest
income. The primary component of non-interest income is service fees on deposit
accounts which increased slightly, from $654,346 in 1996, to $668,163 in 1997.
Other fee income of $39,197 was $1,308 higher than last year. Accordingly, total
non-interest income from deposit and other fees increased by $15,125, or 2.2%
during the 1997 year.
NON-INTEREST EXPENSES
Total non-interest expenses decreased $81,473, or 2.1%, to $3,842,625 in
1997 from $3,924,098 for 1996.
Salary expense increased $59,823, or 4.2%, to $1,499,891, from $1,440,068
reported for 1996. Employee benefit expenses decreased $19,428, or 5.3%, to
$346,863. The increase in salaries is the result of a normal merit increase and
increases in incentive compensation bonus payments. The reduction in employee
benefits is the result of favorable claims experience in the Company's self-
funded health insurance plan.
Occupancy expenses decreased $3,909, or 0.9%, to $494,513 from the $498,422
reported in 1996.
Equipment expenses were down $9,642, or 4.1%, to $223,418 from the $233,060
reported for 1996. Reductions in furniture and fixture expenses account for most
of this reduction.
D-11
<PAGE>
Professional fees were down $49,633, or 24.4%, to $153,834 from the
$203,467 reported in 1996. Reduced legal fees and regulatory examination fee
accrual are the primary reason for this decrease.
Data processing and related service charges increased $3,837, or 1.5%, to
$256,017.
Deposit insurance increased by $9,272 as the result of changes in the
method of assessment by the FDIC for such insurance.
Other operating expenses decreased $54,368, or 7.9%, from the $689,116
reported for 1996. Reductions in stationery and supplies, shareholder expenses,
delivery service and organization expenses of $17,425, $23,424, $22,584 and
$27,338, respectively, were realized while marketing costs increased by $14,695
and other losses increased by $17,100.
LIQUIDITY AND INTEREST SENSITIVITY
Liquidity can be defined as the ability to provide cash flow in a manner
that dispenses obligations in a timely fashion and adequately provides for
future funding demands. In the ordinary course of business, funds are generated
from the repayment or satisfaction of loans, maturities within the investment
portfolio and the acquisition of deposits. Management's interest sensitivity
efforts involve matching the maturity and repricing rate of interest-earning
assets with interest-bearing liabilities. This matching should be designed to
optimize net interest income within the constraints imposed by regulatory
authorities regarding liquidity and capital guidelines.
The Company's Asset/Liability Management Committee is responsible for
reviewing interest rate risk and evaluating future liquidity needs over various
time periods. The schedule below shows the Company's one year GAP at
December 31, 1997 and 1996. For purposes of this schedule, the one year GAP
amount is defined as the excess of interest sensitive liabilities over interest
sensitive assets that mature or reprice within a one year time frame. This
schedule indicated that the Company's one year GAP amount at December 31, 1997
was $24.7 million, or approximately 22.0% of total assets, compared to
$23.8 million, or 22.4% of total assets, at December 31, 1996.
<TABLE>
<CAPTION>
ONE YEAR GAP ANALYSIS
ASSETS AND LIABILITIES MATURING OR
REPRICING WITHIN ONE YEAR
AS OF DECEMBER 31, 1997 AND 1996
------------------------------------
(AMOUNTS IN THOUSANDS)
1997 1996 CHANGE
INTEREST SENSITIVE ASSETS: -------- -------- --------
<S> <C>
Loans................................................. $ 7,462 $ 13,155 $ (5,693)
Investments(A)........................................ 20,378 17,254 3,124
Money market funds.................................... 2,634 2,135 499
Federal funds sold.................................... 9,370 4,100 5,270
-------- -------- --------
Total interest sensitive assets...................... 39,844 36,644 3,200
-------- -------- --------
INTEREST SENSITIVE LIABILITIES:
NOW and money market accounts......................... 20,513 17,093 3,420
Savings accounts(B)................................... 16,979 18,081 (1,102)
Time deposits......................................... 27,049 25,287 1,762
-------- -------- --------
Total interest sensitive liabilities................. 64,541 60,461 4,080
-------- -------- --------
One Year GAP amount (excess of interest sensitive
liabilities over interest sensitive assets)......... $(24,697) $(23,817) $ 880
======== ======== ========
One Year GAP amount as a percentage
Of total assets..................................... (22.0)% (22.4)% (0.4)%
</TABLE>
D-12
<PAGE>
NOTES
(A) Investments do not include approximately $16 million of callable bonds which
will probably be called during 1998 if market rates remain as they were at
December 31, 1997.
(B) Savings accounts are assumed to have an annual decay factor of 50%.
Static GAP analysis, such as that presented above, cannot always be relied
upon to represent a company's one year interest-rate risk exposure because it is
based upon various assumptions as to future events. Accordingly, such as static
analysis is limited in its ability to measure future interest-rate risk
exposure.
CAPITAL RESOURCES
Capital management involves consideration of the quality and diversity of
the loan and securities investment portfolios, interest rate risk, and sources
and concentration of deposits.
The Federal Reserve Board and the Federal Insurance Deposit Corporation
have adopted capital adequacy regulations for banking institutions. These
regulations require banking institutions to maintain a minimum tier one capital
to average assets ratio of 4% and that total capital to risk weighted assets be
at least 8%. At December 31, 1997, Ironbound Bankcorp, NJ's capital levels
substantially exceed those regulatory minimums with a tier one capital ratio of
9.6% and total risk based capital of 21.1%.
D-13
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
ASSETS
<S> <C> <C>
Cash and due from banks...................................................... $ 3,322,032 $ 2,521,026
Federal funds sold and money market funds.................................... 12,003,636 6,234,819
------------ ------------
Total cash and cash equivalents............................................ 15,325,668 8,755,845
Investment securities held to maturity (market value of
$42,184,510 in 1997 and $45,937,053 in 1996) (Note C)..................... 42,092,640 46,617,193
Investment securities available for sale (amortized cost of $13,780,909 in
1997 and $12,439,264 in 1996) (Note C).................................... 13,910,013 12,505,102
Loans (less allowance for possible loan losses
of $903,013 in 1997 and $789,923 in 1996) (Notes D and E)................. 37,872,726 34,972,742
Premises and equipment, net (Note F)......................................... 1,675,223 1,855,510
Accrued interest receivable.................................................. 841,934 888,362
Prepaid expenses and other assets............................................ 157,247 238,363
Purchased deposits premium................................................... 78,643 214,096
Deferred taxes (Note I)...................................................... 259,074 309,681
------------ ------------
Total assets............................................................... $112,213,168 $106,356,894
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing demand deposits......................................... $ 17,747,158 $ 16,176,372
Interest-bearing demand deposits............................................. 20,512,718 17,093,024
Savings deposits............................................................. 33,957,997 36,161,169
Time deposits under $100,000................................................. 22,403,437 19,770,639
Time deposits $100,000 and over (Note H)..................................... 6,089,529 6,037,021
------------ ------------
Total deposits............................................................. 100,710,839 95,238,225
Accrued interest payable..................................................... 105,955 92,893
Accrued expenses and other liabilities....................................... 552,011 459,893
Income taxes payable......................................................... -- 277,246
------------ ------------
Total liabilities.......................................................... 101,368,805 96,068,257
------------ ------------
Commitments (Notes G and K)
STOCKHOLDERS' EQUITY:
Capital stock ($5 par value, 4,000,000 shares authorized,.................... 5,208,315 5,208,315
1,041,663 shares issued in 1997 and 1996) (Note J)
Paid-in capital.............................................................. 4,298,362 4,298,362
Retained earnings............................................................ 1,797,537 742,457
Treasury stock, at cost (36,520 shares in 1997) (Note N)..................... (537,314) --
Net unrealized gain on securities available for sale......................... 77,463 39,503
------------ ------------
Total stockholders' equity................................................. 10,844,363 10,288,637
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $112,213,168 $106,356,894
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
D-14
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
INTEREST INCOME:
<S> <C> <C>
Loans......................................................... $3,566,221 $3,130,011
Investment securities......................................... 3,608,502 3,512,647
Federal funds sold and money market funds..................... 520,611 310,196
---------- ----------
Total interest income....................................... 7,695,334 6,952,854
---------- ----------
INTEREST EXPENSE:
Demand deposits............................................... 394,707 328,080
Savings deposits.............................................. 833,240 866,543
Time deposits................................................. 1,382,435 1,042,804
---------- ----------
Total interest expense...................................... 2,610,382 2,237,427
---------- ----------
Net interest income............................................ 5,084,952 4,715,427
Provision for possible loan losses (Note E)................... -- --
---------- ----------
Net interest income after provision for possible loan losses... 5,084,952 4,715,427
---------- ----------
NON-INTEREST INCOME:
Gain (loss) on sale of securities (Note C).................... 15,682 (3,321)
Service fees on deposit accounts.............................. 668,163 654,346
Other......................................................... 39,197 37,889
---------- ----------
Total non-interest income................................... 723,042 688,914
---------- ----------
NON-INTEREST EXPENSES:
Salaries...................................................... 1,499,891 1,440,068
Employee benefits............................................. 346,863 366,291
Occupancy..................................................... 494,513 498,422
Equipment..................................................... 223,418 233,060
Professional fees............................................. 153,834 203,467
Data processing and service charges........................... 256,017 252,180
Stationery and supplies....................................... 86,456 103,881
Amortization of purchased deposits premium.................... 135,454 135,454
Deposit insurance............................................. 11,431 2,159
Other operating expenses...................................... 634,748 689,116
---------- ----------
Total non-interest expenses................................. 3,842,625 3,924,098
---------- ----------
Income before income taxes..................................... 1,965,369 1,480,243
Provision for income taxes (Note I)............................ 704,637 633,620
---------- ----------
Net income..................................................... $1,260,732 $ 846,623
========== ==========
Basic net income per share..................................... $1.22 $0.81
========== ==========
Net income per share - assuming dilution....................... $1.19 $0.80
========== ==========
Weighted average shares outstanding............................ 1,035,461 1,041,663
========== ==========
Weighted average shares outstanding - assuming dilution........ 1,058,163 1,056,761
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
D-15
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
CAPITAL STOCK (LOSS) ON
----------------------- SECURITIES
NO. OF PAID IN RETAINED TREASURY AVAILABLE
SHARES VALUE CAPITAL EARNINGS STOCK FOR SALE TOTAL
---------- ---------- ---------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995............. 1,041,663 $5,208,315 $4,298,362 $ -- $ -- $106,289 $ 9,612,966
Change in unrealized gain (loss)
on securities available for sale... -- -- -- -- -- (66,786) (66,786)
1996 net income....................... -- -- -- 846,623 -- -- 846,623
Cash dividends paid or declared....... -- -- -- (104,166) -- -- (104,166)
---------- ---------- ---------- ---------- --------- -------- -----------
Balance December 31, 1996............. 1,041,663 5,208,315 4,298,362 742,457 -- 39,503 10,288,637
Change in unrealized gain (loss)
on securities available for sale... -- -- -- -- -- 37,960 37,960
1997 net income....................... -- -- -- 1,260,732 -- -- 1,260,732
Purchase of Treasury Stock............ (36,520) -- -- -- (537,314) -- (537,314)
Cash dividends paid or declared....... -- -- -- (205,652) -- -- (205,652)
---------- ---------- ---------- ---------- --------- -------- -----------
Balance December 31, 1997............. 1,005,143 $5,208,315 $4,298,362 $1,797,537 $(537,314) $ 77,463 $10,844,363
========== ========== ========== ========== ========= ======== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
D-16
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
OPERATING ACTIVITIES:
<S> <C> <C>
Net income.......................................................... $ 1,260,732 $ 846,623
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................................... 261,514 282,398
Amortization of securities premium, net........................... 48,488 83,987
Net (gain) loss on sale of investment securities.................. (15,682) 3,321
Amortization of purchased deposits premium........................ 135,454 135,454
(Decrease) increase in deferred loan fees......................... (4,755) 9,292
Decrease in deferred taxes........................................ 50,607 78,660
Decrease (increase) in accrued interest receivable, prepaid
expenses and other assets...................................... 161,755 (198,064)
(Decrease) increase in accrued interest payable, income taxes
payable and other accrued expenses and liabilities............. (202,184) 452,834
Net gain on sale of other real estate............................. (15,059) (6,016)
Other (decreases) increases....................................... (25,307) 25,934
------------ ------------
Net cash provided by operating activities....................... 1,655,563 1,714,423
------------ ------------
INVESTING ACTIVITIES:
Purchase of investment securities................................... (13,874,371) (22,358,863)
Maturities of investment securities................................. 15,661,270 14,019,334
Proceeds from sale of investment securities available for sale...... 1,363,203 1,046,563
Net increase in loans............................................... (2,895,229) (6,839,526)
Purchase of equipment............................................... (81,227) (121,266)
Proceeds on sale of other real estate............................... 15,059 417,480
------------ ------------
Net cash provided by (used in) investing activities............. 188,705 (13,836,278)
------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits............................................ 5,472,614 15,572,705
Cash dividends paid................................................. (205,652) (104,166)
Purchase of treasury stock.......................................... (537,314) --
Principal payments under capital lease obligations.................. (4,093) (8,746)
------------ ------------
Net cash provided by financing activities....................... 4,725,555 15,459,793
------------ ------------
Net increase in cash and cash equivalents............................ 6,569,823 3,337,938
Cash and cash equivalents, beginning of year......................... 8,755,845 5,417,907
------------ ------------
Cash and cash equivalents, end of year............................... $ 15,325,668 $ 8,755,845
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest.............................. $ 2,597,320 $ 2,222,410
Cash paid during the year for income taxes.......................... $ 1,075,503 $ 373,410
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Adjustment to equity for unrealized gains (losses) on securities
available for sale (net of income tax effect).................... $ 37,960 $ (66,786)
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
D-17
<PAGE>
IRONBOUND BANKCORP, NJ AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
A. ORGANIZATION AND NATURE OF OPERATIONS
Ironbound Bankcorp, NJ (the "Company"), a bank holding company, was
incorporated on February 14, 1997 with authorized capital of 4,000,000 shares of
$5.00 par value common stock. On July 1, 1997 the Company acquired 100 percent
of the shares of Ironbound Bank (the "Bank") by exchanging one share of its
common stock for each share of the Bank's stock. This exchange of shares has
been accounted for as a reorganization of entities under common control, similar
to a pooling of interest, which resulted in no changes to the underlying
carrying amounts of assets and liabilities.
The Bank, which was chartered in 1988, is a full service Community Bank,
providing competitively priced commercial, mortgage and consumer loan products
to businesses and individuals primarily in its northern New Jersey market area.
The Bank also offers non-interest bearing demand deposits and a variety of
interest bearing deposits with varying rates which generally reflect market
conditions.
The majority of the Company's net income is derived from interest on loans
and investments, plus fees on deposit accounts, less interest on deposit
accounts and operating expenses.
B. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
PRINCIPALS OF CONSOLIDATION. The consolidated financial statements
include the accounts of the Company, established in 1997, its wholly owned
subsidiary, Ironbound Bank, and the Bank's wholly owned subsidiary, Ironbound
Investment Company, Inc. which was established in 1996. All significant
intercompany accounts and transactions have been eliminated.
BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION. The accounting and
reporting policies used in the preparation of the financial statements of the
Company conform to generally accepted accounting principles and to general
practices within the banking industry.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
INVESTMENT SECURITIES. Held-to-maturity securities are those debt
securities which the Company has the intent and ability to hold to maturity and
are reported at amortized cost adjusted for unamortized purchase premiums and
discounts. Available-for-sale securities are those debt and equity securities
which are neither held-to-maturity securities nor trading securities and are
reported at fair value, with unrealized gains and losses, net of the related
income tax effect, excluded from earnings and reported in a separate component
of stockholders' equity. The Company does not hold any securities for trading
purposes. The cost of investments sold is determined on the specific
identification method.
LOANS AND LOAN FEES. Loans are stated at their principal amount
outstanding, net of deferred loan fees and costs and allowance for possible loan
losses. Interest income on loans is accrued generally based upon the principal
amount outstanding. Net deferred fees are amortized into income over the
contractual life of the related loans by use of a method which approximates the
interest method. Interest income is not accrued on
D-18
<PAGE>
loans where management has determined that the borrowers may be unable to meet
contractual principal and/or interest obligations or where interest or principal
is 90 days or more past due, unless the loans are well secured and in process of
collection. When a loan is placed on nonaccrual, interest accruals cease and in
general, uncollected past due interest (including interest applicable to prior
years, if any) is reversed and charged against current income. Thereafter,
interest income is not accrued unless the financial condition and payment record
of the borrower warrant the accrual of interest income. Interest on loans that
have been restructured is accrued according to the renegotiated terms.
ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan losses
is established or increased through charges to income. Loan losses are charged
against the allowance when it is believed that the collectibility of principal
is unlikely. The level of allowance is based upon management's estimate of
potential future losses in the existing loan portfolio. Periodic evaluations of
the loan portfolio which take into consideration such factors as the borrowers'
ability to pay, specific review of problem loans, changes in the nature and
volume of the loan portfolio, overall portfolio quality and prevailing and
anticipated economic conditions are used for this purpose. Since the allowance
is based on estimates, ultimate losses may vary from current estimates. As
adjustments become necessary, they are reflected in operations in the period in
which they become known.
PURCHASED DEPOSITS PREMIUM. Purchased deposits premium is amortized on a
straight-line basis over the life of the deposits acquired, which is estimated
to be seven years.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization is provided
on a straight-line basis over the shorter of the estimated lives of the assets
or the term of the related leases, including renewal options. Estimated useful
lives are as follows: 30 years for buildings, 7 to 20 years for leasehold
improvements and 5 to 10 years for furniture and equipment.
CASH FLOW REPORTING. For purposes of reporting cash flows, the Company
considers cash and cash equivalents to include cash on hand and due from banks,
federal funds sold and money market funds. Federal funds sold are generally due
within one business day.
C. INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities at
December 31, 1997 and 1996 are as follows:
D-19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES HELD
TO MATURITY:
U.S. Treasury securities and agencies... $27,450,091 $110,383 $140,259 $27,420,215
Mortgage-backed securities.............. 11,880,365 171,461 53,467 11,998,359
Other debt securities................... 2,762,184 10,778 7,026 2,765,936
----------- -------- -------- -----------
Total................................ $42,092,640 $292,622 $200,752 $42,184,510
=========== ======== ======== ===========
INVESTMENT SECURITIES
AVAILABLE FOR SALE:
U.S. Treasury securities and agencies... $ 8,217,856 $ 47,782 $ -- $ 8,265,638
Mortgage-backed securities.............. 3,327,074 55,726 3,214 3,379,586
Other debt securities................... 1,738,479 3,810 -- 1,742,289
Preferred stock......................... 497,500 25,000 -- 522,500
----------- -------- -------- -----------
Total................................ $13,780,909 $132,318 $ 3,214 $13,910,013
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------
AMORTIZED GROSS GROSS ESTIMATED
COST UNREALIZED UNREALIZED MARKET
GAINS LOSSES VALUE
------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES HELD
TO MATURITY:
U.S. Treasury securities and agencies... $30,446,474 $ 35,871 $537,414 $29,944,931
Mortgage-backed securities.............. 4,270,598 20,947 22,513 4,269,032
Other debt securities................... 11,900,121 72,440 249,471 11,723,090
----------- -------- -------- -----------
Total................................ $46,617,193 $129,258 $809,398 $45,937,053
=========== ======== ======== ===========
INVESTMENT SECURITIES
AVAILABLE FOR SALE:
U.S. Treasury securities................ $ 8,792,149 $ 37,403 $ 8,628 $ 8,820,924
Mortgage-backed securities.............. 1,619,142 14,540 -- 1,633,682
Other debt securities................... 1,372,967 -- 2,152 1,370,815
Preferred stock......................... 655,006 25,000 325 679,681
----------- -------- -------- -----------
Total................................ $12,439,264 $ 76,943 $ 11,105 $12,505,102
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1997 by maturity is shown below. Expected maturities may differ
from contractual maturities because certain securities can be called or prepaid
by the issuer with or without call or prepayment penalties.
D-20
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT SECURITIES INVESTMENT SECURITIES
AVAILABLE FOR SALE HELD TO MATURITY
1997 1997
-----------------------------------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
-----------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 925,546 $ 926,390 $ 6,799,767 $ 6,785,089
Due after one year through five years.... 5,702,195 5,735,230 9,392,637 9,372,701
Due after five years through ten years... 2,473,004 2,490,700 16,705,061 16,689,347
Due after ten years...................... 4,182,664 4,235,193 9,195,175 9,337,373
Preferred stock.......................... 497,500 522,500 -- --
----------- ----------- ----------- -----------
Total................................. $13,780,909 $13,910,013 $42,092,640 $42,184,510
=========== =========== =========== ===========
</TABLE>
Proceeds from the sales of investment securities available for sale were
$1,363,203 and $1,046,563 for the years ended December 31, 1997 and 1996,
respectively. A gain on sale of securities of $15,682 was realized in 1997. A
loss of $3,321 was realized in 1996.
D. LOANS RECEIVABLE
The components of loans receivable at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Commercial.............................. $28,273,655 $27,175,747
Consumer................................ 3,108,046 2,715,745
Real estate............................. 7,522,765 6,004,655
----------- -----------
Gross loans............................. 38,904,466 35,896,147
Less:
Net deferred loan fees............... 128,727 133,482
Allowance for possible loan losses... 903,013 789,923
----------- -----------
Net loans........................ $37,872,726 $34,972,742
=========== ===========
</TABLE>
The total amount of nonaccruing loans approximated $177,000 and $208,000 at
December 31, 1997 and 1996, respectively. Gross interest income of $21,089 and
$26,630 would have been recorded for the years ended December 31, 1997 and 1996,
respectively, if nonaccrual loans had been current. Interest collected on
nonaccrual loans amounted to $17,597 and $82,270 for the years ended December
31, 1997 and 1996, respectively.
At December 31, 1997 loans consisted of the following:
<TABLE>
<CAPTION>
MATURITY FIXED VARIABLE TOTAL
- -------- ----------- ----------- -----------
<S> <C> <C> <C>
One year or less................... $ 3,418,050 $1,394,439 $ 4,812,489
One to five years.................. 20,151,353 2,371,441 22,522,794
More than 5 years.................. 10,985,813 583,370 11,569,583
----------- ---------- -----------
$34,555,216 $4,349,250 $38,904,466
=========== ========== ===========
</TABLE>
An analysis of activity with respect to loans outstanding to directors,
officers, their entities and immediate families is as follows:
D-21
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Balance, beginning of year............. $ 392,000 $274,000
New loans.............................. 1,660,000 180,000
Repayments............................. (150,000) (62,000)
---------- --------
Balance, end of year................... $1,902,000 $392,000
========== ========
</TABLE>
These loans were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons.
E. ALLOWANCE FOR POSSIBLE LOAN LOSSES
A summary of activity in the allowance for possible loan losses account for
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Balance, beginning of year............. $789,923 $762,149
Provision for possible loan losses..... -- --
Loans charged off...................... (75,370) (11,042)
Recoveries............................. 188,460 38,816
-------- --------
Balance, end of year................... $903,013 $789,923
======== ========
</TABLE>
The ratio of net charge offs to average loan balance for the year ending
December 31, 1997 and 1996 was (.31%) and (.09%), respectively.
F. PREMISES AND EQUIPMENT
The composition of premises and equipment at December 31, 1997 and 1996 is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
Leasehold improvements........................... $1,250,756 $1,257,831
Furniture, fixtures and equipment................ 1,304,638 1,394,977
Building......................................... 696,098 691,358
---------- ----------
Total........................................... 3,251,492 3,344,166
Less accumulated depreciation and amortization... 1,576,269 1,488,656
---------- ----------
Premises and equipment, net................... $1,675,223 $1,855,510
========== ==========
</TABLE>
G. LEASES
Operating leases are in place for certain properties. One such lease is
with a related party under a net lease agreement at $21 per square foot for
approximately 7,900 square feet. The company has options to renew
D-22
<PAGE>
all of its operating leases. As of December 31, 1997, aggregate minimum rental
commitments under operating and capital leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEARS ENDING DECEMBER 31, LEASES LEASES
- ---------------------------------- ---------- ----------
<S> <C> <C>
1998................................. $ 258,392 $ 5,311
1999................................. 260,392 5,311
2000................................. 260,392 6,195
2001................................. 260,392 --
2002................................. 260,392 --
---------- ----------
Total minimum lease payments $1,299,960 16,817
==========
Less: Amount representing interest 1,655
----------
Net lease payments................... $15,162
==========
</TABLE>
H. DEPOSITS
At December 31, 1997, time deposits had remaining periods to
contractual maturity as follows:
<TABLE>
<CAPTION>
UNDER OVER
MATURITY $100,000 $100,000 TOTAL
- -------- ----------- ---------- -----------
<S> <C> <C> <C>
Three months or less.......... $10,948,371 $3,230,724 $14,179,095
Three to twelve months........ 10,478,562 2,390,921 12,869,483
One to three years............ 941,292 467,884 1,409,176
Over three years.............. 35,212 -- 35,212
$22,403,437 $6,089,529 $28,492,966
</TABLE>
I. INCOME TAXES
The income tax expense is comprised of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
------------------------
<S> <C> <C>
Current federal income tax expense......................... $597,027 $437,243
Current state income tax expense........................... 82,308 73,299
Deferred federal and state income tax provision............ 25,302 123,078
-------- --------
Total income tax expense................................ $704,637 $633,620
======== ========
</TABLE>
Net deferred tax assets at December 31, 1997 and 1996 of $259,074 and
$309,681, respectively, have been provided for the temporary differences between
the tax basis and financial statement carrying amounts of assets and
liabilities. The net deferred tax asset at December 31, 1997 and 1996 includes
liabilities of $51,641 and $26,335, respectively, recorded on the unrealized
appreciation on securities classified as available-for-sale under SFAS 115.
These amounts were reflected in the financial statement as adjustments to
stockholders' equity.
D-23
<PAGE>
The major sources of temporary differences and their deferred tax effect
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
--------- ----------
DEFERRED TAX ASSETS:
<S> <C> <C>
Allowance for loan losses.............................. $139,718 $150,703
Loan fees.............................................. -- 9,900
Premiums on securities................................. 131,577 144,911
Depreciation and amortization.......................... 50,751 22,812
Other.................................................. 6,056 7,690
--------- ----------
Total deferred tax assets............................ 328,102 336,016
--------- ----------
DEFERRED LIABILITIES:
Net unrealized gain on securities available for sale... 51,641 26,335
Loan fees.............................................. 17,387 --
--------- ----------
Total deferred tax liabilities....................... 69,028 26,335
--------- ----------
Net deferred tax assets............................. $259,074 $309,681
========= ==========
</TABLE>
A reconciliation of the 1997 statutory income tax provision to the
effective income tax provision is as follows:
<TABLE>
<CAPTION>
STATUTORY
AMOUNT RATE
-------- ---------
<S> <C> <C>
Federal income tax expense..................................... $668,225 34.00%
State income tax expense (net of federal tax benefit).......... 57,225 2.91
Meals and entertainment........................................ 1,843 0.09
Penalties...................................................... 1,301 0.07
Interest on tax-exempt securities.............................. (20,092) (1.02)
Other.......................................................... (3,865) (0.20)
-------- ---------
Total income tax provision.................................. $704,637 35.85%
======== =========
</TABLE>
J. DIVIDENDS
The Board of Directors declared four cash dividends during the 1997 year,
each at $.05 per share. Total dividends paid or declared in 1997 and 1996 were
$205,652 and $104,166, respectively.
K. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involved, in varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statement of financial condition.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the
D-24
<PAGE>
contractual notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
A summary of financial instruments whose contract amounts represent credit
risk at December 31, 1997 is as follows:
<TABLE>
<S> <C>
Commitments to extend credit.................... $4,491,000
Commitments to purchase securities.............. 833,000
Commercial and standby letters of credit........ 71,000
----------
Total........................................ $5,395,000
==========
</TABLE>
Commitments to extend credit are legally binding agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed dates or other termination clauses
and may require the customer to pay a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's credit
worthiness is evaluated on a case-by-case basis. The amount of collateral
obtained, if deemed necessary upon the extension of credit, is based on
management's credit evaluation of the borrower. Collateral held varies but may
include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company
to assure the performance of a customer to a third party. Commercial letters of
credit are conditional commitments issued by the Company to provide financing
upon the delivery of commercial goods to a customer. All guarantees under
letters of credit extend for a period of up to a year from the issuance date.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. If deemed necessary,
the Company may hold collateral supporting those commitments.
L. FAIR VALUE OF FINANCIAL INSTRUMENTS
The information provided below is required by SFAS No. 107, "Disclosures
About Fair Value of Financial Instrument." These amounts represent estimates of
fair value of financial instruments at a point in time. Significant estimates
using available market information and appropriate valuation methodologies were
used for the purposes of this disclosure. The estimates are not necessarily
indicative of the amounts that could realize in a current market exchange, and
the use of different market assumptions or methodologies could have a material
effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
ESTIMATED
CARRYING FAIR OR
VALUE MARKET VALUE
--------------------------
<S> <C> <C>
Cash and cash equivalents....... $ 15,325,668 $ 15,325,668
Investment securities:
Held to maturity............... 42,092,640 42,184,510
Held for sale.................. 13,910,013 13,910,013
Loans receivable................ 38,904,466 39,154,424
Deposits........................ 100,710,839 100,779,406
</TABLE>
D-25
<PAGE>
The fair value of investment securities is based on quoted market prices.
The fair value of loans receivable was estimated by discounting the future cash
flows over the estimated remaining term of the loans. The discount factor was
determined by taking into consideration current market rates and loss
experience.
Demand deposits and savings deposits are shown at their face values. The
fair value of time deposits was estimated by discounting the future cash flows
over the remaining term. The estimated value of demand and savings does not
reflect the value of core deposits which is determined by taking into
consideration the customer base and deposit mix. Management believes there is
significant core deposit value which is not reflected in the above schedule.
M. STOCK OPTIONS AND EARNINGS PER SHARE
The Company has a stock option plan (the "Plan") which provides for grants
of options to purchase a total of 49,608 shares of stock (24,804 shares to each
of the Company's two executive officers). Options vest at a rate of 10,000 per
year beginning in 1995 through 1998 with the remainder of 9,608 shares vesting
in 1999. The option price of $8.00 per share was higher than the related market
value per share at the date of the grant. At December 31, 1997 and 1996, all
49,608 options remained outstanding.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation expense
has been recognized for The Plan. Had compensation cost for The Plan been
determined based on the fair value at the grant date of awards in 1997 and 1996,
consistent with the provisions of SFAS No. 123, the Bank's net earnings and
earnings per share would have been reduced to the pro forma amounts indicated
below:
At December 31, 1997, there were 30,000 options that were vested and
exercisable.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
------------------------
<S> <C> <C>
Net income, as reported..................... $1,260,732 $846,623
Net income, pro forma....................... 1,250,722 836,523
Basic earnings per share, as reported....... $ 1.22 $ 0.81
Basic earnings per share, pro forma......... 1.21 0.80
Diluted earnings per share, as reported..... 1.19 0.80
Diluted earnings per share, pro forma....... 1.18 0.79
</TABLE>
The fair value of each option grant of $1.54 is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1997 and 1996: dividend yield of 1.7%,
risk-free interest rate of 6.5%, and expected lives of five years.
D-26
<PAGE>
Basic earnings per share and diluted earnings per share, as reported, were
calculated as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996
--------------------------------- ------------------------------
EARNINGS EARNINGS
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
--------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share.......... $1,260,732 1,035,461 $ 1.22 $846,623 1,041,663 $ 0.81
Effect of stock options........... -- 22,702 (0.03) -- 15,098 (0.01)
---------- --------- ------ -------- --------- ------
Diluted earnings per share........ $1,260,732 1,058,136 $ 1.19 $846,623 1,056,761 $ 0.80
========== ========= ====== ======== ========= ======
</TABLE>
N. STOCK REPURCHASE PROGRAM
On July 2, 1997 the Board of Directors authorized the repurchase of up to
5%, or 52,083 shares of the Company's outstanding stock. This program permits
the Company to repurchase such shares, from time to time, in the open market or
in privately negotiated transactions as market conditions, in the opinion of
management, may warrant. The repurchase shares will be held in treasury and may
be used for general corporate purposes. The repurchase program can be
discontinued at any time. At December 31, 1997 the Company had repurchased
36,520 shares at a cost of $537,314.
O. CAPITAL ADEQUACY
The Company and its subsidiary Bank are subject to various regulatory
capital requirements administered by the federal banking agencies. The
regulations require the Company and the Bank to meet specific minimum capital
adequacy guidelines that involve quantitative measures of assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting
practices. Such capital classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
D-27
<PAGE>
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of Tier 1 capital (as defined in the regulations) to
total average assets (as defined), and minimum ratios of Tier 1 and total
capital (as defined) to risk-weighted assets (as defined). The Company's
(Ironbound Bankcorp, NJ) and its subsidiary (Ironbound Bank) actual capital
amounts and ratios are presented in the following table:
<TABLE>
<CAPTION>
REQUIRED BY REGULATION REQUIRED BY REGULATION
FOR CAPITAL ADEQUACY TO BE CONSIDERED
ACTUAL PURPOSES WELL CAPITALIZED
-------------------- ---------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ ------ ------------- ------- ------------ --------
IRONBOUND BANKCORP, NJ (CONSOLIDATED)
DECEMBER 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital to Average Assets................ $10,605,745 9.6% $4,401,040 4.0% $5,501,300 5.0%
Tier 1 Capital to Risk Weighted Assets.......... 10,688,257 20.8 2,055,520 4.0 3,083,280 6.0
Total Capital to Risk Weighted Assets........... 10,844,363 21.1 4,111,040 8.0 5,138,800 10.0
IRONBOUND BANK
DECEMBER 31, 1997:
Tier 1 Capital to Average Assets................ $10,605,745 9.6% $4,401,359 4.0% $5,501,699 5.0%
Tier 1 Capital to Risk Weighted Assets.......... 10,688,257 20.8 2,056,320 4.0 3,084,480 6.0
Total Capital to Risk Weighted Assets........... 10,844,363 21.1 4,112,640 8.0 5,140,800 10.0
IRONBOUND BANK
DECEMBER 31, 1996:
Tier 1 Capital to Average Assets................ $ 9,603,238 9.6% $3,991,904 4.0% $4,989,880 5.0%
Tier 1 Capital to Risk Weighted Assets.......... 10,035,038 15.9 2,517,560 4.0 3,776,340 6.0
Total Capital to Risk Weighted Assets........... 10,288,637 16.4 5,035,120 8.0 6,293,900 10.0
</TABLE>
All of the above capital ratios for the Company and the Bank substantially
exceeded regulatory requirements. The FDIC's most recent examination of the
Bank was performed as of the close of business at September 30, 1996. In this
examination report, the FDIC categorized the Bank as a well-capitalized
institution. Management is not aware of any change in conditions or events
since the FDIC examination date which would lead it to believe that the
institution's capital category has changed.
D-28
<PAGE>
P. CONDENSED FINANCIAL STATEMENTS OF IRONBOUND BANKCORP, NJ (PARENT COMPANY
ONLY)
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 1997
-------------------------------- -----------------
ASSETS
<S> <C>
Cash and due from banks...................................................... $ 50,271
Other assets - organization costs............................................ 27,254
Investment in subsidiary (equity method)..................................... 10,844,363
-----------
TOTAL ASSETS.................................................................. $10,921,888
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Dividends payable............................................................ $ 50,271
Due to subsidiary............................................................ 27,254
-----------
Total liabilities......................................................... 77,525
-----------
STOCKHOLDERS' EQUITY
Common stock................................................................. 5,208,315
Paid-in capital.............................................................. 4,298,362
Retained earnings............................................................ 1,797,537
Treasury stock............................................................... (537,314)
Net unrealized gains on held-for-sale securities (net of tax)................ 77,463
-----------
Total stockholders' equity................................................. 10,844,363
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $10,921,888
===========
YEAR ENDED
STATEMENT OF INCOME DECEMBER 31, 1997
------------------- -------------------
Dividends from subsidiary for acquisition of treasury stock and
dividends to shareholders....................................................... $ 742,966
Other income-management fee changed to subsidiary................................ 2,478
-----------
Total income.................................................................. 745,444
Other expense-amortization of organization costs................................. 2,478
-----------
Income before equity in undistributed earnings of subsidiary..................... 742,966
Equity in undistributed earnings of subsidiary................................... 517,766
-----------
NET INCOME....................................................................... $ 1,260,732
===========
STATEMENT OF CASH FLOWS
-----------------------
OPERATING ACTIVITIES:
Net income....................................................................... $ 1,260,732
Adjustments to reconcile net income to net cash provided from operations:
Equity in undistributed earnings of subsidiary................................. (517,766)
Amortization of organization costs............................................. 2,478
Management fee charged to subsidiary Bank...................................... (2,478)
Increase in organization costs................................................. (27,254)
Increase in total liabilities.................................................. 77,525
-----------
Net cash provided from operating activities................................... 793,237
-----------
FINANCING ACTIVITIES:
Cash dividends paid to shareholders........................................... (205,652)
Acquisition of treasury stock................................................. (537,314)
-----------
Net cash (used) for financing activities..................................... (742,966)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 50,271
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................................... --
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR........................................... $ 50,271
===========
</TABLE>
D-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of Stockholders
Ironbound Bankcorp, NJ
Newark, New Jersey
We have audited the accompanying consolidated statements of financial
condition of Ironbound Bankcorp, NJ and Subsidiary as of December 31, 1997 and
1996 and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Ironbound Bankcorp, NJ and
Subsidiary as of December 31, 1997 and 1996 and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
January 27, 1998
Parsippany, New Jersey
D-30
<PAGE>
EXHIBIT 5.1
[MULDOON, MURPHY & FAUCETTE LETTERHEAD]
__________, 1998
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Re: Richmond County Financial Corp.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel for Richmond County Financial Corp., a
Delaware corporation ("Richmond County") and, at the request of Richmond County,
have examined the registration statement on Form S-4 (the "Registration
Statement"), filed by Richmond County with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act") on October __, 1998, and the regulations promulgated thereunder. All
capitalized terms not otherwise defined herein are defined herein as in the
Registration Statement.
The Registration Statement relates to, among other things, the registration
under the Act of ___________ shares, subject to adjustment, of common stock,
$0.01 par value per share, of Richmond County (the "Merger Shares"), into which
certain shares of common stock, $5.00 par
<PAGE>
Richmond County Financial Corp.
_______________, 1998
Page 2
value per share of Ironbound Bankcorp, NJ, a New Jersey corporation
("Ironbound"), will be converted pursuant to an Agreement and Plan of Merger
dated as of July 17, 1998 (the "Merger Agreement") by and between Ironbound and
Richmond County and certain related instruments and agreements described in the
Registration Statement that were executed, or are to be executed, in connection
with the Merger Agreement (the "Related Instruments"). In rendering the opinion
set forth below, we do not express any opinion concerning law other than the
federal law of the United States and the corporate law of the State of Delaware.
It is our understanding that upon consummation of the Merger, among other
things, (i) Ironbound will merge with and into Richmond County, with Richmond
County as the surviving corporation, succeeding to all of the assets and
liabilities of Ironbound (the "Merger"); (ii) subject to certain exceptions,
each outstanding share of common stock, $5.00 par value per share, of Ironbound
(the "Ironbound Common Stock"), will be converted and exchangeable for 1.45
Merger Shares (the "Exchange Ratio") plus cash in lieu of fractional shares; and
(iii) if the Richmond County Market Value is less than $15.945 but equal to or
greater than $14.00, the Exchange Ratio will be increased so that the value of
the consideration at the Valuation Date to be paid for each share of Ironbound
Common Stock to be converted to Richmond County Common Stock (and cash in lieu
of fractional shares) is $23.12.
<PAGE>
Richmond County Financial Corp.
_______________, 1998
Page 3
In addition, each option granted by Ironbound to purchase Ironbound Common
Stock which is outstanding and unexercised immediately prior to consummation of
the Merger shall be converted automatically into the right to receive such
number of Merger Shares (rounded to the nearest whole shares) as is equal in
value (the Richmond County Common Stock value shall be determined as of July 17,
1998) to the amount equal to the product of the Exchange Ratio and the number of
shares of Ironbound Common Stock issuable upon exercise of the Ironbound Options
immediately prior to the Ironbound Effective Time multiplied by the spread
between the market price (as of July 17, 1998) and the exercise price for each
Ironbound Option, provided that Ironbound optionholders will receive cash in
lieu of any fractional shares that result from such multiplication.
In the preparation of this opinion, we have examined originals or copies
identified to our satisfaction of (i) the Certificate of Incorporation of
Richmond County, as filed with the State of Delaware; (ii) the By-laws of
Richmond County; (iii) certain minutes of Richmond County made available to us
by officers of Richmond County; (iv) certain certificates from officers of
Richmond County as to certain factual matters material to the opinion expressed
below; (v) the Certificate of Incorporation of Ironbound as filed with the
Secretary of State of the State of New Jersey; (vi) the By-laws of Ironbound;
(vii) certain minutes of Ironbound made available to us by officers of
Ironbound; (viii) certain certificates from officers of Ironbound as to certain
factual matters material to the opinion expressed below; (ix) the
representations of Richmond County and Ironbound
<PAGE>
Richmond County Financial Corp.
_______________, 1998
Page 4
contained in the Merger Agreement and the Registration Statement; and (x) the
Registration Statement, including the exhibits thereto. We have also examined
originals or copies of such documents, corporate records, certificates of public
officials and other instruments, and have conducted such other investigations of
law and fact, as we have deemed necessary or advisable for purposes of our
opinion.
In our examinations, we have assumed, without investigation, the
genuineness of all signatures, the authenticity of all documents and instruments
submitted to us as originals, the conformity to the originals of all documents
and instruments submitted to us as certified or conformed copies and the
authenticity of the originals of such copies, the correctness of all
certificates, and the accuracy and completeness of all records, documents,
instruments and materials made available to us by Richmond County and Ironbound.
In addition, in rendering this opinion we have assumed, without
investigation, (i) that the Merger Shares will be offered and shares of
Ironbound Common Stock will be exchanged in the manner and on the terms
identified or referred to in the Registration Statement; (ii) that all
conditions to the Merger have been, or will be, met; (iii) that the Merger will
be consummated in accordance with the terms of the Registration Statement, the
Merger Agreement and the Related Instruments; (iv) the Registration Statement
becomes and remains effective under the Act and fully complies with
<PAGE>
Richmond County Financial Corp.
_______________, 1998
Page 5
all of the requirements of the Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the regulations promulgated thereunder, during
all relevant periods; (v) the Proxy Statement/Prospectus forming a part of the
Registration Statement, and the delivery procedures with respect thereto,
fulfill all requirements of the Act, the Exchange Act, and all applicable
regulations promulgated under the Act and the Exchange Act, throughout all
relevant periods; (vi) compliance with all federal and state securities laws
throughout all relevant periods; (vii) the Merger has become effective under
applicable state law; and (viii) the Merger Shares are issued and delivered in
the manner referred to in the Merger Agreement and the Registration Statement,
upon consummation of the Merger. We have also relied, without independent
investigation, upon the representations and warranties of the parties to the
Merger Agreement set forth in the Merger Agreement.
Our opinion is limited to the matters set forth herein and we express no
opinion other than as expressly set forth herein. Our opinion is expressed as
of the date hereof and is based on laws currently in effect. Accordingly, the
conclusions set forth in this opinion are subject to change in the event that
any laws should change or be enacted in the future. We are under no obligation
to update this opinion or to otherwise communicate with you in the event of any
such change. This opinion is given solely for the benefit of Richmond County
and Ironbound and may not be relied
<PAGE>
Richmond County Financial Corp.
_______________, 1998
Page 6
upon by any other person or entity, nor quoted in whole or in part, or otherwise
referred to in any document without our express written consent.
Based upon and subject to the foregoing, it is our opinion that, upon
effectiveness of the Registration Statement, the issuance of the Merger Shares
in accordance with the terms of the Merger Agreement will have been duly
authorized and, when the Merger Shares are issued in accordance with the terms
of the Merger Agreement and the Registration Statement, the Merger Shares will
be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our Firm under the caption "Legal
Matters" in the Proxy Statement/Prospectus forming a part of the Registration
Statement. In giving such consent we do not hereby admit that we are experts or
otherwise within the category of persons whose consent is required under Section
7 of the Act or the rules or regulations of the Securities and Exchange
Commission thereunder.
Sincerely,
MULDOON, MURPHY & FAUCETTE
<PAGE>
EXHIBIT 8.1
[MULDOON, MURPHY & FAUCETTE LETTERHEAD]
[FORM OF FEDERAL TAX OPINION]
_____________, 199__
Board of Directors
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Re: Federal Income Tax Consequences of Merger of Ironbound Bankcorp, NJ
with and into Richmond County Financial Corp.
To the Members of the Board of Directors:
You have requested an opinion regarding federal tax consequences of a
proposed transaction involving the merger of Ironbound Bankcorp, NJ, a bank
holding company organized under the laws of the State of New Jersey
("Ironbound") with and into Richmond County Financial Corp. ("Richmond County"),
a savings and loan holding company organized under the laws of the State of
Delaware. The merger will be effected pursuant to the Agreement and Plan of
Merger, dated as of July 17, 1998, by and between Richmond County Financial
Corp. and Ironbound Bankcorp, NJ (the "Merger Agreement"). The merger and
related transactions are described in the Merger Agreement and in the Proxy
Statement/Prospectus (the "Proxy Statement") included in Richmond County's
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the merger (the "Registration Statement"). All
capitalized terms used but not defined in this letter shall have the meanings
set forth in the Merger Agreement or the Proxy Statement.
Under the Merger Agreement, at the Ironbound Effective Time, Ironbound
shall be merged with and into Richmond County (the "Merger") and the separate
existence of Ironbound shall cease. Richmond County shall be the surviving
corporation in the Merger and shall continue its corporate existence under the
laws of Delaware. By virtue of the Merger, automatically and without any action
on the part of the holder thereof, each share of Ironbound's common stock (the
"Ironbound Common Stock") issued and outstanding immediately prior to the
Ironbound Effective Time shall be converted into the right to receive that
number of shares of the common stock of Richmond County (the "Richmond County
Common Stock") determined under the formula set out in the Merger Agreement,
subject to the payment of cash in lieu of fractional shares.
<PAGE>
Board of Directors
__________________, 199_ DRAFT
Page 2
Our opinion is provided solely with respect to federal income tax
consequences of the Merger. This opinion is being delivered at your request and
pursuant to Sections 5.2(e) of the Merger Agreement.
In connection with the opinions expressed herein, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Merger Agreement and the Proxy Statement, and of such
corporate records of the parties to the Merger as we have deemed appropriate.
We have also received and relied upon, without independent verification, the
representations of Ironbound concerning Ironbound itself as well as the
transaction ("Representations"); we have received and relied upon, without
independent verification, the representations of Richmond County concerning the
transaction and certain post-Merger plans ("Representations"). We have assumed
that such Representations are true and that the parties to the Merger will act
in accordance with the Merger Agreement. We have assumed that all daily
operations of Richmond County will be conducted in a manner wholly consistent
with all Representations provided by Richmond County. In addition, we have made
such investigations of law as we have deemed appropriate to form a basis for the
opinions expressed below.
We will rely upon the accuracy of the Representations and the statements of
facts contained in the examined documents, particularly the Merger Agreement.
We have also assumed the authenticity of all signatures, the legal capacity of
all natural persons and the conformity to the originals of all documents
submitted to us as copies. We have assumed that the Merger will be consummated
strictly in accordance with the terms of the Merger Agreement.
The Merger Agreement and the Proxy Statement contain a detailed description
of the Merger. These documents as well as the Representations to be provided by
Richmond County and Ironbound are incorporated in this letter as part of the
statement of the facts.
LIMITATIONS ON OPINION
The opinions expressed herein are rendered only with respect to the issues
specified herein. We express no opinion with respect to any other federal, state
or local tax or other legal aspect of the transaction. If any of the above
referenced facts or Representations are not true, correct and complete in all
material respects, our opinion could be subject to change. In issuing our
opinion, we are relying on the provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and regulations issued thereunder which are cited
herein. All such provisions are subject to change, which change can be
retroactive in effect. Any such change could have an effect on the validity of
<PAGE>
Board of Directors
__________________, 199_ DRAFT
Page 3
our opinions. We assume no obligation to revise or supplement this opinion if
any subsequent change were to occur.
The opinions contained herein are not binding on the Internal Revenue
Service ("IRS") or any court. No assurance can be given that the IRS will not
take a different view of these transactions and that view may be ultimately
sustained by a court. It is our understanding that neither party to the Merger
intends to request a ruling from the IRS concerning the Merger.
FEDERAL TAX OPINION
Based on and subject to the foregoing, the facts referenced in this
opinion, the Representations referred to above, and subject to the limitations
referenced herein, it is our opinion that for federal income tax purposes, under
the current law:
(1) The Merger will constitute a tax-free reorganization under Section
368(a)(1)(A) of the Code and Richmond County and Ironbound will each be
a party to the reorganization.
(2) No gain or loss will be recognized by Richmond County, Richmond County
Savings Bank, Ironbound or Ironbound Bank as a result of the Merger.
(3) No gain or loss will be recognized by the stockholders of Ironbound who
exchange all of their Ironbound Common Stock solely for Richmond County
Common Stock pursuant to the Merger, except to the extent of any cash
received in lieu of a fractional share interest in Richmond County
Common Stock.
(4) The tax basis of the Richmond County Common Stock received by
shareholders who exchange their Ironbound Common Stock for Richmond
County Common Stock pursuant to the Merger will be the same as the tax
basis of the Ironbound Common Stock surrendered in exchange therefor,
reduced by any amount allocable to a fractional share interest for
which cash is received and increased by any gain recognized on the
exchange.
(5) The holding period of Richmond County Common Stock received by each
stockholder in the Merger will include the holding period of Ironbound
Common Stock exchanged therefor, provided that such stockholder held
such Ironbound Common Stock as a capital asset on the Ironbound
Effective Date.
<PAGE>
Board of Directors
__________________, 199_ DRAFT
Page 4
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement of Richmond County filed in connection with the Merger
and to the references to us under the headings "SUMMARY -- Certain Federal
Income Tax Considerations of the Ironbound Merger" and "THE MERGER --Certain
Federal Income Tax Considerations of the Ironbound Merger" in the Proxy
Statement/Prospectus on Richmond County and Ironbound. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under the Securities Act of 1933.
Sincerely,
MULDOON, MURPHY & FAUCETTE
<PAGE>
EXHIBIT 8.2
FORM OF
FEDERAL TAX OPINION
_____________, 1998
Ironbound Bankcorp, NJ
36 Pacific Street
Newark, New Jersey 07105
Re: Agreement and Plan of Merger Dated as of July 17, 1998,
By and Between Richmond County Financial Corp. and
Ironbound Bankcorp, NJ
-------------------------------------------------------
Dear Sirs:
You have requested our opinion concerning certain federal income tax issues
relating to the Agreement and Plan of Merger, dated as of July 17, 1998 (the
"Merger Agreement"), by and between Richmond County Financial Corp., a Delaware
corporation ("RCFC"), and Ironbound Bankcorp, NJ, a New Jersey corporation
("Ironbound"). Capitalized terms not otherwise defined in this letter shall
have the same meanings as those terms in the Merger Agreement. In rendering
this opinion we have examined (i) the Merger Agreement; (ii) the representation
letters from RCFC and Ironbound, which are attached; and (iii) such other
documents as we have deemed necessary or appropriate in order to render the
requested opinion.
In connection with such examination we have assumed (1) the authenticity of
all documents, agreements and instruments; (2) that the documents reviewed in
connection with rendering the opinion are complete and accurate and will be
complete and accurate as of the effective date of the Merger; (3) that the
Merger will be effective under applicable state laws; and (4) that the Merger
Agreement accurately and completely describes the terms of the Merger. In
rendering our opinion, we have not undertaken any independent investigation of
the accuracy of any assumptions stated herein, the veracity of written
statements as to factual matters relied upon in rendering the opinion or the
authenticity of documents.
Our opinion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated under the Code, published Revenue
Rulings, published Revenue Procedures and existing judicial and administrative
decisions all as of the date of this letter. All of
<PAGE>
Ironbound Bankcorp, NJ
___________________, 1998
Page 2
the foregoing is subject to change and any such change (which could be
retroactive) could affect the opinion contained in this letter.
The opinion is our legal judgment as to certain of the federal income tax
consequences of the proposed Merger. Our opinion is not binding on the Internal
Revenue Service and the Internal Revenue Service may reach a different
conclusion, which conclusion could be sustained by a court if litigated. The
opinion addresses certain tax consequences to Ironbound common stockholders who
are (i) citizens or residents of the United States; (ii) domestic corporations;
or (iii) otherwise subject to United States federal income tax on a net income
basis in respect of shares of Ironbound common stock ("U.S. Holders"). The
opinion is limited to the specific conclusions reached in the opinion and does
not purport to reach any other conclusions, such as the future use of tax
attributes of the parties, tax consequences to holders of Ironbound Common Stock
who hold such shares as other than capital assets or are insurance companies,
tax exempt organizations, financial institutions, dealers in securities, persons
who acquired or acquire shares of Ironbound Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation and persons who
hold Ironbound Common Stock in a hedging transaction or as part of a straddle or
conversion transaction. The opinion does not address foreign, state, local,
estate or other potential tax consequences of the Merger.
On the basis of the foregoing, we are of the opinion that for federal
income tax purposes:
(i) The Merger will constitute a tax-free reorganization under Section
368(a) of the Code. No gain or loss will be recognized by RCFC, Richmond County
Savings Bank ("RCFC Bank"), Ironbound, or Ironbound Bank as a result of the
Merger;
(ii) Except to the extent of any cash received in lieu of a fractional
share interest in RCFC Common Stock, no gain or loss will be recognized by U.S.
Holders of Ironbound Common Stock who exchange their Ironbound Common Stock for
RCFC Common Stock pursuant to the Merger;
(iii) The aggregate adjusted tax basis of RCFC Common Stock received by
U.S. Holders who exchanged their Ironbound Common Stock for RCFC Common Stock o
n the Merger will be the same as the tax basis of Ironbound Common Stock
surrendered pursuant to the 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
(iv) The holding period of RCFC Common Stock received by each U.S. Holder
in the Merger will include the holding period of Ironbound Common Stock
exchanged therefor, provided that such U.S. Holder held such Ironbound Common
Stock as a capital asset on the Effective Date.
<PAGE>
Ironbound Bankcorp, NJ
___________________, 1998
Page 3
We hereby consent to the filing of this opinion as an exhibit to RCFC's
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission. We also consent to the references to our firm in the Prospectus
contained in the Form S-4 under the captions "The Ironbound Merger - Certain
Federal Income Tax Consequences of the Ironbound Merger" and "Legal Matters".
Except as set forth above, we express no opinion as to the tax consequences
to any party, whether federal, state, local or foreign, or of any transaction
related to the Merger contemplated by the Agreements. This opinion is being
furnished only to you in connection with the Merger and solely for your benefit
in connection therewith and may not be used or relied upon for any other purpose
and may not be circulated, quoted or otherwise referred to for any purpose
without our expressed written consent.
Yours very truly,
-------------------------------------
Luse Lehman Gorman Pomerenk & Schick,
A Professional Corporation
<PAGE>
EXHIBIT 23.4
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
We consent to the reference under the caption "Experts" in the Registration
Statement (Form S-4) pertaining to the Richmond County Financial Corp. Proxy
Statement/Prospectus and to the incorporation by reference therein of our report
dated August 6, 1998, with respect to the consolidated financial statements of
Richmond County Financial Corp., included in its Form 10-K for the year ended
June 30, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
New York, New York
December 15, 1998
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Stockholders
Ironbound Bankcorp., NJ
Newark, New Jersey
We consent to the use in this Registration Statement of Richmond County
Financial Corp. on Form S-4 of our report dated January 27, 1998 relating to the
consolidated statements of financial condition of Ironbound Bankcorp, NJ and
Subsidiary as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended, appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Selected Historical
Financial Data of Richmond County and Ironbound" and "Experts" in such
Prospectus.
/s/ Deloitte & Touche, LLP
--------------------------
Deloitte & Touche, LLP
Parsippany, New Jersey
December 15, 1998
<PAGE>
EXHIBIT 23.6
Consent of Ostrowski & Company, Inc.
Ostrowski & Company, Inc. hereby consents to the inclusion of its fairness
opinion addressed to the Board of Directors of Ironbound Bankcorp, NJ as an
annex to the Form S-4 Registration Statement of Richmond County Financial Corp.
and to references to our firm contained in or made a part of the Registration
Statement.
/s/ Ostrowski & Company, Inc.
-----------------------------
Ostrowski & Company, Inc.
New York, NY
December 15, 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>
<PAGE>
PROXY
IRONBOUND BANKCORP, NJ
SPECIAL MEETING OF STOCKHOLDERS
____________, 1999
The undersigned hereby appoints_______________, with full powers of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of capital stock of Ironbound Bankcorp, NJ ("Ironbound") which the
undersigned is entitled to vote at the Special Meeting of Stockholders (the
"Ironbound Meeting") to be held at___________________________ and at any and
all adjournments and postponements thereof, as follows:
1. To approve and adopt the Agreement and Plan of Merger, dated as of July 17,
1998, by and between Richmond County Financial Corp. ("Richmond County")
and Ironbound (the "Ironbound Merger Agreement"), providing for the merger
of Ironbound with and into Richmond County (the "Ironbound Merger"), and
the conversion of each share of common stock of Ironbound, into the right
to receive 1.45 shares of the common stock of Richmond County, plus cash in
lieu of any fractional share interest (subject to possible adjustment as
set forth in the Ironbound Merger Agreement).
[_] FOR [_] AGAINST [_] VOTE WITHHELD
2. To transact such other business as may properly come before the Ironbound
Meeting or any adjournment or postponement thereof.
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Ironbound Meeting or any adjournment
or postponement thereof, including proposals to adjourn the Ironbound Meeting to
permit the further solicitation of proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL LISTED ABOVE.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY_______________________ IN
THEIR DISCRETION. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and choose to vote at the Ironbound
Meeting or at any adjournments or postponements thereof, and after notification
to the Secretary of Ironbound at the Ironbound Meeting of the stockholder's
decision to terminate this proxy, then the power of such attorneys or proxies
shall be deemed terminated and of no further force and effect. This proxy may
also be revoked by filing a written notice of revocation with the Secretary of
Ironbound or by duly executing a proxy bearing a later date.
The undersigned acknowledges receipt from Ironbound, prior to the execution
of this proxy, of Notice of the Ironbound Meeting and of a Proxy
Statement/Prospectus dated _____, 199_.
Date:________________, 199_ [_] Check Box if you plan to Attend Meeting
_________________________ ___________________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ ___________________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
________________________________________________________________________________
PLEASE COMPLETE, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
________________________________________________________________________________
