<PAGE>
As filed with the Securities and Exchange Commission on January 8, 1999
Registration No. 333-66749
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________
PRE-EFFECTIVE AMENDMENT NO. 2 TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_____________________________________
RICHMOND COUNTY FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 6036 06-1498455
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification Number)
of Incorporation or Organization) Classification Code 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)
______________________________________________________
COPIES TO:
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DOUGLAS P. FAUCETTE, ESQ. MICHAEL M. HORN, ESQ.
MARC P. LEVY, ESQ. MCCARTER & ENGLISH, LLP
MULDOON, MURPHY & FAUCETTE LLP 100 MULBERRY STREET
5101 WISCONSIN AVENUE, N.W. NEWARK, NEW JERSEY
WASHINGTON, D.C. 20016 07102
(202) 362-0840 (973) 622-4444
</TABLE>
__________________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS OF
THIS REGISTRATION STATEMENT AND THE SATISFACTION OR WAIVER OF ALL OTHER
CONDITIONS TO THE MERGER DESCRIBED IN THE
JOINT PROXY STATEMENT/PROSPECTUS.
If the securities being registered on this form are to be offered in connection
with the formation of a holding company
and there is compliance with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
_________________________________________________
Calculation of Registration Fee
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Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities Being 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 10,041,277 N/A $143,150,359 $39,796(3)
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 consummation of the acquisition of Bayonne Bancshares, Inc.
("Bayonne") by Richmond County.
(2) The registration fee has been computed pursuant to Rules 457(f)(1) and
457(c) under the Securities Act of 1933, as amended, based on the average of
the high and low prices for shares of common stock of Bayonne reported on
the Nasdaq National Market of the Nasdaq Stock Market on October 30, 1998,
($14.969) and the estimated maximum number of such shares (9,563,121),
including shares issuable upon the exercise of outstanding stock options,
that may be exchanged for the securities being registered.
(3) Registration fee previously paid with Form S-4 filed on November 3, 1998.
______________________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OR
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
RICHMOND COUNTY FINANCIAL CORP.'S COMMON STOCK IS LISTED ON THE NASDAQ
NATIONAL MARKET OF THE NASDAQ STOCK MARKET AND IS TRADED UNDER THE SYMBOL"RCBK".
<PAGE>
LOGO OF LOGO OF
RICHMOND COUNTY FINANCIAL CORP. BAYONNE BANCSHARES, INC.
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Richmond County Financial Corp. and Bayonne
Bancshares, Inc. have agreed on a merger of Richmond County and Bayonne. In the
merger, Bayonne will merge into Richmond County, with Richmond County being the
surviving corporation. The combined company will be an effective competitor on
many fronts in its New York and New Jersey market areas, with total assets
approaching $2.4 billion, deposits of approximately $1.5 billion and
stockholders' equity of approximately $435 million. We are convinced that this
merger will position our two companies to grow and flourish as the financial
services business evolves and consolidates.
As a result of the merger, each share of Bayonne common stock that you hold will
be converted automatically into the right to receive 1.05 shares of common stock
of Richmond County.
We cannot complete the merger unless the stockholders of both of our companies
approve it. Each of us will hold a meeting of our stockholders to vote on this
merger proposal. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to
attend your stockholder meeting, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you want to vote, your proxy will be counted as a
vote in favor of the merger. Not returning your card or not instructing your
broker how to vote any shares held for you in "street name" will have the same
effect as a vote against the merger.
The dates, times and places of the meetings are as follows:
FOR RICHMOND COUNTY FINANCIAL CORP. FOR BAYONNE BANCSHARES, INC.
__________, 1999, __:__ local time ________, 1999, __:__ local time
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
This document provides you with detailed information about these meetings and
the proposed merger. You can also get information about our companies from
publicly available documents that our companies have filed with the Securities
and Exchange Commission. We encourage you to read this entire document
carefully.
We strongly support this combination of our companies and join with all of the
other members of our Boards of Directors in enthusiastically recommending that
you vote in favor of the merger.
Michael F. Manzulli Patrick F.X. Nilan
Chairman and Chief Executive Officer Chairman
Richmond County Financial Corp. Bayonne Bancshares, Inc.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK
SUBSIDIARY OF ANY OF THE PARTIES, AND THEY ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY GOVERNMENTAL
AGENCY.
- --------------------------------------------------------------------------------
RICHMOND COUNTY'S AND BAYONNE'S COMMON STOCK ARE BOTH TRADED ON THE NATIONAL
MARKET SYSTEM OF THE NASDAQ STOCK MARKET. THE TRADING SYMBOL
FOR RICHMOND COUNTY COMMON STOCK IS "RCBK." THE TRADING
SYMBOL FOR BAYONNE COMMON STOCK IS "FSNJ."
JOINT PROXY STATEMENT/PROSPECTUS DATED ______________, 199_
AND FIRST MAILED TO STOCKHOLDERS ON ______________, 199_
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
1214 CASTLETON AVENUE
STATEN ISLAND, NEW YORK 10310
(718) 448-2800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________ __, 199_
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of Richmond
County Financial Corp. ("Richmond County"), _______________, New York will be
held at the _______________________________, _____________________________,
_________, New York, _____ on __________ __, 199__ at _:__ a.m., local time,
(the "Richmond County Meeting") for the following purposes, all of which are
more completely set forth in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, amended and restated as of
October 14, 1998, by and between Richmond County Financial Corp. and
Bayonne Bancshares, Inc. (the "Bayonne Merger Agreement"), pursuant to
which each share of common stock of Bayonne, par value $0.01 per share,
will be converted into the right to receive 1.05 shares of the common
stock of Richmond County, par value $0.01 per share, plus cash in lieu
of any fractional share interest (the "Bayonne Merger Consideration"),
subject to possible adjustment as set forth in the merger agreement.
2. The ratification of certain amendments to the Richmond County Financial
Corp. 1998 Stock-Based Incentive Plan; and
3. To transact such other business as may properly come before the
Richmond County Meeting and any adjournment or postponement thereof.
Pursuant to Richmond County's Bylaws, the Board of Directors has fixed
__________ __, 199_ as the record date for the determination of stockholders
entitled to notice of and to vote at the Richmond County Meeting and any
adjournment or postponement thereof. Only stockholders of record at the close
of business on that date will be entitled to notice of and to vote at the
Richmond County Meeting. A list of Richmond County stockholders entitled to
vote at the Richmond County Meeting will be available for examination for any
purpose germane to the Richmond County Meeting, during ordinary business hours,
at the principal executive offices of Richmond County located at 1214 Castleton
Avenue, Staten Island, New York 10310 for ten days prior to the Richmond County
Meeting and will also be available at the Richmond County Meeting.
In the event that there are not sufficient votes to approve the foregoing
proposal at the time of the Richmond County Meeting, the Richmond County Meeting
may be adjourned in order to permit further solicitation by Richmond County.
By Order of the Board of Directors
Thomas R. Cangemi
Senior Vice President and Corporate Secretary
Staten Island, New York
_______, 199_
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT AND "FOR" THE PROPOSAL TO RATIFY THE
AMENDMENTS TO THE RICHMOND COUNTY FINANCIAL CORP. 1998 STOCK-BASED INCENTIVE
PLAN.
WHETHER OR NOT YOU PLAN TO ATTEND THE RICHMOND COUNTY MEETING, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
PRE-ADDRESSED POSTAGE-PAID ENVELOPE. YOUR PROXY MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH THE CORPORATE SECRETARY OF RICHMOND COUNTY PRIOR TO THE
RICHMOND COUNTY MEETING A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE, OR BY ATTENDING THE RICHMOND COUNTY MEETING, FILING A
WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF THE MEETING AND VOTING IN
PERSON.
<PAGE>
BAYONNE BANCSHARES, INC.
568 BROADWAY
BAYONNE, NEW JERSEY 07002
(201) 437-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________ __, 199_
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Bayonne
Bancshares, Inc. ("Bayonne") will be held at ____________, ________________,
________, New Jersey on ______, ________ __, 199_ at _:__ a.m., local time, (the
"Bayonne Meeting") for the following purposes, all of which are more completely
set forth in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, amended and restated as of
October 14, 1998, by and between Richmond County Financial Corp.
("Richmond County") and Bayonne (the "Bayonne Merger Agreement")
pursuant to which each share of common stock of Bayonne, par value
$0.01 per share, will be converted into the right to receive 1.05
shares of the common stock of Richmond County, par value $0.01 per
share, plus cash in lieu of any fractional share interest, subject to
possible adjustment as set forth in the merger agreement.
2. The election of two directors to three-year terms of office each.
3. The ratification of the appointment of KPMG LLP as independent
auditors of Bayonne for the fiscal year ending March 31, 1999; and
4. To transact such other business as may properly come before the
Bayonne Meeting or any adjournment or postponement thereof.
Pursuant to Bayonne's Bylaws, the Board of Directors has fixed
____________________, 199_ as the record date for the determination of
stockholders entitled to notice of and to vote at the Bayonne Meeting and any
adjournment or postponements thereof. Only stockholders of record at the close
of business on that date will be entitled to notice of and to vote at the
Bayonne Meeting. A list of Bayonne stockholders entitled to vote at the Bayonne
Meeting will be available for examination for any purpose germane to the Bayonne
Meeting, during ordinary business hours, at the principal executive offices of
Bayonne located at 568 Broadway, Bayonne, New Jersey 07002 for ten days prior to
the Bayonne Meeting and will also be available at the Bayonne Meeting.
In the event that there are not sufficient votes to approve any one or more
of the foregoing proposals at the time of the Bayonne Meeting, the Bayonne
Meeting may be adjourned in order to permit further solicitation by Bayonne.
By Order of the Board of Directors
Thomas Coughlin
Corporate Secretary
Bayonne, New Jersey
_______, 199_
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT, "FOR" THE ELECTION TO THE
BOARD THE DIRECTOR NOMINEES NAMED IN THIS DOCUMENT, AND "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF BAYONNE.
WHETHER OR NOT YOU PLAN TO ATTEND THE BAYONNE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING PRE-
ADDRESSED POSTAGE-PAID ENVELOPE. YOUR PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE
BY FILING WITH THE CORPORATE SECRETARY OF BAYONNE PRIOR TO THE BAYONNE MEETING A
WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR
BY ATTENDING THE BAYONNE MEETING, FILING A WRITTEN NOTICE OF REVOCATION WITH THE
SECRETARY OF THE BAYONNE MEETING AND VOTING IN PERSON.
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
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Page
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SUMMARY................................................................ 1
The Companies...................................................... 1
Richmond County Financial Corp................................ 1
Bayonne Bancshares, Inc....................................... 1
The Stockholders' Meetings......................................... 1
Richmond County Stockholders.................................. 1
Bayonne Stockholders.......................................... 1
Who Can Vote at the Meetings; What Vote is Required for
Approval of the Merger Agreement.............................. 2
Richmond County Stockholders.................................. 2
Bayonne Stockholders.......................................... 2
The Bayonne Merger................................................. 2
General....................................................... 2
Bayonne Stockholders Will Receive 1.05 Shares
of Richmond County Common Stock for Each
Bayonne Share They Own
Tax Free Transaction for Bayonne Stockholders................. 3
You Do Not Have Appraisal Rights in the Merger................ 3
Accounting Treatment of the Merger............................ 3
Interests of Bayonne's Directors and Officers in the
Merger that are Different From Your Interests
Differences in the Rights of Richmond County's
and Bayonne's Stockholders............................. 4
Our Reasons for the Merger.................................... 4
Our Recommendations to Stockholders........................... 5
The Transaction is Fair to Stockholders According
to Two Investment Advisors............................. 5
Stock Options................................................. 5
Management and Operations after the Merger.................... 5
What We Need to do to Complete the Merger..................... 5
Terminating the Agreement; Who Pays for What.................. 6
Waiving and Amending Provisions of the Agreement.............. 7
Bayonne Merger Stock Option Agreement......................... 7
The Ironbound Merger............................................... 8
INDEX OF DEFINED TERMS................................................. 9
SELECTED HISTORICAL FINANCIAL DATA OF RICHMOND COUNTY AND
BAYONNE............................................................ 12
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION............ 18
COMPARATIVE PER SHARE DATA............................................. 20
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THE COMPANIES.......................................................... 21
Richmond County.................................................... 21
Bayonne............................................................ 21
WHERE YOU CAN FIND MORE INFORMATION.................................... 22
FORWARD-LOOKING STATEMENTS............................................. 24
MARKET PRICES AND DIVIDEND INFORMATION................................. 25
THE STOCKHOLDERS' MEETINGS............................................. 26
MEETING OF RICHMOND COUNTY STOCKHOLDERS................................ 26
Date, Time and Place; Purpose of Meeting........................... 26
Who Can Vote on Matters Addressed in this Document................. 27
Proxies; Voting and Revocation of Proxies.......................... 27
Vote Required; Principal Stockholders.............................. 29
BENEFICIAL OWNERSHIP OF RICHMOND COUNTY COMMON STOCK................... 30
Owners of 5% of Richmond County Common Stock....................... 30
ADDITIONAL MATTERS TO BE CONSIDERED AT THE
RICHMOND COUNTY MEETING............................................ 32
Ratification of the Amendments to the Richmond County
Financial Corp. 1998 Stock-Based Incentive Plan................ 32
MEETING OF BAYONNE STOCKHOLDERS........................................ 33
Date, Time and Place; Purpose of Meeting........................... 33
Who Can Vote on Matters Addressed in this Document................. 33
Proxies; Voting and Revocation of Proxies.......................... 34
Vote Required; Principal Stockholders.............................. 35
BENEFICIAL OWNERSHIP OF BAYONNE COMMON STOCK........................... 39
Owners of 5% of Bayonne Common Stock............................... 39
What Bayonne's Directors and Executive Officers Own................ 40
PROPOSAL NO. 1 FOR THE RICHMOND COUNTY AND BAYONNE STOCKHOLDERS:
THE MERGER............................................................ 41
General............................................................ 41
Background of the Merger........................................... 41
Recommendation of the Richmond County Board;
Richmond County's Reasons for the Merger....................... 44
The Transaction is Fair to Richmond County's
Stockholders According to Richmond County's
Investment Advisor............................................. 47
Recommendation of the Bayonne Board; Bayonne's Reasons for
the Merger..................................................... 56
The Transaction is Fair to Bayonne's Stockholders According
to Bayonne's Investment Advisor................................ 58
Bayonne Stockholders Will Receive 1.05 Shares of Richmond
County Common Stock for Each Bayonne Share..................... 68
Procedures For Exchanging Your Stock for Exchange of
Certificates................................................... 70
Richmond County.................................................... 70
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Bayonne..................................................... 70
Interests of Directors and Officers in the Bayonne Merger
that are Different from Your Interests...................... 71
Management and Operations Following the Merger.................. 73
Employee Matters................................................ 73
Conditions to the Merger........................................ 75
Regulatory Approvals Needed to Complete the Merger.............. 79
Conduct of Business Pending the Merger.......................... 81
Representations and Warranties Made by Richmond County and
Bayonne in the Merger Agreement............................. 86
What Happens If a Third Party Offers to Buy Bayonne............. 86
Waiving and Amending Provisions in, or Terminating the
Merger Agreement............................................ 88
Price-Based Termination of the Merger Agreement................. 90
Nasdaq National Market Listing.................................. 91
Accounting Treatment of the Merger.............................. 91
Tax-Free Transaction for Bayonne Stockholders................... 91
Selling the Richmond County Common Stock You Receive in the
Merger...................................................... 92
You Do Not Have Appraisal Rights in the Merger.................. 93
Who Pays For What............................................... 93
When Will the Merger Be Completed............................... 94
CERTAIN RELATED TRANSACTIONS........................................ 94
Bayonne Merger Stock Option Agreement........................... 94
Effect of the Bayonne Merger Stock Option Agreements........ 97
Bayonne Bank Merger Agreement................................... 97
THE IRONBOUND MERGER................................................ 98
REGULATION AND SUPERVISION.......................................... 98
General......................................................... 98
New York State Law.............................................. 98
FDIC Regulations................................................ 99
Investment Activities........................................... 101
Transactions with Affiliates.................................... 102
The FDIC's Enforcement Authority................................ 102
Insurance of Deposit Accounts................................... 103
Payment of FICO Bonds........................................... 104
Federal Reserve System.......................................... 104
Community Reinvestment Act...................................... 104
Holding Company Regulation...................................... 105
Interstate Banking and Branching................................ 107
DESCRIPTION OF RICHMOND COUNTY CAPITAL STOCK........................ 108
General......................................................... 108
Common Stock.................................................... 108
Preferred Stock................................................. 109
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS........................ 109
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS.............................................. 110
ADDITIONAL MATTERS TO BE CONSIDERED AT THE BAYONNE MEETING............ 119
Proposal No. 2 for Bayonne Stockholders:
Election of Bayonne Directors.................................. 119
Information with Respect to the Nominees, Continuing
Directors and Executive Officers of Bayonne.................... 119
Compensation Committee and Insider Participation in
Compensation Decisions......................................... 122
Directors' Compensation........................................... 122
Executive Compensation............................................ 123
Summary Compensation Table........................................ 127
Employment Agreements............................................. 128
Change in Control Agreements...................................... 129
Retirement Plan................................................... 129
Supplemental Executive Retirement Income-Deferred
Compensation Agreements....................................... 130
Option Exercises and Year-End Value............................... 131
Transactions With Certain Related Persons......................... 131
Stock Performance Graph........................................... 132
Proposal No. 3 for Bayonne Stockholders:
Ratification of Appointment of Independent Auditors............ 133
ADDITIONAL INFORMATION................................................ 133
If You Want to Have a Stockholder Proposal Included in
Bayonne's Proxy Statement Relating to the 1999
Annual Stockholders' Meeting.................................. 133
Notice of Business to be Conducted at a Bayonne Meeting........... 133
LEGAL MATTERS......................................................... 134
EXPERTS............................................................... 134
STOCKHOLDER PROPOSALS................................................. 134
INFORMATION NOT REQUIRED IN PROSPECTUS................................ II-1
SIGNATURES............................................................ II-8
EXHIBIT INDEX........................................................ II-10
</TABLE>
Annex A Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc.
Annex B Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp.
Annex C Opinion of Tucker Anthony Incorporated.
Annex D Opinion of Sandler O'Neill & Partners, L.P.
Annex E Proposed Amended Richmond County Financial Corp. 1998 Stock-Based
Incentive Plan
<PAGE>
SUMMARY
This brief summary highlights selected information from the Joint Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. You should carefully read the entire Joint 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 __.
THE COMPANIES (PAGE __)
RICHMOND COUNTY FINANCIAL CORP.
1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
Richmond County is a savings and loan holding company organized under the laws
of the State of Delaware in 1997. We operate Richmond County Savings Bank,
which has 14 banking offices in the New York City Borough of Staten Island, one
banking office in the New York City Borough of Brooklyn, and one multi-family
loan processing center in Jericho, Long Island. At September 30, 1998, Richmond
County had total assets of $1.7 billion, deposits of $953.5 million and
stockholders' equity of $329.8 million.
BAYONNE BANCSHARES, INC.
568 Broadway
Bayonne, New Jersey 07002
(201) 437-1000
Bayonne is a savings and loan holding company organized under the laws of the
State of Delaware in 1997. We operate First Savings Bank of New Jersey, SLA,
which has four banking offices and one financial center in Bayonne, New Jersey.
At September 30, 1998, Bayonne had total assets of $672.7 million, deposits of
$420.7 million and stockholders' equity of $95.2 million.
THE STOCKHOLDERS' MEETINGS (PAGE __)
Richmond County Stockholders. The Richmond County special meeting will be held
on ________, ________, 199__ at _____ _.m., local time, at the ____________,
______________. At the Richmond County special meeting, you will be asked to:
1. approve the merger of our company with Bayonne Bancshares, Inc.
2. ratify amendments to the Richmond County Financial Corp. 1998 Stock-Based
Incentive Plan; and
3. act on any other items that may be submitted to a vote at the meeting.
Bayonne Stockholders. The Bayonne annual meeting will be held on ____________,
at ___ _.m., local time, at ________________, ______________.
At the Bayonne annual meeting, you will be asked to:
1. approve the merger of our company with Richmond County;
2. elect Patrick F.X. Nilan and Joseph L. Wisniewski to the board of directors
of Bayonne for a term of three years;
3. ratify the appointment by the board of directors of KPMG LLP as independent
auditors of Bayonne Bancshares, Inc.; and
1
<PAGE>
4. to act on any other items that may be submitted to a vote at the annual
meeting.
WHO CAN VOTE AT THE MEETINGS; WHAT VOTE IS REQUIRED FOR APPROVAL OF THE MERGER
AGREEMENT (PAGES _ AND _)
Richmond County Stockholders. You can vote at the meeting of Richmond County
stockholders if you owned Richmond County common stock at the close of business
on _______, 199_. You can cast one vote for each share of Richmond County
common stock that you owned at that time. In order to approve the merger, the
holders of a majority of the outstanding shares of Richmond County's common
stock must vote in its favor. Richmond County's Bylaws and Delaware law require
a majority of the votes cast at the Richmond County meeting to ratify the
amendments to the Richmond County Financial Corp. 1998 Stock-Based Incentive
Plan. You can vote your shares by telephone, by attending the Richmond County
meeting and voting in person or by mailing the enclosed proxy card. We have
printed instructions on how to vote by telephone on the proxy card. You can
revoke your proxy as late as the date of the meeting either by sending in a new
proxy, by changing your vote by telephone or by attending the meeting and voting
in person.
Bayonne Stockholders. You can vote at the meeting of Bayonne stockholders if
you owned Bayonne common stock at the close of business on ______, 199_. You
can cast one vote for each share of Bayonne common stock you owned at that
time. In order to approve the merger, the holders of a majority of the
outstanding shares of Bayonne common stock must vote in its favor. You can vote
your shares by telephone, by attending the Bayonne meeting and voting in person,
or by mailing the enclosed proxy card. We have printed instructions on how to
vote by telephone on the proxy card. You can revoke your proxy as late as the
date of the meeting either by sending in a new proxy, by changing your vote by
telephone, or by attending the meeting and voting in person.
THE BAYONNE MERGER (PAGE __)
We have attached the agreement and plan of merger to this document as Annex A.
Please read the agreement. It is the legal document that governs the merger.
GENERAL
We propose a combination in which Bayonne will merge with and into Richmond
County. The resulting company will be named "Richmond County Financial Corp."
We hope to complete this merger by the first quarter of 1999.
BAYONNE STOCKHOLDERS WILL RECEIVE 1.05 SHARES OF RICHMOND COUNTY COMMON STOCK
FOR EACH BAYONNE SHARE THEY OWN (PAGE __)
As a Bayonne stockholder, each of your shares of Bayonne common stock will
automatically become exchangeable for 1.05 shares of Richmond County common
stock. The total number of shares you receive will therefore be equal to the
number of shares of Bayonne common stock you own multiplied by 1.05. Richmond
County will not issue fractional shares. Instead, you will receive the value of
any fractional share in cash. You will have to surrender your Bayonne stock
certificates to receive new certificates for Richmond County stock. We will
send you written instruction after we have completed the merger. For more
information on how this exchange procedure works, see "Procedures for Exchanging
Your Stock Certificates" on page __ of this document. For example, if you owned
ten shares of Bayonne common stock, after the
2
<PAGE>
merger you will send in the letter of transmittal and your old Bayonne
certificates and in exchange you will receive ten shares of the Richmond County
common stock and a check for the market value of one-half of a share of Richmond
County common stock.
Shares of Richmond County and Bayonne common stock are quoted on the Nasdaq
National Market. On October 13, 1998, the last trading day before we
announced the amended and restated merger agreement, Richmond County common
stock closed at $12.25 per share and Bayonne common stock closed at $12.00 per
share. On _______, Richmond County common stock closed at $_____ per share and
Bayonne common stock closed at $_____ per share.
Based on the exchange ratio in the merger, the market value of the consideration
that Bayonne stockholders will receive in the merger for each share of Bayonne
common stock would be $_____ based on Richmond County's closing stock price on
_____________. Of course, the market price of Richmond County will fluctuate
prior to the merger, while the exchange ratio is fixed. You should obtain
current stock price quotations for Richmond County common stock and Bayonne
common stock. These quotations are available from your stock broker, in major
newspapers such as The Wall Street Journal and on the Internet.
TAX FREE TRANSACTION FOR BAYONNE STOCKHOLDERS (PAGE __)
For United States federal income tax purposes, your exchange of shares of
Bayonne common stock for shares of Richmond County common stock generally will
not cause you to recognize any gain or loss. You will, however, have to
recognize gain in connection with any cash received instead of fractional
shares.
Our obligation to complete the merger depends on our receipt of legal opinions
about the federal income tax treatment of our companies and our stockholders.
We have received these tax opinions, which will be updated at the completion of
the merger. 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 THAT ARE PARTICULAR TO YOU.
YOU DO NOT HAVE APPRAISAL RIGHTS IN THE MERGER (PAGE __)
Richmond County Stockholders. Delaware law does not provide you with
dissenters' appraisal rights in the merger.
Bayonne Stockholders. Delaware law does not provide you with dissenters'
appraisal rights in the merger.
ACCOUNTING TREATMENT OF THE MERGER (PAGE __)
We will account for the merger 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
Bayonne's assets, less liabilities, on its financial statements. Because the
purchase price is greater than the fair market value of Bayonne's net assets,
Richmond County will record an asset called "goodwill" of approximately
$28.6 million. Richmond County will write off this goodwill as an expense over
the next 15 years, reducing net income during that period. The Ironbound merger,
discussed later, will create additional goodwill of approximately $16.1 million,
which will also be written off over 15 years.
3
<PAGE>
INTERESTS OF BAYONNE'S DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT
FROM YOUR INTERESTS (PAGE __)
Some of Bayonne's directors and officers have interests in the merger that are
different from, or in addition to, their interests as Bayonne stockholders.
The members of our boards of directors knew about these additional interests,
and considered them, when they approved the agreement and the merger. These
include provisions in the merger agreement relating to the payout of cash
benefits under existing employment agreements, and the acceleration of benefits
and the vesting of benefits under employee benefit plans. For example, 49,684
shares of unvested restricted Bayonne common stock will be converted into
approximately 52,200 shares of Richmond County common stock. Further, all
outstanding options to purchase Bayonne common stock will be converted into
options to purchase Richmond County common stock. Bayonne's officers and
directors hold options to purchase 460,783 shares of Bayonne common stock. In
addition, Mr. Michael A. Nilan, who is currently the President, Chief Executive
Officer and a director of Bayonne, will become an officer of Richmond County
Savings Bank. Richmond County has also agreed to increase its board of directors
by one member and to appoint Mr. Patrick F.X. Nilan to fill that seat until the
year 2000. Additionally, Mr. Patrick F.X. Nilan's consulting agreement with
Bayonne will also be terminated after the merger, in return for which he will
receive $100,000. Bayonne has also agreed to pay its Chief Financial Officer,
Mr. Eugene Malinowski, approximately $350,000 if he is terminated because of the
merger.
Also, following the merger, Richmond County will purchase directors' and
officers' insurance for the officers and directors of Bayonne and will indemnify
directors and officers of Bayonne for events occurring before the merger,
including events related to the merger. This indemnity and insurance will be in
addition to the indemnification and insurance to which the officers and
directors of Richmond County are entitled. Additional interests of some of our
directors and executive officers are described under "-- Bayonne Stockholders
Will Receive 1.05 Shares of Richmond County Common Stock for Each Bayonne Share"
at page __ of this document.
DIFFERENCES IN THE RIGHTS OF RICHMOND COUNTY'S AND BAYONNE'S STOCKHOLDERS (PAGE
__)
After the merger is completed, Bayonne's stockholders automatically will become
stockholders of Richmond County. Their rights as stockholders of Richmond
County will be governed by Delaware General Corporation Law and by Richmond
County's Certificate of Incorporation and Bylaws. The rights of stockholders of
Richmond County, as defined in its Certificate of Incorporation and Bylaws, do
not materially differ from the rights of the stockholders of Bayonne.
OUR REASONS FOR THE MERGER (PAGES __ AND __)
Our companies are proposing to merge because we believe that by combining them
we can create a stronger and more diversified company that will provide
significant benefits to our stockholders and customers alike. We believe that
by bringing our customers and banking products together, we can do a better job
of increasing our combined revenues than we could if we did not merge. We
believe that the merger will strengthen our position as a competitor in the
financial services business, which is rapidly changing and growing more
competitive. While no assurances can be made, we expect to achieve cost savings
and additional revenue opportunities in the merger that should have a beneficial
effect on our earnings per share. To review our reasons for the merger in
greater detail, as well as how we came to agree on the merger, please see pages
__ through __.
4
<PAGE>
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGES __ AND __)
The boards of directors of Richmond County and Bayonne believe that the terms
of the merger agreement are fair to their respective shareholders, and
unanimously recommend that their respective shareholders vote "FOR" the
proposal to approve the merger agreement.
THE TRANSACTION IS FAIR TO STOCKHOLDERS ACCORDING TO TWO INVESTMENT ADVISORS
(PAGES __ AND __)
Tucker Anthony Incorporated has delivered to the Richmond County board its
opinion that, as of the date of this document, the exchange ratio is fair to
Richmond County stockholders from a financial point of view. Sandler O'Neill
& Partners, L.P. has delivered to the Bayonne board its opinion that, as of the
date of this document, the exchange ratio is fair to Bayonne stockholders from a
financial point of view. We have attached their opinions to this document as
Annex C and Annex D. You should read these opinions completely to understand
the assumptions made, matters considered and limitations of the review made by
Tucker Anthony and Sandler O'Neill in providing these opinions.
STOCK OPTIONS (PAGE __)
Upon completion of the merger, each option to acquire Bayonne common stock
granted under Bayonne's stock option plans that is outstanding and unexercised
immediately before completing the merger will become an option to purchase
Richmond County common stock. The option will be governed by the terms of the
Richmond County stock option plan. The number of shares of Richmond County
common stock subject to Bayonne stock options, as well as the exercise price of
those stock options, will be adjusted to account for the exchange ratio in the
merger.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE __)
After the merger, the Richmond County board of directors will be made up of the
directors on the board immediately before the merger, plus Patrick F.X. Nilan.
Mr. Nilan is currently Chairman of the Bayonne board of directors. Mr. Nilan
will serve on the Richmond County board until the year 2000. The remainder of
Bayonne's board of directors who desire to do so will serve on an advisory 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 both the Richmond County stockholders and the
Bayonne stockholders.
5
<PAGE>
2. Approval of the merger must be approved by the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the Superintendent of Banks
of New York State, and the Commissioner of the New Jersey Department of
Banking and Insurance.
We have filed, or soon will file, all of the required applications or
notices with these regulatory authorities.
As of the date of this document, we have not yet received the required
approvals. While we do not know of any reason why we would not be able to
obtain the necessary approvals in a timely manner, we cannot be certain
when or if we will get them.
3. Receipt by Richmond County and Bayonne of a legal opinion from their
respective tax counsel that, for United States federal income tax purposes,
Bayonne stockholders who exchange their shares for shares of Richmond
County common stock will not recognize any gain or loss as a result of the
merger, except in connection with the payment of cash instead of fractional
shares. These opinions will be subject to various limitations and we
recommend that you read the fuller description of tax consequences provided
in this document beginning at page __.
4. Approval by the National Market System of the Nasdaq Stock Market of the
listing of the shares of Richmond County common stock to be issued in
exchange for Bayonne's common stock.
5. The absence of any injunction or legal restraint blocking the merger or
government proceedings trying to block the merger.
Where the law permits, Richmond County or Bayonne could decide to complete the
merger even though one or more of these conditions has not been met. We cannot
be certain when or if the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
TERMINATING THE AGREEMENT; WHO PAYS FOR WHAT (PAGE __)
We can agree at any time to terminate the agreement without completing the
merger, even if the stockholders of both our companies have approved it. Also,
either of us can decide, without the consent of the other, to terminate the
agreement if:
1. Any government agency denies an approval we need to complete the merger and
that denial has become final and nonappealable, or if any governmental
entity issues a final, nonappealable order blocking the merger.
2. We do not complete by April 30, 1999, unless the failure to complete the
merger by that time is due to the failure to obtain a governmental or
regulatory approval, consent or waiver, in which case the terminate date
would be extended to then by July 31, 1999.
3. One party breaches the agreement in a way that would entitle the other
party to terminate, as long as the party seeking to terminate the agreement
has not also materially breached the agreement.
4. Richmond County's and/or Bayonne's stockholders do not approve the merger.
Bayonne can also terminate the agreement if the price of Richmond County common
stock is
6
<PAGE>
less than $15.41 and has declined by more than 15% compared to a select group of
its peers during a period prior to the anticipated closing. If Bayonne elects
to terminate on this basis, Richmond County may preclude termination by
increasing the number of shares of Richmond County stock to be received by
Bayonne stockholders.
Regardless of whether the merger is completed, we will each pay our own fees and
expenses, except that we will evenly divide the costs and expenses that we have
incurred in printing and mailing this document and the registration fees that we
will have to pay to the Securities and Exchange Commission.
WAIVING AND AMENDING PROVISIONS OF THE AGREEMENT (PAGE __)
We can agree to amend the agreement, and each of us can waive our right to
require the other party to adhere to the terms and conditions of the agreement,
where the law allows. However, we may not do so after our stockholders approve
the agreement if the amendment or waiver reduces or changes the consideration
that will be received by Bayonne stockholders unless the affected stockholders
approve the amendment or waiver.
BAYONNE MERGER STOCK OPTION AGREEMENT (PAGE __)
At the request of Richmond County, Bayonne entered into a stock option agreement
granting Richmond County an option to purchase 1,809,804 shares of Bayonne
common stock.
Richmond County cannot exercise its option unless certain events occur. These
events include the merger of Bayonne or the sale of a substantial amount of its
assets to a third party unrelated to Richmond County. We do not know of any
event that has occurred as of the date of this document that would permit
Richmond County to exercise its option.
The most shares that can be purchased if the option is exercised is 19.9% of the
total number of outstanding shares of Bayonne common stock. The purchase price
per share under the option agreement is $15.50 per share.
Bayonne granted the option to increase the likelihood that we would complete the
merger.
7
<PAGE>
The option agreement could discourage other companies from trying or proposing
to combine with Bayonne before we complete the merger.
THE IRONBOUND MERGER (PAGE __)
In a separate and unrelated transaction, Richmond County is also acquiring
Ironbound Bankcorp, NJ. Ironbound is a New Jersey bank holding company. It
operates Ironbound Bank. Ironbound Bank is a commercial bank that operates three
branches in the New Jersey counties of Union and Essex. At September 30, 1998,
Ironbound had total assets of $115.3 million, deposits of $102.8 million, and
stockholders' equity of $11.5 million. The Ironbound Merger does not require
the approval of the Richmond County or Bayonne stockholders.
8
<PAGE>
INDEX OF DEFINED TERMS
PAGE
----
"adequately capitalized"........................................................
"affiliate".....................................................................
"bank holding company"..........................................................
"Bank Index"....................................................................
"Bank Merger Act"...............................................................
"beneficially own"..............................................................
"BHC Act".......................................................................
"broker non-vote"...............................................................
"capital asset".................................................................
"covered transaction"...........................................................
"CRA"...........................................................................
"critically undercapitalized"...................................................
9
<PAGE>
"DGCL"..........................................................................
"domestic building and loan association"........................................
"ERISA".........................................................................
"Exchange Act"..................................................................
"Excluded shares"...............................................................
"FASB"..........................................................................
"FDI Act".......................................................................
"FDIC"..........................................................................
"FDICIA"........................................................................
"Federal Reserve Act"...........................................................
"FHLB"..........................................................................
"FICO"..........................................................................
"Final Index Price".............................................................
"FRB"...........................................................................
"GAAP"..........................................................................
"Guidelines"....................................................................
"Highly Valued Group"...........................................................
"HOLA"..........................................................................
"Index Group"...................................................................
"Index Ratio"...................................................................
"Initial Index Price"...........................................................
"Initial Richmond County Market Value"..........................................
"Interstate Banking Act"........................................................
"investment power"..............................................................
"Large Thrift Highly Valued Group"..............................................
"Material Adverse Effect".......................................................
"Nationwide Transactions".......................................................
"NYBB"..........................................................................
"NYBD"..........................................................................
"NYBL"..........................................................................
"NYCRA".........................................................................
"opt in"........................................................................
"opt out".......................................................................
"outside directors".............................................................
"Peer Group"....................................................................
10
<PAGE>
"Pooling-of-interests"..........................................................
"portfolio assets"..............................................................
"preliminary purchase event"....................................................
"pro forma".....................................................................
"purchase"......................................................................
"purchase event"................................................................
"prudent person"................................................................
"QTL"...........................................................................
"QTL Test"......................................................................
"qualified thrift investments"..................................................
"Regional Group"................................................................
"Regional Transactions".........................................................
"Registration Statement"........................................................
"risk-based capital ratio"......................................................
"Securities Act"................................................................
"Selected Market Transactions"..................................................
"Selected U.S. Transactions"....................................................
"SFAS"..........................................................................
"SFAS No. 115"..................................................................
"SFAS No. 106"..................................................................
"SFAS No. 109"..................................................................
"significantly undercapitalized"................................................
"superior proposal".............................................................
"Tier I"........................................................................
"Tier II".......................................................................
"undercapitalized"..............................................................
"Valuation Date"................................................................
"voting power"..................................................................
"well capitalized"..............................................................
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF
RICHMOND COUNTY AND BAYONNE
(UNAUDITED)
The following tables show summarized historical financial data for each of
us.
The information in the following tables is based on historical financial
information that we have presented in our prior Securities and Exchange
Commission filings. All of the summary financial information we provide in the
following tables should be read in connection with this historical financial
information and with the more detailed financial information we provide in this
document, which you can find beginning at page __. The historical financial
statements of Richmond County and Bayonne are incorporated by reference into
this document. See "WHERE YOU CAN FIND MORE INFORMATION."
Because Richmond County's fiscal year ends on June 30 and Bayonne's fiscal
year ends on March 31, the financial data for Bayonne for the three months ended
September 30 have been presented to coincide with the fiscal reporting period
for Richmond County. Following the merger, the combined company's fiscal year,
like that of Richmond County, will end on June 30.
Richmond County was organized under Delaware law in September 1997.
Therefore, all financial information contained herein for periods prior to
December 31, 1997 relates solely to Richmond County Savings Bank. Richmond
County's audited annual historical financial statements were audited by Ernst &
Young LLP, independent certified public accountants, and Bayonne's audited
annual historical financial statements were audited by KPMG LLP, independent
certified public accountants.
12
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
------------------------ ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL CONDITION
DATA:
Total assets............................. $1,692,615 $1,023,780 $1,595,844 $993,370 $914,483 $851,751 $825,663
Federal funds sold....................... 4,200 4,000 26,000 6,000 20,000 18,000 17,500
Debt and equity securities, net /(1)/:
Available for sale.................. 237,956 40,764 238,890 19,706 21,659 607 --
Held to maturity.................... -- 187,469 -- 205,201 307,700 287,879 328,779
Mortgage-backed and mortgage-related
securities, net /(1)/:
Available for sale.................. 593,714 76,286 604,304 27,398 1,394 1,683 --
Held to maturity.................... -- 147,737 -- 185,122 80,284 92,404 74,961
Loans receivable, net /(2)/.............. 774,558 515,516 644,469 496,258 419,270 392,409 355,850
Federal Home Loan Bank of
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 -- -- -- --
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 Conversion /(5)/....... $.22 N/A $(0.16) N/A N/A N/A N/A
========== ==========
</TABLE>
(footnotes on next page)
13
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEARS ENDED JUNE 30,
------------------------ ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL RATIOS
AND OTHER DATA /(6)/:
Performance Ratios /(7)/:
Return on average assets............... 1.32% 1.13% 1.26% 1.13% 0.99% 0.91% 1.27%
Return on average stockholders' equity. 6.48 10.96 8.36 11.25 10.25 9.80 14.97
Average stockholders' equity to
average assets....................... 20.37 10.27 15.05 10.07 9.70 9.29 8.50
Stockholders' equity to total assets
at end of period..................... 19.49 10.18 20.59 10.15 9.83 9.53 8.91
Net interest rate spread /(8)/......... 2.81 3.60 3.29 3.64 3.48 3.66 3.85
Net interest margin /(9)/.............. 3.87 4.22 4.10 4.22 3.96 4.06 4.16
Average interest-earning assets
to average interest-bearing liabilities 132.95 119.74 126.04 118.94 114.99 113.96 111.64
Total non-interest expense to
average assets /(10)/................ 1.88 1.94 1.93 1.99 2.07 2.15 2.13
Net interest income to operating
expenses............................ 197.37 205.01 201.09 193.59 177.32 175.67 181.65
Efficiency ratio /(11)/................ 44.68 44.43 45.75 46.08 51.04 51.63 49.40
Asset Quality Ratios:
Non-performing loans as a percent
of loans, net........................ 0.49% 0.84% 0.85% 0.78% 0.91% 0.76% 1.51%
Non-performing assets as a percent
of total assets...................... 0.24 0.50 0.37 0.46 0.48 0.39 0.71
Allowance for loan losses
as a percent of loans receivable, net 1.01 1.13 1.12 1.10 1.14 0.83 0.87
Allowance for loan losses as a percent
of total non-performing loans........ 208.59 135.08 131.50 141.09 125.55 109.35 57.64
Regulatory Capital Ratios and Other Data:
Leverage capital....................... 12.38% 9.64% 12.81% 9.54% 9.65% 9.25% 8.60%
Total risk-based capital............... 22.49 18.52 24.81 18.91 19.20 18.33 16.23
Tier I capital......................... 21.60 17.63 23.87 17.98 18.33 17.92 15.71
Number of customer facilities............ 14 13 13 13 13 13 13
</TABLE>
- ------------------------
(1) Richmond County Savings Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities," as of July 1, 1994, and
reclassified securities having a market value of $26 million from its held
to maturity portfolio to its available for sale portfolio in November 1995,
pursuant to Financial Accounting Standards Board ("FASB") special report or
implementation of SFAS No 115. In February 1998, Richmond County
transferred its entire securities held to maturity portfolio to its
securities available for sale portfolio as part of a balance sheet
restructuring initiative implemented at that time, primarily in connection
with a reassessment by Richmond County of its asset/liability management
strategy.
(2) Loans receivable, net, consist of gross loans receivable, less unamortized
discounts, plus deferred loan costs, less deferred loan fees and the
allowance for loan losses. The allowance for loan losses at September 30,
1998, 1997, and June 30, 1998, 1997, 1996, 1995 and 1994 were $7.9 million,
$5.9 million, $7.3 million, $5.5 million, $4.8 million, $3.3 million and
$3.1 million, respectively. Loan receivable, net, at June 30, 1996,
includes $1.2 million of loans held for sale.
(3) Includes the one-time non-recurring charge of $19.6 million ($11.2 million,
net of tax) for funding of the Richmond County Savings Foundation at the
time of Richmond County Savings Bank's mutual-to-stock 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 Richmond County Savings Foundation at the time of
Richmond County Savings' conversion.
(8) The net interest margin spread represents the difference between the
weighted average yield on average interest-earning assets and the weighted
average cost of average interest-bearing liabilities.
(9) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(10) Total non-interest expense excludes the effect of amortization of goodwill.
The 1997 ratio excludes the one-time special assessment of $493,000 to
recapitalize the Savings Association Insurance Fund. Including the effects
of the amortization of goodwill and funding of the Richmond County Savings
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 Savings
Association Insurance Fund's 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 Richmond County
Savings Foundation, the efficiency ratio for the year ended June 30, 1998
would be 83.35%.
14
<PAGE>
BAYONNE BANCSHARES, INC.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, MAY 31,
-------------------- -------------------------------------------- --------
1998 1997 1998 1997 1996 1995 1994/(4)/
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED FINANCIAL CONDITION DATA:
Total assets...................................$672,657 $609,053 $646,058 $577,004 $651,945 $512,126 $547,550
Cash and cash equivalents...................... 3,047 14,221 16,617 15,472 11,791 6,111 47,839
Loan receivable, net:
Real estate................................. 278,802 203,262 208,723 207,262 198,658 197,240 172,552
Consumer.................................... 29,987 28,558 26,742 28,362 25,370 21,314 16,428
-------- -------- -------- -------- -------- -------- --------
Total loans receivable, net/(1)/....... 308,789 231,820 235,465 235,624 224,028 218,554 188,980
U.S. Government and agency obligations,........ 88,208 76,931 77,446 76,489 101,729 148,062 146,806
net of valuation allowance /(2)/
Mortgage securities, net/(3)/.................. 244,179 262,646 274,652 222,980 289,848 117,205 141,271
Deposits....................................... 420,749 432,131 423,545 444,139 445,424 444,380 471,681
Borrowed funds................................. 147,022 75,489 115,380 75,598 151,334 15,032 --
Stockholders' equity........................... 95,152 95,161 98,649 48,079 49,519 46,625 34,066
</TABLE>
_______________________
(1) Excludes loans to joint ventures of First Savings's subsidiaries.
(2) At September 30, 1998 and 1997, March 31, 1998, 1997, 1996 and 1995, and May
31, 1994, $80.3 million, $61.1 million, $69.5 million, $67.6 million, $92.6
million, $64.3 million and $64.1 million of such securities, respectively,
net of valuation allowance, were classified as available for sale, and $7.9
million, $7.9 million, $7.9 million, $8.9 million, $8.9 million, $83.7
million and $82.7 million, respectively, of such securities were classified
as held to maturity.
(3) Includes mortgage-backed securities and mutual funds that invest primarily
in mortgage-backed securities, net of valuation allowance. At March 31,
1998, 1997, 1996 and 1995, and May 31, 1994, all such securities were
classified as available for sale.
(4) At the time of First Savings' reorganization into the mutual holding company
structure in 1995, First Savings Bank changed its fiscal year end from May
31, to March 31.
(5) At June 30, 1998, Bayonne had total assets of $700.0 million, deposits of
$422.0 million and stockholders' equity of $96.0 million. Net income for the
three months ended June 30, 1998 was $1.1 million, compared to $838,000 for
the three months ended June 30, 1997.
15
<PAGE>
<TABLE>
<CAPTION>
TEN
MONTHS YEAR
THREE MONTHS ENDED ENDED ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31, MARCH 31, MAY 31,
------- ------- ---------------------------------------------- -------
1998 1997 1998 1997 1996 1995/(1)/ 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED OPERATING DATA:
Total interest and dividend income...........$11,137 $10,293 $40,860 $41,126 $37,309 $28,431 $35,616
Total interest expense....................... 6,735 6,429 24,872 27,469 23,842 15,831 20,795
------- ------- ------- ------- ------- ------- -------
Net interest income /(8)/................... 4,402 3,864 15,988 13,657 13,467 12,600 14,821
Provision for loan losses /(8)/.............. 75 45 180 320 450 350 500
------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
loan losses /(8)/.......................... 4,327 3,819 15,808 13,337 13,017 12,250 14,321
------- ------- ------- ------- ------- ------- -------
Other income (loss):
Loan fees and service charges............... 69 63 238 294 307 285 428
Deposit fees................................ 159 147 611 576 327 256 305
Gain (loss) on sale of securities
available for sale, net/(2)/............... 197 (5) (5) (2,878) (2,217) (547) 262
Income from subsidiary...................... 69 26 204 168 251 85 18
Gain (loss) on sale of real estate
acquired in settlement of loans............ (8) (1) (9) (92) (7) -- 62
Other....................................... 52 53 304 136 126 49 705
------- ------- ------- ------- ------- ------- -------
Total other income (loss) /(8)/............ 538 283 1,343 (1,796) (1,213) 128 1,780
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Compensation and employee benefits.......... 1,588 1,476 5,619 7,184 5,821 4,674 4,735
Occupancy and equipment..................... 310 311 1,179 1,201 1,211 1,000 1,035
Data processing service expense.............. 210 207 821 707 683 488 585
Savings Association Insurance Fund
assessment /(3)/........................... -- -- -- 2,895 -- -- --
Federal insurance premiums.................. 134 142 569 974 1,163 990 1,210
Other....................................... 526 428 1,982 1,641 1,937 1,799 1,951
------- ------- ------- ------- ------- ------- -------
Total operating expenses................... 2,768 2,564 10,170 14,602 10,815 8,951 9,516
------- ------- ------- ------- ------- ------- -------
Income/(loss) before income tax
expenses and cumulative effect of
accounting changes.......................... 2,097 1,538 6,981 (3,061) 989 3,427 6,585
Income tax expense........................... 776 569 2,602 154 374 1,236 2,247
------- ------- ------- ------- ------- ------- -------
Income/(loss) before cumulative effect of
accounting changes.......................... 1,321 969 4,379 (3,215) 615 2,191 4,338
Cumulative effect of accounting changes:
Income taxes................................ -- -- -- -- -- -- 400
Postretirement benefits..................... -- -- -- -- -- -- (1,216)
Investments................................. -- -- -- -- -- -- 471
------- ------- ------- ------- ------- ------- -------
Net income/(loss) /(8)/....................$ 1,321 $ 969 $ 4,379 $(3,215) $ 615 $ 2,191 $ 3,993
======= ======= ======= ======= ======= ======= =======
Basic earnings/(loss) per share.............. $0.15 $0.11 $0.49 $(0.37) $0.07 N/A/(4)/ N/A/(4)/
======= ======= ======= ======= =======
Diluted earnings/(loss) per share............ $0.15 $0.11 $0.49 $(0.37) $0.07 N/A/(4)/ N/A/(4)/
======= ======= ======= ======= =======
</TABLE>
(continued on next page)
16
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS TEN MONTHS
ENDED ENDED YEAR ENDED
SEPTEMBER 30, /(9)/ YEARS ENDED MARCH 31, MARCH 31, MAY 31,
------------ -------- -------------------------- ----------- ----------
1998 1997 1998 1997 1996 1995 1994
------------ -------- ------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance ratios:
Equity to assets at period end /(7)/................... 14.15% 15.62% 15.27% 8.33% 7.60% 9.10% 6.22%
Net interest rate spread (difference between average
yield on interest-earning assets and average cost of
interest-bearing liabilities) /(7)/................... 2.05 2.12 2.18 1.99 2.16 2.92 2.52
Net interest margin (net interest income as a
percentage of average interest-earning assets) /(7)/.. 2.66 2.63 2.72 2.28 2.48 3.12 2.71
Return on average assets (net income divided by
average total assets) /(7)/........................... 0.78 0.64 0.72 (0.52) 0.11 0.52 0.71
Return on average equity (net income divided by
average equity) /(7)/................................. 5.53 6.85 5.82 (6.56) 1.20 7.06 10.22
Dividend payout ratio /(5)/............................ 41.67% 38.64% 24.64% N/A/(4)/ 238.0% N/A/(4)/ N/A/(4)/
Stockholders' equity to average assets ratio (average
stockholders' equity divided by average
total assets)......................................... 14.04 9.30 12.39 7.90 9.08 7.30 6.92
Total other income to average assets /(7)/............. 0.32 0.19 0.22 (0.29) (0.21) 0.03 0.31
Total operating expenses to average assets /(6)(7)/.... 1.63 1.69 1.68 1.87 1.91 1.76 1.68
Net interest income to total operating expense /(6)/... 1.59x 1.51x 1.57x 1.18x 1.25x 1.41x 1.56x
Net interest income after provision for loan losses,
to total operating expense /(6)/...................... 1.56x 1.49x 1.55x 1.15x 1.20x 1.37x 1.51x
Average interest-earning assets to average
interest-bearing liabilities /(7)/.................... 1.15x 1.12x 1.13x 1.06x 1.07x 1.05x 1.05x
Asset quality ratios:
Loans 90 days or more past due to net loans............ 1.39% 2.77% 1.62% 2.38% 2.66% 2.55% 3.64%
Loans 90 days past due and other nonperforming
assets to total assets................................ 0.71% 1.05% 0.64% 1.08% 1.00% 1.29% 1.53%
Allowance for loan losses to loans 90 days
past due and other nonperforming assets............... 63.43% 50.56% 71.21% 50.66% 45.54% 40.62% 34.74%
Allowance for loan losses as a percent of net loans
receivable at end of period........................... 0.98% 1.40% 1.25% 1.34% 1.33% 1.22% 1.54%
Regulatory capital ratios:
Tangible capital /(7)/................................. 12.24% 11.99% 12.01% 8.99% 8.48% 10.83% 6.22%
Core capital /(7)/..................................... 12.24 11.99 12.01 8.99 8.48 10.83 6.22
Risk-based capital /(7)/............................... 27.30 34.67 33.85 25.31 26.10 32.21 20.61
Number of full-service offices.......................... 4 4 4 4 4 4 4
</TABLE>
_________________
(1) At the time of its 1995 reorganization, First Savings Bank changed its
fiscal year end from May 31 to March 31.
(2) The loss on securities available for sale in 1997 and 1996 resulted from the
sale of investment securities as part of First Savings Bank restructuring of
its investment portfolio.
(3) Reflects the Savings Association Insurance Fund's Special Assessment of $2.9
million as of September 30, 1996.
(4) Not applicable.
(5) Aggregate dividends per share divided by net income per share.
(6) Total operating expense does not include income tax expense, the provision
for loan losses or the Savings Association Insurance Fund Special
Assessment.
(7) At June 30, 1998 Bayonne had an equity to assets ratio of 13.10%, a net
interest rate spread ratio of 2.00%, a net interest rate margin ratio of
2.61%, a return on average assets ratio of .67%, a return on average equity
ratio of 4.56%, a total other income to assets ratio of .19, a total
operating expenses to average assets ratio of 1.64%, an average interest-
earning assets to average interest-bearing liabilities ratio of 1.15x, a
tangible capital ratio of 11.42%, a core capital ratio of 11.42% and a risk-
based capital ratio of 25.9%.
(8) Net interest income was $4.2 million for the quarter ended June 30, 1998
compared to $3.6 million for the comparable prior year quarter. Non-interest
income totalled $311,000 for the three months ended June 30, 1998, compared
to $398,000 for the quarter ended June 30, 1997. Total interest expense was
$6.4 million for the three months ended June 30, 1998, compared to $6.3
million for the three months ended June 30, 1997. The provision for loan
losses totalled $50,000 for the three months ended June 30, 1998 as compared
to $45,000 for the prior year's three month period.
(9) Annualized where appropriate.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL INFORMATION
The following unaudited pro forma combined selected financial information
combine Richmond County's historical results with Bayonne's historical results
as if the Bayonne merger had become effective as of the dates indicated in the
case of the balance sheet information presented, and as if the Bayonne merger
had become effective at the beginning of the periods indicated in the case of
the income statement information presented. We refer to this as "pro forma"
information. In addition, because the Bayonne merger and the Ironbound merger
are expected to be completed during the same time period, the following pro
forma tables reflect the Bayonne merger and the Ironbound merger. The pro forma
---
information in the tables assumes that the Bayonne merger and the Ironbound
merger are accounted for using the purchase method of accounting.
The merger will be accounted for as a "purchase," which means that the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the time the companies are combined.
For a more detailed description of purchase accounting, see "THE BAYONNE MERGER
- -- Accounting Treatment of the Merger."
Because Richmond County's fiscal year ends on June 30, Bayonne's fiscal
year ends on March 31, and Ironbound Bankcorp, NJ's ends on December 31, the
financial data for Bayonne and Ironbound Bankcorp, NJ for the three months ended
September 30 have been presented to coincide with the fiscal reporting period
for Richmond County. Following the Bayonne merger, the combined company's
fiscal year, like that of Richmond County, will end on June 30.
When reviewing these tables, you should also read the historical financial
statements, including their notes, of Richmond County and Bayonne. See "WHERE
YOU CAN FIND MORE INFORMATION" on page __ of this document. You should also
read the more detailed pro forma financial information, including their notes,
that are found on page ___ of this document.
This information is presented for informational purposes only. You should
not assume that Richmond County, Bayonne and Ironbound would have achieved the
combined pro forma results if they had actually been combined during the periods
shown.
There may be certain cost savings and/or revenue enhancements that will
result from the Bayonne merger and the Ironbound merger. Except as described in
Note __ found on page __ of this document, the information furnished in these
tables does not reflect either the cost savings or the revenue enhancements.
18
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
OF RICHMOND COUNTY, IRONBOUND AND BAYONNE
<TABLE>
<CAPTION>
AT
SEPTEMBER 30,
-------------------
1998
-------------------
(in thousands)
<S> <C>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
Total assets................................ $2,522,691
Long term borrowings........................ 548,582
Total stockholders' equity.................. 478,377
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, JUNE 30,
------------------- --------------
1998 1998
------------------- --------------
(in thousands, except per share data)
<S> <C> <C>
PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME
Net interest income after provision for
loan losses................................. $19,808 $67,596
Net income.................................. 6,378 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 Richmond County Savings Foundation at the
time of Richmond County Savings' conversion.
19
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table sets forth information about our earnings per share,
dividends per share and book value per share, and similar information reflecting
the Bayonne merger. In addition, we have included similar information relating
to the Ironbound merger. You can use this table to understand how the Bayonne
merger and the Ironbound merger would have affected Richmond County's earnings,
dividends and book value, all on a per share basis if the mergers had taken
effect on the first day of the period described below. The first item listed
in each category gives you historical information relating to Richmond County.
The information set forth below is only a summary and you should read it
together with the historical financial statements and related notes contained in
the annual reports and other information that Richmond County and Bayonne have
either attached to this document or have filed previously with the SEC. See
"WHERE YOU CAN FIND MORE INFORMATION" on page __.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
1998 1998
----------------- ----------------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE /(1)/:
Richmond County............................................................. $ 0.22 $ (0.16) /(4)/
Bayonne..................................................................... 0.15 0.49
Richmond County pro forma (with Bayonne only)............................... 0.18 0.21
Bayonne pro forma equivalent................................................ 0.19 0.22
Bayonne pro forma equivalent with Ironbound................................. 0.19 0.24
DILUTED EARNINGS (LOSS) PER SHARE /(2)/:
Richmond County............................................................. $ 0.22 $ (0.16) /(4)/
Bayonne..................................................................... 0.15 0.49
Richmond County pro forma (with Bayonne only)............................... 0.18 0.21
Bayonne pro forma equivalent................................................ 0.19 0.23
Bayonne pro forma equivalent with Ironbound................................. 0.19 0.24
CASH DIVIDENDS DECLARED PER SHARE /(3)/:
Richmond County............................................................. $0.070 $ 0.110
Bayonne..................................................................... 0.063 0.170
Richmond County pro forma (with Bayonne only)............................... 0.070 0.110
Bayonne pro forma equivalent................................................ 0.074 0.116
Bayonne pro forma equivalent with Ironbound................................. 0.074 0.116
BOOK VALUE PER SHARE AT PERIOD END /(1)/:
Richmond County............................................................. $12.48 $ 12.44
Bayonne..................................................................... 10.43 10.85
Richmond County pro forma (with Bayonne only)............................... 12.58 N/A
Bayonne pro forma equivalent................................................ 13.21 N/A
Bayonne pro forma equivalent with Ironbound................................. 12.78 N/A
TANGIBLE BOOK VALUE PER SHARE AT PERIOD END:
Richmond County............................................................. $12.44 12.39
Bayonne..................................................................... 10.43 10.85
Richmond County pro forma (with Bayonne only)............................... 11.78 N/A
Bayonne pro forma equivalent................................................ 12.37 N/A
Bayonne pro forma equivalent with Ironbound................................. 12.16 N/A
</TABLE>
___________________________________
(1) The pro forma combined net income per share of Richmond County common stock
is based upon the combined historical net income for Richmond County and
Bayonne for the periods indicated divided by the average pro forma fully
diluted common share of the combined entities.
(2) Richmond County pro forma cash dividends per share represent historical cash
dividends declared by Richmond County and assumes no changes in cash
dividends declared per share. Bayonne pro forma equivalent cash dividends
per share represent such amounts multiplied by the exchange ratio of 1.05.
(3) Richmond County pro forma stated and tangible book value per share amounts
are based on the historical total stockholders' equity of the combined
entity divided by the total pro forma common shares of the combined entity
based on the exchange ratio of 1.05. The Bayonne pro forma equivalent
stated book value and tangible book value per share amounts are computed by
multiplying the Richmond County pro forma amounts by the exchange ratio of
1.05.
(4) Richmond County converted to stock form on February 18, 1998, accordingly,
earnings per share for the fiscal year ended June 30, 1998 are presented on
an historical basis from February 18, 1998 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 Richmond County Savings Foundation at the time of
Richmond County Savings' conversion.
20
<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, 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 of the FDIC.
At September 30, 1998, Richmond County had total assets of $1.7 billion,
deposits of $953.5 million and stockholders' equity of $329.8 million.
For more information about Richmond County, reference is made to the 1998
Richmond County Form 10-K, which is incorporated herein by reference. See
"WHERE YOU CAN FIND MORE INFORMATION."
BAYONNE
Bayonne is a savings and loan holding company organized under the laws of
the State of Delaware in 1997. Bayonne's wholly owned subsidiary, First Savings
Bank of New Jersey, SLA, operates four banking offices and one financial center
in Bayonne, New Jersey. First Savings is a New Jersey savings association which
has operated since 1889. First Savings' deposits are insured by the Savings
Association Insurance Fund of the FDIC.
In January 1995, First Savings reorganized from a New Jersey chartered
mutual savings and loan association into the federal mutual holding company form
of organization. In connection with the 1995 reorganization, First Savings
became a New Jersey chartered stock savings association and issued approximately
54% of its outstanding common stock to Bayonne Bankshares, M.H.C., a federal
mutual holding company. First Savings sold the remaining shares of outstanding
common stock to certain members of the general public.
In August 1997, First Savings and Bayonne MHC completed a conversion and
reorganization from the mutual holding company to the stock holding company form
of organization. Through the second-step conversion, First Savings formed
Bayonne and as the result of a series of corporate reorganizations became a
wholly owned subsidiary of Bayonne. Bayonne exchanged 2.933 shares of its
common stock for each share of common stock of First Savings held by public
stockholders and sold an additional 4.8 million shares of its common stock to
members of the general public. The shares of First Savings common stock held by
Bayonne MHC were cancelled and the separate corporate existence of Bayonne MHC
was terminated.
At September 30, 1998, Bayonne had total assets of $672.7 million, deposits
of $420.7 million and stockholders' equity of $95.2 million.
For more information about Bayonne, reference is made to the 1998 Bayonne
Form 10-K. The Bayonne Form 10-K is incorporated by reference into this
document. See "WHERE YOU CAN FIND MORE INFORMATION."
21
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Richmond County and Bayonne file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that the companies file at the SEC's public reference rooms in Washington, D.C.,
New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Richmond County and
Bayonne public filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Website maintained by the SEC
at "http://www.sec.gov."
Richmond County has filed the Registration Statement to register with the
SEC the shares of Richmond County common stock to be issued to Bayonne
stockholders in the merger. This Joint Proxy Statement/Prospectus is a part of
the Registration Statement and constitutes a Prospectus of Richmond County, a
Proxy Statement of Richmond County for the Richmond County Special Meeting and a
Proxy Statement of Bayonne for the Bayonne Annual Meeting.
As allowed by SEC rules, this document does not contain all the information
that stockholders can find in the Registration Statement or the exhibits to the
Registration Statement.
The SEC allows Richmond and Bayonne to "incorporate by reference"
information into this document, which means that Richmond County and Bayonne can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this document, except for any information superseded by information
contained directly in the document. This document incorporates by reference
other documents, which are listed below that Richmond and Bayonne have
previously filed with the SEC. The documents contain important information about
their financial condition.
<TABLE>
<CAPTION>
RICHMOND COUNTY SEC FILINGS (FILE NO. 0-23271)
<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
Amended Quarterly Report on Form 10-Q/A Three months ended September 30, 1998
Current Report on Form 8-K Dated July 27, 1998
Current Report on Form 8-K Dated October 16, 1998
BAYONNE SEC FILINGS (FILE NO. 0-22499)
Registration Statement on Form 8-A Dated April 30, 1997
Annual Report on Form 10-K Year ended March 31, 1998
Amended Annual Report on Form 10-K/A Year ended March 31, 1998
Quarterly Report on Form 10-Q Three months ended June 30, 1998
Quarterly Report on Form 10-Q Three months ended September 30, 1998
Amended Quarterly Report on Form 10-Q/A Three months ended September 30, 1998
Current Report on Form 8-K Dated July 27, 1998
Current Report on Form 8-K/A Dated October 16, 1998
</TABLE>
22
<PAGE>
Richmond County and Bayonne incorporate by reference additional documents
that they might file with the SEC between the date of this Joint Proxy
Statement/Prospectus and the date of their meetings. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements. The Bayonne Annual
Report on Form 10-K for the Year Ended March 31, 1998 and any amendments to
this form, are also being mailed along with this document to Bayonne
stockholders.
Richmond County has supplied all information contained or incorporated by
reference in this document relating to Richmond County.
Bayonne has supplied all information contained or incorporated by reference
in this document relating to Bayonne.
If you are a stockholder of Richmond County or Bayonne, as the case may be,
we may have sent you some of the documents incorporated by reference, but you
can obtain any of them through Richmond County or Bayonne, as the case may be,
or the SEC or the SEC's Internet World Wide Website described above.
Documents incorporated by reference are available from the companies
without charge, excluding all exhibits unless specifically incorporated by
reference as an exhibit to this Joint Proxy Statement/Prospectus. Stockholders
of Richmond County or Bayonne may obtain documents incorporated by reference in
this Joint Proxy Statement/Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Attention: Thomas R. Cangemi, Corporate Secretary
Telephone No. (718) 448-2800
Bayonne Bancshares, Inc.
568 Broadway
Bayonne, New Jersey 07002
Attention: Thomas Coughlin, Corporate Secretary
Telephone No. (201) 437-1000
If you would like to request documents from either company, please do so by
_________________ to receive them before the Richmond County special meeting
and/or Bayonne annual meeting. If you request any incorporated documents from
us we will mail them to you by first-class mail, or other equally prompt means,
within one business day of our receipt of your request.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Richmond County meeting
and/or Bayonne meeting. Richmond County and Bayonne have not authorized anyone
to provide you with information that is different from what is contained in this
document. This Joint Proxy Statement/Prospectus is dated ______________, 199_.
You should not assume that the information contained in the Joint Proxy
Statement/Prospectus is
23
<PAGE>
accurate as of any date other than that date, and neither the mailing of this
document 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 document or in any of the materials that
have been incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
FORWARD-LOOKING STATEMENTS
This document, the documents incorporated by reference in this document, or
any other written or oral statements made by or on behalf of Richmond County and
Bayonne may include forward-looking statements with respect to the financial
condition, results of operations and business of Richmond County and Bayonne,
based on management's belief and information currently available to management.
Such forward-looking statements are subject to risks, uncertainties and
assumptions. Actual results may vary materially from those anticipated,
estimated, projected or expected. Among, but not limited to, the factors that
may cause variations from such forward-looking statements are:
. fluctuations in the economy, especially in the market areas of
Richmond County and its proposed acquisition entities;
. changes in the interest rate environment;
. Richmond County's ability to realize anticipated cost savings relating
to pending acquisitions;
. 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;
. the continued growth of the markets in which Richmond County operates;
and
. the enactment of legislation impacting Richmond County.
Readers are cautioned not to place undue reliance on any forward-looking
statements made by or on behalf of Richmond County and Bayonne. Additional
information with respect to factors that may cause the results to differ
materially from those contemplated by such forward-looking statements is
included in Richmond County's and Bayonne's current and subsequent filings with
the SEC.
24
<PAGE>
MARKET PRICES AND DIVIDEND INFORMATION
Richmond County common stock is listed on the Nasdaq National Market under
the symbol "RCBK." Bayonne common stock is listed on the Nasdaq National Market
under the symbol "FSNJ."
The following table lists the high and low prices per share for Richmond
County common stock and Bayonne common stock as reported on the Nasdaq National
Market and the quarterly cash dividends declared by each company for the periods
indicated. Richmond County common stock began trading on the Nasdaq National
Market on February 18, 1998. After the second-step conversion of Bayonne, the
common stock of Bayonne began trading on the Nasdaq National Market in August,
1997.
<TABLE>
<CAPTION>
RICHMOND COUNTY COMMON STOCK BAYONNE COMMON STOCK
--------------------------------------- --------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
--------- ----------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997
Quarter ended March 31.................... N/A N/A N/A $ 8.35 $ 7.16 $.0425
Quarter ended June 30..................... N/A N/A N/A 9.21 7.93 .0425
Quarter ended September 30................ N/A N/A N/A 13.06 9.20 .0425
Quarter ended December 31................. N/A N/A N/A 13.38 11.63 .0425
1998
Quarter ended March 31.................... $19.63 $15.68 $0.05 14.88 12.06 .0425
Quarter ended June 30..................... 19.75 17.75 0.06 17.38 15.25 .0625
Quarter ended September 30................ 18.69 11.88 0.07 17.13 10.00 .0625
Quarter ended December 31................. 17.13 11.31 0.07 17.56 10.63 .0625
1999
Quarter ended March 31....................
As of ________, 1999......................
</TABLE>
The following table shows the closing price per share of Richmond County
common stock, Bayonne common stock and the equivalent per share price for
Bayonne common stock giving effect to the merger on (1) October 13, 1998 the
last business day preceding the public announcement of the amendments to the
merger agreement, and (2) _________, 1999, which is the last practicable trading
day prior to the mailing of this document. The equivalent per share price of
Bayonne common stock was computed by multiplying the price of Richmond County
common stock by the 1.05 exchange ratio.
<TABLE>
<CAPTION>
EQUIVALENT PRICE PER
RICHMOND COUNTY BAYONNE COMMON SHARE OF
COMMON STOCK STOCK BAYONNE COMMON STOCK
--------------- -------------- --------------------
<S> <C> <C> <C>
October 13, 1998....... $12.25 $12.00 $12.86
_______ __, 1999...... $_____ $_____ $_____
</TABLE>
You should obtain current market quotations for Richmond County common
stock and Bayonne common stock as the market price of Richmond County common
stock will continue to fluctuate between the date of this document and the date
on which the Bayonne Merger is completed and thereafter. Because the number of
shares of Richmond County common stock that Bayonne stockholders will receive is
generally fixed and because the market price of Richmond County common stock
fluctuates, the value of the shares of Richmond County
25
<PAGE>
common stock that holders of Bayonne common stock would receive in the merger
may increase or decrease prior to the merger. See "THE BAYONNE MERGER -- Bayonne
Stockholders Will Receive 1.05 Shares of Richmond County Common Stock for Each
Bayonne Share" and "-- Waiving and Amending Provisions in, or Terminating the
Merger Agreement."
THE STOCKHOLDERS' MEETINGS
MEETING OF RICHMOND COUNTY STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
The Richmond County meeting will be held at ________________________,
_____________________________, _________, New York _____, on ________,
___________ __, 199_ at _:__ a.m., local time. At this meeting, Richmond
County's stockholders will be asked to vote upon:
. a proposal to approve and adopt the merger agreement; and
. the ratification of amendments to the Richmond County Financial Corp.
1998 Stock-Based Incentive Plan; and
. other matters properly brought before the Richmond County meeting.
A copy of the merger agreement is attached as Annex A. A copy of the
proposed amended Richmond County Incentive Plan is attached as Annex E.
THE RICHMOND COUNTY BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
HAS DETERMINED THAT THE TERMS OF THE MERGER AND THE MERGER AGREEMENT ARE FAIR
TO AND IN THE BEST INTERESTS OF RICHMOND COUNTY AND ITS STOCKHOLDERS. THE
RICHMOND COUNTY BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT RICHMOND COUNTY'S
STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. IN
ADDITION, THE RICHMOND COUNTY BOARD HAS DETERMINED THAT THE AMENDMENTS TO THE
RICHMOND COUNTY 1998 STOCK-BASED INCENTIVE PLAN DESCRIBED IN THIS DOCUMENT ARE
IN THE BEST INTERESTS OF RICHMOND COUNTY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT RICHMOND COUNTY STOCKHOLDERS VOTE "FOR" THE AMENDMENTS TO THE
RICHMOND COUNTY STOCK-BASED INCENTIVE PLAN.
See "THE BAYONNE MERGER -- Background of the Merger" and "-- Recommendation
of the Richmond County Board; Richmond County's Reasons for the Merger."
26
<PAGE>
Additional information on the ratification of certain amendments to the
Richmond County Incentive Plan is included under "ADDITIONAL MATTERS TO BE
CONSIDERED AT THE RICHMOND COUNTY MEETING."
WHO CAN VOTE ON MATTERS ADDRESSED IN THIS DOCUMENT
The Richmond County board has fixed __________ __, 199_ as the record date
for determining which stockholders are entitled to notice of and to vote at the
Richmond County meeting. Only holders of record of Richmond County common stock
at the close of business on the record date will be entitled to notice and to
vote. As of the record date, there were __________ shares of Richmond County
common stock outstanding and entitled to vote, which were held by approximately
____ holders of record.
PROXIES; VOTING AND REVOCATION OF PROXIES
Each record holder of Richmond County common stock on the record date is
entitled to cast one vote for share of stock owned. However, Richmond County's
Certificate of Incorporation provides that record holders of common stock who
beneficially own more than 10% of the outstanding shares of common stock can
only vote their stock up to the 10% limit. The limit includes shares which
people have the right to acquire through any agreement or the exercise of any
rights, warrants or options.
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Richmond County common stock
entitled to vote at the meeting is necessary to constitute a quorum. To
determine if a quorum exists Richmond County will count shares of common stock
present in person at the meeting but not voted, and shares of stock for which it
has received proxies but with respect to which holders have abstained on any
matter, as present at the meeting. Because the approval and adoption of the
merger agreement requires the affirmative vote of the holders of a majority of
the outstanding shares of common stock entitled to vote, each non-voting share
and abstention will have the effect of a vote against the merger agreement. In
addition, brokers who hold shares in street name for customers who are
beneficial owners of those shares are prohibited from giving a proxy to vote
shares held for those customers without specific instructions from such
customers. Given that the approval and adoption of the merger agreement requires
a majority vote, the failure to provide specific instructions to a broker with
respect to shares (a "broker non-vote") will be counted as a vote against the
merger agreement.
27
<PAGE>
Shares of Richmond County common stock represented at the meeting by
properly executed proxies received prior to or at the meeting, and which are not
revoked, will be voted as instructed on the proxies. If no instructions are
indicated, the proxies will be voted:
. "FOR" approval and adoption of the merger agreement,
. "FOR" the ratification of the amendments to the Richmond County 1998
Stock-Based Incentive Plan, and
. in the discretion of the proxy holders on any other matter voted on.
This includes a motion to adjourn or postpone the meeting to solicit
additional proxies. However, no proxy voted against a proposal will be
voted in favor of any adjournment or postponement to solicit
additional votes in favor of that proposal.
If any other matters are voted on at the meeting, the persons named in the
proxy will have authority to vote on the matters at their discretion. Richmond
County does not know of any other matters to be presented at the meeting.
Richmond County stockholders who grant their proxy can revoke the proxy
before it is voted by:
. delivering to the Corporate Secretary of Richmond County, at or before
the taking of the vote at the meeting, a written notice of revocation
bearing a later date than the date of the proxy;
. executing a later-dated proxy relating to the same shares and
delivering it to the Corporate Secretary of Richmond County before the
taking of the vote at the meeting; or
. attending the meeting and voting in person (although attendance at the
meeting will not in and of itself constitute revocation of the proxy).
Any written notice of revocation or subsequently executed proxy should be
delivered to Richmond County Financial Corp., 1214 Castleton Avenue, Staten
Island, New York 10310, Attention: Corporate Secretary, or hand delivered to
Richmond County's Corporate Secretary at that address on or before the day of
the meeting or to the Inspector of Elections of the meeting before the taking of
the vote. IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
--------------------------------------------------------------------
NAME, YOU WILL NEED ADDITIONAL
- ------------------------------
28
<PAGE>
DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO BE ADMITTED TO THE MEETING.
- -----------------------------------------------------------------------------
Examples of such documentation include a broker's statement, letter or other
document confirming your ownership of shares.
Richmond County will pay for the solicitation of proxies from the holders
of Richmond County's stock. Proxies may be solicited by mail, by directors,
officers and employees of Richmond County in person or by telephone, telegram or
other means of communication. Directors, officers and employees who solicit
proxies will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses they incur in the solicitation. Richmond
County has retained Kissel-Blake, Inc., a proxy soliciting firm, to assist in
the solicitation. The fee to be paid to Kissel-Blake is not expected to exceed
$5,000, plus reasonable out-of-pocket costs and expenses. Further, Richmond
County will make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals and will
reimburse those parties for their expenses in doing so.
HOLDERS OF RICHMOND COUNTY COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE,
SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO RICHMOND
COUNTY IN THE ENCLOSED POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
VOTE REQUIRED; PRINCIPAL STOCKHOLDERS
The approval and adoption of the merger agreement by Richmond County
stockholders will require at least a majority vote for the merger from the
outstanding shares of common stock. STOCKHOLDER APPROVAL IS A CONDITION TO
CLOSING THE MERGER.
The ratification of certain amendments to the Richmond County 1998 Stock-
Based Incentive Plan will require a majority of the votes cast by Richmond
County stockholders. Shares as to which the "Abstain" box has been selected on
the proxy card will be counted as present and entitled to vote and have the
effect of a vote against the matter. In contrast, shares underlying broker non-
votes or in excess of the Richmond County limit will have no effect on the vote
on the item.
As of September 30, 1998, directors and executive officers of Richmond
County and their affiliates beneficially owned and were entitled to vote 282,317
shares of Richmond County common stock. This equals 1.10% of the outstanding
common stock that may be voted at the Richmond County meeting. This figure does
not include shares which may be acquired through stock options under the
Richmond County Financial Corp. 1998 Stock-Based Incentive Plan. These persons
have informed Richmond County that they intend to vote or direct the vote of
their shares FOR approval of the merger agreement. In addition as of
September 30, 1998, Bayonne, its subsidiaries and the directors and executive
officers of Bayonne beneficially owned 900 shares of Richmond County common
stock. See "CERTAIN RELATED TRANSACTIONS -- Bayonne Merger Stock Option
Agreement."
29
<PAGE>
BENEFICIAL OWNERSHIP OF RICHMOND COUNTY COMMON STOCK
OWNERS OF 5% OF RICHMOND COUNTY COMMON STOCK
Other than those persons listed below, Richmond County is not aware of any
person who is the beneficial owner of more than 5% of the outstanding shares of
Richmond County common stock as of September 30, 1998. For the purposes of the
following table and the table set forth under "-- Directors and Executive
Officers," a person is considered to "beneficially own" any shares of Richmond
County common stock (1) over which he or she has, directly or indirectly, sole
or shared voting or investment power, or (2) of which he or she 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 below, "voting power" includes the power to vote, or direct the
voting of shares, "Investment power" includes the power to dispose, or direct
the disposition of shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL COMMON STOCK
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OUTSTANDING
- ------------------------------- --------------------------------------- --------------------- ------------------
<S> <C> <C> <C>
Common Stock Richmond County Savings Bank 2,113,880/(1)/ 8.0%
Employee Stock Ownership Plan
1214 Castleton Avenue
Staten Island, New York 10310
Common Stock Richmond County Savings Foundation 1,957,300/(2)/ 7.4%
1214 Castleton Avenue
Staten Island, New York 10310
Common Stock Thomson, Horstmann & Bryant, Inc. 1,682,350/(3)/ 6.4%
Park 80 West, Plaza One
Saddle Brook, New Jersey 07663
</TABLE>
____________________________
(1) Shares of Richmond County common stock were acquired by the Richmond County
Savings ESOP in Richmond County Savings' conversion. The Richmond County
Savings ESOP Committee administers the Richmond County Savings ESOP. Marine
Midland Bank is the corporate trustee for the Richmond County Savings ESOP.
The Richmond County Savings ESOP trustee, is required to vote all allocated
shares held in the Richmond County Savings ESOP as instructed by the
Richmond County Savings ESOP participants. As of September 30, 1998, no
shares had been allocated under the Richmond County Savings ESOP.
Unallocated shares are required to be voted by the Richmond County Savings
ESOP trustee in a manner calculated to most accurately reflect the voting
instructions received from Richmond County Savings ESOP participants. That
vote must be done according to the laws of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(2) The Richmond County Savings Foundation was established and funded by
Richmond County in connection with Richmond County Savings' Conversion with
an amount of Richmond County's common stock equal to 8.0% of the total
amount of Richmond County common stock sold in the Conversion. The Richmond
County Savings Foundation is a Delaware non-stock corporation and is
dedicated to the promotion of charitable purposes within the communities in
which Richmond County Savings operates. The Richmond County Savings
Foundation is governed by a board of directors with eight members, all of
whom are directors of Richmond County or Richmond County Savings. All shares
of Richmond County common stock held by the Richmond County Savings
Foundation must be voted in the same ratio as all other shares of Richmond
County's common stock on all proposals considered by stockholders of
Richmond County.
(3) According to information disclosed on a Schedule 13F, filed with the SEC on
July 27, 1998, as well as a Schedule 13F filed with the SEC in September
1998. Thomson, Horstmann & Bryant, Inc. is an investment adviser under
Section 203 of the Investment Advisers Act of 1940.
30
<PAGE>
WHAT RICHMOND COUNTY'S DIRECTORS AND EXECUTIVE OFFICERS OWN
The following table provides information about the shares of Richmond
County common stock beneficially owned by each director of Richmond County, by
Richmond County's Chief Executive Officer and by the next four most highly
paid executive officers of Richmond County. It also includes all directors
and executive officers of Richmond County as a group as of September 30, 1998.
Except as otherwise indicated, each person and each group shown in the table
has sole voting and investment power over their shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME TITLE OWNERSHIP/(1)/ OUTSTANDING/(2)/
- --------------------- ---------------------------------- --------------------- ----------------
<S> <C> <C> <C>
Michael F. Manzulli Chairman of the Board and Chief 27,225 *
Executive Officer
Anthony E. Burke President, Chief Operating Officer 14,425 *
and Director
Godfrey H. Carstens, Jr. Director 17,032 *
Robert S. Farrell Director 19,945 *
William C. Frederick Director 6,000 *
Maurice K. Shaw Director 6,326 *
James L. Kelley Director 13,640 *
T. Ronald Quinlan, Jr. Director 1,000 *
Thomas R. Cangemi Senior Vice President, Chief 27,175 *
Financial Officer and Secretary
John M. McKenna Executive Vice President 1,063 *
All directors and executive 282,317 1.10%
officers as a group (23 persons)
</TABLE>
________________________
* Represents less than 1% of outstanding Richmond County common stock.
(1) Does not include options and awards intended to be granted under the
Richmond County Incentive Plan.
(2) Percentages have been calculated on the basis of 26,423,550 shares of
Richmond County common stock, the number of shares of Richmond County common
stock outstanding as of September 30, 1998.
31
<PAGE>
ADDITIONAL MATTERS TO BE CONSIDERED
AT THE RICHMOND COUNTY MEETING
RATIFICATION OF THE AMENDMENTS TO THE RICHMOND COUNTY FINANCIAL CORP. 1998
STOCK-BASED INCENTIVE PLAN
The Richmond County board presents for stockholder ratification an amended
and restated Richmond County Incentive Plan. Stockholders originally approved
the Richmond County Incentive Plan on September 29, 1998. The proposed amended
and restated Incentive Plan is attached as Annex E.
The Richmond County board believes it is in the best interest of Richmond
County and Richmond County Savings to amend the Incentive Plan primarily in two
respects. First, the amended plan allows Richmond County the discretion to
accelerate or modify the vesting of restricted stock awards and stock options
following a participant's retirement. Second, the amended plan provides for
accelerated vesting of outstanding restricted stock awards and stock options
upon a change in control of Richmond County or Richmond County Savings.
Richmond County also amended the Richmond County Incentive Plan for conforming
changes and certain minor administrative matters.
As of December 31, 1998, Richmond County had granted options covering
2,617,885 shares of Richmond County's common stock under the Richmond County
Incentive Plan and 24,470 shares remained available for future grants of stock
options. As of December 31, 1998, Richmond County had granted restricted stock
awards of 1,054,274 under the Richmond County Incentive Plan and 2,668 shares of
common stock.
Richmond County implemented the Richmond County Incentive Plan largely to
attract, keep, and motivate qualified individuals in key positions. The
Richmond County Incentive Plan provides officers, employees and non-employee
directors, "outside directors," of Richmond County and its affiliates, including
Richmond County Savings, an incentive to contribute to the success of Richmond
County by giving them an ownership interest in Richmond County. This aligns the
interests of management and stockholders and rewards employees for outstanding
performance.
The Richmond County Incentive Plan allows Richmond County to grant awards
of restricted shares of Richmond County common stock and options to purchase
Richmond County common stock. All full-time employees and all outside directors
of Richmond County and its affiliates, including Richmond County Savings, are
eligible to receive awards under the Richmond County Incentive Plan. A
committee consisting of three members of the Richmond County board, who are not
employees of Richmond County or its affiliates, administers the Richmond County
Incentive Plan.
FDIC policies provide that restricted stock and stock option awards granted
under any stock-based benefit plan, such as the Richmond County Incentive Plan,
adopted by a financial institution within the first year after conversion to
stock form, must vest at a rate of no greater than 20% per year, except in the
case of death or disability. However, following one year after conversion, the
financial institution may amend the plan to also provide for accelerated vesting
in the cases of retirement and change in control. The one year ban on
accelerated vesting in these cases, as applied to Richmond County Savings and
Richmond County, ends in February 1999.
32
<PAGE>
THE RICHMOND COUNTY BOARD RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENTS
TO THE RICHMOND COUNTY FINANCIAL CORP. 1998 STOCK-BASED INCENTIVE PLAN.
MEETING OF BAYONNE STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
The Bayonne meeting will be held on ___________ __, 199_, at _:__ a.m.,
local time, at _____________________, ________________, ________, New Jersey.
At the Bayonne meeting, holders of Bayonne common stock will be asked to vote
on:
. a proposal to approve and adopt the merger agreement;
. the election of two directors of Bayonne to serve until completion of the
merger or, if the merger is not completed, for three-year terms and
until their successors shall have been elected and qualified;
. the ratification of the appointment of KPMG LLP as independent auditors
of Bayonne for the fiscal year ending March 31, 1999; and
. such other matters as may properly be brought before the meeting.
THE BAYONNE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND HAS
DETERMINED THAT THE TERMS OF THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND
IN THE BEST INTERESTS OF BAYONNE AND ITS STOCKHOLDERS. THE BAYONNE BOARD
THEREFORE UNANIMOUSLY RECOMMENDS THAT BAYONNE'S STOCKHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT. IN ADDITION, THE BAYONNE BOARD HAS
DETERMINED THAT THE ELECTION OF THE DIRECTOR NOMINEES TO THE BOARD NAMED IN THIS
DOCUMENT IS IN THE BEST INTERESTS OF BAYONNE AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT BAYONNE STOCKHOLDERS VOTE "FOR" THE ELECTION TO THE
BOARD THE DIRECTOR NOMINEES TO SERVE UNTIL COMPLETION OF THE MERGER OR FOR
THREE-YEAR TERMS IF THE MERGER IS NOT COMPLETED. FURTHER, THE BAYONNE BOARD HAS
DETERMINED THAT THE RATIFICATION OF APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS OF BAYONNE IS IN BAYONNE'S AND ITS STOCKHOLDERS BESTS INTERESTS AND
UNANIMOUSLY RECOMMENDS THAT BAYONNE'S STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF BAYONNE.
See "THE BAYONNE MERGER -- Recommendation of the Bayonne Board; Bayonne's
Reasons for the Merger."
Additional information on the election of directors and the ratification of
independent auditors is included under "ADDITIONAL MATTERS TO BE CONSIDERED AT
THE BAYONNE MEETING.
WHO CAN VOTE ON MATTERS ADDRESSED IN THIS DOCUMENT
The Bayonne Board of Directors has fixed the close of business on
_________, 199_ as the record date for determining which Bayonne stockholders
are entitled to receive notice of and to vote at the meeting. Only holders of
record of Bayonne common stock at the close of business on
33
<PAGE>
the Bayonne record date are entitled to receive notice of and to vote. At the
close of business on the Bayonne record date, there were _________ shares of
Bayonne common stock outstanding and entitled to be voted at the meeting. The
presence, in person or by proxy, of the holders of at least a majority of the
total number of outstanding shares of Bayonne common stock entitled to vote at
the meeting is necessary to constitute a quorum.
PROXIES; VOTING AND REVOCATION OF PROXIES
Each holder of Bayonne common stock on the Bayonne record date will be
entitled to one vote for each share of stock owned on each matter to be voted
upon at the meeting. However, Bayonne's Certificate of Incorporation, imposes a
limit on stockholders who beneficially own more than 10% of the outstanding
shares of Bayonne common stock. Those people can only vote their stock up to
this limit. The limit applies to stockholders and their affiliates (as described
on page __).
Shares of common stock represented at the meeting by properly executed
proxies received prior to or at the meeting and which are not revoked will be
voted as instructed on the proxies. If no instructions are given, the proxies
will be voted:
. "FOR" approval and adoption of the merger agreement;
. "FOR" the election of the nominees for director named in this document;
and
. "FOR" the ratification of KPMG LLP as independent auditors of Bayonne
for the fiscal year ending March 31, 1999.
The presence of a stockholder at the meeting will not automatically revoke
the stockholder's proxy. However, a stockholder may revoke a proxy at any time
prior to its exercise by:
. filing a written notice of revocation with the Corporate Secretary of
Bayonne prior to the meeting;
. delivering to the Corporate Secretary of Bayonne prior to the meeting
a duly executed proxy bearing a later date; or
. attending the meeting, filing a written notice of revocation with the
secretary of the meeting and voting in person.
IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
---------------------------------------------
34
<PAGE>
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
- ------------------------------------------------------------------------------
RECORD HOLDER IN ORDER TOb BE ADMITTED TO THE MEETING. Examples of such
- ----------------------------------------------------
documentation include a broker's statement, letter or other document confirming
your ownership of shares.
Bayonne will pay for the soliciting of proxies from the holders of Bayonne
common stock. In addition to the solicitation of proxies by mail, Kissel-Blake,
Inc., a proxy solicitation firm, will assist Bayonne in soliciting proxies for
the meeting. Kissel-Blake will be paid a fee estimated to be $5,000, plus
out-of-pocket expenses. Proxies may also be solicited personally, by telephone,
facsimile or other means, by directors, officers and employees of Bayonne or its
subsidiaries, without additional compensation. Bayonne will also request
persons, firms and corporations holding shares of Bayonne common stock in their
names or in the name of their nominees, which are beneficially owned by others,
to forward proxy materials to and obtain proxies from the beneficial owners,
and will reimburse the record holders for their reasonable expenses incurred in
doing so.
HOLDERS OF BAYONNE COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE, SIGN
AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT TO BAYONNE IN THE ENCLOSED
POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
VOTE REQUIRED; PRINCIPAL STOCKHOLDERS
The approval and adoption of the merger agreement will require the
affirmative vote of at least a majority of the outstanding shares of common
stock. 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 merger agreement. Shares underlying broker non-votes or held in
excess of the limit will not be counted as having been voted in person or by
proxy at the meeting and will have the same effect as a vote Against the
merger agreement.
As to the election of directors, the proxy card being provided by the
Bayonne board enables a stockholder to vote "FOR" the election of the nominees
proposed by the Bayonne board, or to "WITHHOLD" authority to vote for one or
more of the nominees being proposed. Under Delaware law and Bayonne's Bylaws,
directors are elected by a plurality of votes cast, without regard to either
(1) broker non-votes, or (2) proxies as to which authority to vote for one or
more of the nominees being proposed is withheld. "Plurality" means that the
directors are elected by a majority of votes. Accordingly, the two nominees
receiving the most votes will be elected.
As to the ratification of KPMG LLP as independent auditors of Bayonne,
the proxy card being provided by the Bayonne board enables a stockholder to
check the appropriate box on the proxy card to:
. vote "FOR" the item;
. vote "AGAINST" the item; or
. "ABSTAIN" from voting on such item.
A representative of KPMG LLP will be in attendence at the meeting in order
to answer any questions you might have.
35
<PAGE>
Under Delaware law and Bayonne's Bylaws, a majority of the shares of
Bayonne common stock present, in person or by proxy, at the meeting is required
for stockholder approval. Shares as to which the "ABSTAIN" box has been selected
on the proxy card will be counted as present and entitled to vote and have the
effect of a vote against the matter. In contrast, shares underlying broker non-
votes or in excess of the limit will have no effect on the vote on the item.
As of September 30, 1998, directors and executive officers of Bayonne and
their affiliates beneficially owned and were entitled to vote 873,465 shares of
Bayonne common stock. This is 9.58% of the outstanding Bayonne common stock
which may be voted at the Bayonne meeting. This figure does not include shares
of common stock that may be acquired upon the exercise of stock options under
the Bayonne Bancshares, Inc. Amended and Restated 1995 Stock Option Plan and
shares awarded, but that have not vested, under the Bayonne Bancshares, Inc.
1998 Stock-Based Incentive Plan. These people have indicated their intent to
vote their shares in favor of the approval and adoption of the merger agreement.
As of September 30, 1998, Richmond County, its subsidiaries and the directors
and executive officers of Richmond County beneficially owned approximately
443,000 shares of Bayonne common stock. Additionally, Richmond County may also
be considered to be the beneficial owner of 1,809,804 shares of Bayonne common
stock issuable under the Bayonne Merger Stock Option Agreement. That document is
attached hereto to this document as Annex B. Under the Bayonne Merger Stock
Option Agreement, Richmond County has the right to exercise an option to
purchase 1,809,804 shares if some events occur, none of which has yet occurred.
Richmond County has expressly disclaimed beneficial ownership of such these
1,809,804 shares. See "CERTAIN RELATED TRANSACTIONS -- Bayonne Merger Stock
Option Agreement."
36
<PAGE>
BENEFICIAL OWNERSHIP OF BAYONNE COMMON STOCK
OWNERS OF 5% OF BAYONNE COMMON STOCK
Other than those persons listed below, Bayonne is not aware of any person
who is the beneficial owner of more than 5% of the outstanding shares of Bayonne
common stock as of September 30, 1998.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL BENEFICIAL COMMON STOCK
OF SECURITY OWNERS OWNERSHIP OUTSTANDING/(1)/
- --------------- ------------------------------------- --------------- ------------------
<S> <C> <C> <C>
Common Stock First Savings Bank of New Jersey, SLA 708,179/(1)/ 7.76%
Employee Stock Ownership Plan
568 Broadway
Bayonne, New Jersey 07002
Common Stock Jeffrey S. Halis 94,846/(2)(3)/ 1.04%
500 Park Avenue
Fifth Floor
New York, New York 10022
Common Stock Michael Lowenstein 431,151/(4)/ 4.73%
500 Park Avenue
Fifth Floor
New York, New York 10022
</TABLE>
________________________
(1) Shares of common stock were acquired by the Bayonne ESOP in connection with
Bayonne's second-step conversion, which closed on August 22, 1997. The
Bayonne ESOP Committee administers the Bayonne ESOP. First Security Trust
Company is the trustee for the Bayonne ESOP. The Bayonne ESOP trustee, is
required to vote all allocated shares held in the Bayonne ESOP in accordance
with the instructions of the Bayonne ESOP participants. At September 30,
1998, 191,186 shares had been allocated under the Bayonne ESOP and 516,993
shares remain unallocated. Each participant, however, will be deemed to have
one share of Bayonne common stock in the Bayonne ESOP allocated to the
participant's account for providing voting instructions to the Bayonne ESOP
trustee. Under the Bayonne ESOP, unallocated shares and allocated shares as
to which voting instructions are not given by participants will be voted by
the Bayonne ESOP trustee in a manner calculated to most accurately reflect
the instructions received from participants regarding the allocated stock
so. This must be done in conformance with the fiduciary provisions of ERISA.
(2) Based on information disclosed in a Schedule 13D/A filed with the SEC on
June 9, 1998.
(3) The 431,151 shares reported in a Schedule 13D filed by Michael Lowenstein on
September 5, 1997 include shares owned by Tyndall Partners, L.P., Madison
Avenue Partners, L.P., Tyndall Institutional Partners, L.P., and Halo
International, Ltd. According to the Schedule 13D filed on September 5,
1997, Michael Lowenstein possesses the sole power to vote and dispose of the
common stock held by this investment group. However, Jeffrey S. Halis is a
general partner of Halo Capital Partners, L.P., which is the sole general
partner of each member of the investment group, and also serves as a member
of Jemi Management, L.L.C., which serves as the investment manager for Halo
International, Ltd.
(4) Based on information disclosed in a Schedule 13D filed with the SEC on
September 5, 1997. Mr. Lowenstein disclaims any interest in the shares
owned individually by Mr. Halis.
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<PAGE>
WHAT BAYONNE'S DIRECTORS AND EXECUTIVE OFFICERS OWN
The following table provides information on the shares of Bayonne common
stock beneficially owned by each director of Bayonne, by Bayonne's Chief
Executive Officer and by the next four most highly paid executive officers of
Bayonne. It also includes all directors and executive officers of Bayonne as a
group as of September 30, 1998. Except as otherwise indicated, each person and
each group shown in the table has sole voting and investment power over their
shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME TITLE/(1)/ OWNERSHIP/(1)(2)3)/ OUTSTANDING/(7)/
- ----------------------------------- ---------------------------------- -------------------- ----------------
<S> <C> <C> <C>
Patrick F.X. Nilan Chairman of the Board 295,416/(1)(2)(3)/ 3.24%
Michael A. Nilan President, Chief Executive 93,655/(3)(4)(5)/ 1.03%
Officer and Director
James F. Sisk Director 74,583/(1)(2)/ *
Patrick D. Conaghan Director 110,440/(1)(2)/ 1.21%
Frederick G. Whelpley Director 97,360/(1)(2)/ 1.07%
Joseph L. Wisniewski Director 94,966/(2)(3)/ 1.04%
Eugene V. Malinowski, C.P.A. Vice President and Chief Financial 43,497/(5)/ *
Officer
James E. Collins Vice President/Loan Officer 35,898/(4)(5)/ *
Donald Mindiak Treasurer 27,821/(4)(5)/ *
Thomas M. Coughlin, C.P.A. Corporate Secretary/Controller 15,048/(4)(5)/ *
All directors and executive 888,684/(6)/ 9.74%
officers as a group (10 persons)
</TABLE>
- --------------------------
* Represents less than 1% of outstanding Bayonne common stock.
(1) Includes 3,983, 4,049 and 3,983 options awarded to Messrs. Conaghan,
Whelpley and Sisk, respectively, under the Bayonne 1995 Stock Option Plan,
that are currently exercisable or will become exercisable within 60 days of
September 30, 1998. When the second-step conversion closed, Bayonne
adopted the Bayonne 1995 Stock Option Plan and agreed to issue Bayonne
common stock under that plan. The adjusted exercise price of all of the
options that have been awarded to date under that Plan is $4.43.
(2) Includes 15,932, 3,184, 3,184 and 3,184 shares awarded to Messrs. Patrick
F.X. Nilan, Conaghan, Whelpley and Sisk, respectively, under the Bayonne
1995 RRP Bancshares, Inc. Amended and Restated 1995 Recognition and
Retention Plan that have not vested. Includes 9,738 shares awarded to each
of Messrs. Patrick F.X. Nilan, Wisniewski, Sisk, Conaghan and Whelpley
under the Bayonne Incentive Plan that have not vested. Awards granted under
the Bayonne 1995 RRP and the Bayonne Incentive Plan vest in equal
installments of 20% per year. Upon completion of the second-step
conversion, Bayonne adopted the Bayonne 1995 RRP and agreed to issue
Bayonne common stock under the terms of that plan. Each recipient has
voting power as to the shares awarded.
(3) Includes 13,429, 7,901 and 10,029 shares allocated to Messrs. Patrick F.X.
Nilan, Joseph L. Wisniewski and Michael A. Nilan, respectively, under the
Bayonne ESOP for which each has sole voting power.
(4) Includes 6,069, 6,069, 6,069 and 4,957 options awarded to Messrs. Michael
A. Nilan, Collins, Mindiak and Coughlin under the Bayonne 1995 Stock Option
Plan that are currently, or will become, exercisable in 60 days.
(5) Includes 32,709 and 24,348 shares awarded to Mr. Michael A. Nilan under the
Bayonne 1995 RRP and the Bayonne Incentive Plan, respectively. It also
includes 21,424 shares awarded to Mr. Malinowski under the Bayonne
Incentive Plan, and 3,344, 3,344 and 958 shares awarded to Messrs. Collins,
Mindiak and Coughlin, respectively, under the Bayonne 1995 RRP, that have
not vested. Shares awarded under the Bayonne 1995 RRP vest in equal annual
installments of 20% per year. Approximately 20% of the shares awarded to
Messrs. Michael Nilan and Malinowski, respectively, under the Bayonne
Incentive Plan vest in equal installments during the first and second years
after April 27, 1998, the date of grant. The remaining shares granted to
Mr. Michael Nilan under the Bayonne Incentive Plan vest if Bayonne
satisfies, during years three, four and five after the date of grant,
certain performance goals related to earnings per share and return on
equity. Approximately 10% of the shares awarded to Mr. Malinowski under the
Bayonne Incentive Plan vest in equal installments during years three, four
and five after the date of grant, while the remaining shares vest if the
performance goals referenced above are satisfied. Each recipient has voting
power over the shares awarded.
(6) Includes 64,010 shares awarded under the Bayonne 1995 RRP as to which
voting may be directed. Includes 83,337 options awarded under the Bayonne
1995 Stock Option Plan that are currently exercisable or will become
exercisable in 60 days. Includes 208,248 shares of Bayonne common stock
that may be purchased pursuant to options awarded under the Bayonne
Incentive Plan, none of which are currently exercisable.
(7) Percentages with respect to each person or group of persons have been
calculated on the basis of 9,119,526 shares of Bayonne common stock, the
number of shares of Bayonne common stock outstanding as of September 30,
1998.
38
<PAGE>
PROPOSAL NO. 1 FOR THE RICHMOND COUNTY AND BAYONNE STOCKHOLDERS:
THE MERGER
The following information relates to matters contained in the merger
agreement. It describes the material aspects of the merger but is not a
complete description of the merger agreement. The merger agreement is attached
as Annex A. Richmond County and Bayonne stockholders are urged to read
carefully the merger agreement.
GENERAL
Bayonne will be merged with and into Richmond County and Bayonne's
stockholders will become stockholders of Richmond County. Richmond County will
be the surviving corporation in the merger, and will continue its corporate
existence under Delaware law. After the merger, the separate corporate
existence of Bayonne will terminate. The merger is subject to the satisfaction
of certain conditions, including the receipt of all necessary regulatory
approvals and the approval by the requisite vote of the stockholders of Richmond
County and Bayonne.
As part of the merger, First Savings, will merge with and into a Federal
interim savings bank to be formed by Richmond County Savings. The Federal
interim savings bank will then merge with and into Richmond County Savings, with
the surviving bank being named Richmond County Savings Bank. See "CERTAIN
RELATED TRANSACTIONS -- Bayonne Bank Merger Agreement."
BACKGROUND OF THE MERGER
BAYONNE WAS ORIGINALLY CREATED TO HELP ENHANCE VALUE AND PROMOTE GROWTH.
Since First Savings' conversion to the mutual holding company form of
organization in 1995, the board of directors of First Savings has considered
First Savings' future and how best to enhance value for stockholders given the
competitive position of First Savings in its market area, the growth prospects
of First Savings, the operating results of First Savings and the opportunity for
increasing earnings. In 1997, the mutual holding company converted a stock
holding company form. This second-step conversion was completed in August 1997,
when First Savings became a wholly owned subsidiary of Bayonne.
RICHMOND COUNTY WAS ALSO CREATED IN ORDER TO PROMOTE GROWTH, AND SAW THE
BAYONNE ACQUISITION AS ONE OPPORTUNITY TO GROW.
In February 1998, Richmond County Savings completed its mutual to stock
conversion and became a wholly owned subsidiary of Richmond County. Richmond
County Savings converted to stock form because, among other reasons, it believed
that this provided greater ability to
39
<PAGE>
expand its operations and market area through a variety of methods, including
potential acquisitions of other financial institutions. Shortly after the
completion of its conversion, Richmond County began purchasing shares of Bayonne
common stock in the open market. These purchases were unknown to Bayonne at the
time.
DISCUSSIONS REGARDING BAYONNE'S INCENTIVE PLAN LED TO DISCUSSIONS REGARDING
THE FUTURE OF BAYONNE AND THE ENGAGEMENT OF FINANCIAL ADVISORS.
In March 1998, Bayonne held a special meeting of stockholders to obtain
approval of its the Bayonne Incentive Plan. While the Bayonne Incentive Plan
was approved, there was significant opposition to the plan, including opposition
by some significant Bayonne stockholders. In April 1998, one of those
stockholders notified Bayonne that he intended to nominate himself for election
as a director of Bayonne at Bayonne's next annual meeting of stockholders. This
stockholder later reiterated his intentions in June 1998.
In the following weeks, due in part to the Bayonne board's continuing
obligations to its stockholders to attempt to enhance stockholder value and to
the potential proxy contest, the Bayonne board and senior management considered
its strategic alternatives in light of an increasingly competitive market as
well as the continued consolidation of the banking industry. Strategic
alternatives considered by Bayonne included continued implementation of
Bayonne's business plan, acquisition of other financial institutions or the sale
of Bayonne to another financial institution. Throughout this process, Bayonne
utilized the services of Sandler O'Neill & Partners, L.P., which provided
financial advisory services to Bayonne as well as a significant number of other
financial institutions in the New York metropolitan area. While the Bayonne
board believed it could increase long-term stockholder value by pursuing its
business plan, senior management was authorized to explore the possibility of
acquiring another financial institution. In addition, the Bayonne board
authorized senior management to explore strategic business combinations with
other financial institutions, particularly in light of the consideration paid in
comparable mergers in and around Bayonne's market area. Bayonne contacted a
potential acquisition target during this time, but discussions remained at a
preliminary stage and Bayonne subsequently terminated consideration of the
acquisition.
UPON LEARNING OF RICHMOND COUNTY'S INTEREST IN BAYONNE, ENTERED INTO
GENERAL DISCUSSIONS REGARDING A POSSIBLE COMBINATION.
In June 1998, Bayonne learned that Richmond County had accumulated a block
of its common stock. Accordingly, Bayonne desired to learn the intentions of
Richmond County and requested Sandler O'Neill to arrange a meeting between
representatives of Richmond County and Michael A. Nilan, the President of
Bayonne. Sandler O'Neill had provided financial advisory services for Richmond
County as well as Bayonne and, therefore, had relationships with the management
of both companies. The meeting, which was the first relating to a possible
business combination, took place on June 25, 1998. At the June 25th meeting, the
President of Bayonne, the President and Chief Financial Officer of Richmond
County and a representative of Sandler O'Neill discussed the general terms for a
potential business combination between the two companies. Based on the results
of the June 25th meeting, on June 30, 1998, representatives of Richmond County
met with members of the Bayonne board to reiterate their interest in discussing
the acquisition of Bayonne and a range of preliminary values was presented by
Richmond County to the Bayonne board.
40
<PAGE>
BAYONNE OBTAINED REGULATORY CLEARANCE TO ENGAGE IN FURTHER DISCUSSIONS, AND
STARTED TO NEGOTIATE A MERGER AGREEMENT WITH RICHMOND COUNTY, AND ALSO
ENGAGED IN INVESTIGATING RICHMOND COUNTY.
Having determined that Richmond County's proposal for a business
combination merited further consideration, in early July 1998 Bayonne requested
and received approval from the Office of Thrift Supervision to engage in
discussions with Richmond County. Approval from the OTS was necessary pursuant
to customary conditions imposed in the OTS's approval of Bayonne's second-step
conversion. Discussion concerning a potential business combination continued in
early July 1998 and, on July 10, 1998, Richmond County provided Bayonne with an
initial draft of a definitive merger agreement. Over the course of the next
week, representatives of Bayonne and Richmond County negotiated the terms of the
merger agreement and conducted due diligence investigations with respect to each
other. These due diligence investigations included a review of the operational
matters, including loans, investments, contractual obligations, regulatory
relations and the status of each party's preparations to be Year 2000 compliant.
BAYONNE'S BOARD OF DIRECTORS WAS PRESENTED WITH A DRAFT MERGER AGREEMENT
AND AN ANALYSIS OF THE POTENTIAL MERGER PREPARED BY ITS FINANCIAL ADVISORS,
AND DISCUSSED THE DESIRABILITY OF THE PROPOSED TRANSACTION.
On July 17, 1998, the Bayonne board, along with Sandler O'Neill and
Bayonne's legal counsel, reviewed the contents of the merger agreement together
with its exhibits. Sandler O'Neill presented the Bayonne board with a financial
analysis of both Bayonne and Richmond County, a description of the market for
merger transactions, and an analysis of the proposed merger. The Bayonne board
also considered, among other things, Bayonne's strategic alternatives, including
whether to determine if other potential acquirors existed, and the impact of the
proposed transaction on employees and customers of First Savings. Based on its
analysis, the Bayonne board determined that a strategic alliance with Richmond
County was in the long-term interests of its shareholders and therefore decided
not to seek other potential acquirers. At the conclusion of this meeting, the
Bayonne board authorized management to continue negotiations with Richmond
County.
BAYONNE'S FINANCIAL ADVISORS GAVE THEIR OPINION TO THE DIRECTORS THAT THE
MERGER AGREEMENT WAS FAIR TO BAYONNE'S STOCKHOLDERS.
On July 19, 1998, the Bayonne board reconvened to review the definitive
merger agreement. At this time the Bayonne board received Sandler O'Neill's
written opinion that the exchange ratio was fair to holders of Bayonne common
stock from a financial point of view. The Bayonne board later unanimously
approved the merger agreement.
AT THE SAME TIME, THE DIRECTORS OF RICHMOND COUNTY WERE PERFORMING A
SIMILAR ANALYSIS, AND ALSO RECEIVED AN OPINION REGARDING THE FAIRNESS OF
THE DEAL TO ITS STOCKHOLDERS.
On July 19, 1998, the Richmond County board considered and approved, by
unanimous vote, the merger, the merger agreement and the related transactions.
Presentations were made by both Tucker Anthony Incorporated and Richmond
County's legal counsel. At the special meeting, members of Richmond County's
senior management, together with its legal and financial advisors, reviewed with
the Richmond County board, among other things, the background of the proposed
transaction, the potential benefits of the transaction, including the strategic
rationale for the
41
<PAGE>
transaction, a summary of their due diligence findings, financial and valuation
analyses of the transaction and the terms of the proposed agreements. In
addition, Tucker Anthony delivered to the Richmond County board its written
opinion to the effect that, as of such date, the exchange ratio was fair to
Richmond County stockholders from a financial point of view.
AFTER ENTERING INTO THE MERGER AGREEMENT, BAYONNE AND RICHMOND COUNTY
REVIEWED THE METHOD OF ACCOUNTING FOR THE MERGER.
The merger agreement entered into on July 19, 1998 required that Richmond
County would account for the merger as a pooling-of-interests. After July 19,
1998, representatives of both Richmond County and Bayonne, together with their
respective financial and legal advisors, and Richmond County's independent
auditors, determined that it would be preferable, for financial and operational
reasons, to account for the merger as a "purchase." By utilizing purchase
accounting, (1) Richmond County and Bayonne would not be precluded from
engaging in certain corporate transactions (such as share repurchases) which may
be inconsistent with pooling-of-interests accounting, and (2) Richmond County
would not be precluded following the merger from engaging in share repurchases
in a manner inconsistent with pooling-of-interests accounting.
THE MERGER AGREEMENT WAS REVISED TO TAKE THESE CHANGES INTO ACCOUNT, AND
THE DIRECTORS OF EACH CORPORATION WERE TOLD THAT THESE CHANGES WOULD NOT
AFFECT THE FAIRNESS OF THE TRANSACTION.
On October 14, 1998, the Richmond County board and the Bayonne board each
considered presentations by each company's respective management, legal and
financial advisors regarding the possible amendment to the merger agreement. In
addition, Richmond County considered a presentation by its independent auditors
as well. Richmond County's and Bayonne's financial advisors each confirmed that
the possible amendments to the merger agreement did not affect their opinion to
their respective clients that, as of July 19, 1998, the exchange ratio was fair,
from a financial point of view, to Richmond County or Bayonne and their
respective stockholders, as the case may be. The Richmond County board and the
Bayonne board each authorized its management to take further action to cause the
merger to be accounted for as a purchase. On October 14, 1998, Richmond County
and Bayonne formally amended the original agreement entered into by the parties
on July 19, 1998 to eliminate certain provisions relating to pooling-of-
interests accounting as a condition to the completion merger, to terminate the
Bayonne ESOP at the completion of the merger and to condition the completion of
the merger to be accounted for as a purchase accounting transaction.
RECOMMENDATION OF THE RICHMOND COUNTY BOARD; RICHMOND COUNTY'S REASONS FOR THE
MERGER
Before approving the merger agreement, the Richmond County board consulted
with its legal advisors on the legal terms of, and its obligations in
consideration of, the proposed transaction. It also consulted with its
financial advisors on the financial aspects and fairness of the proposed
transaction, and with management of Richmond County. This is not an exhaustive
list of factors considered by the board but does include all material factors
the board considered. The Richmond County board's evaluation of the merger also
included the following:
42
<PAGE>
(1) its familiarity with and review of Richmond County's business, results
of operations, financial condition, competitive position and
prospects;
(2) the nature of the industry in which Richmond County operates, both on
a historical and future basis;
(3) the potential growth, development, productivity and profitability of
Richmond County;
(4) national and local economic conditions, the competitive environment
for thrifts and other financial institutions, and the trend toward
consolidation in the financial services and thrift industries. The
board also considered the likely effect these factors would have on
Richmond County's potential growth, development, productivity and
profitability;
(5) the review of Bayonne's business, financial condition, results of
operations and management, including the status of Bayonne's
preparations to be Year 2000 compliant, based in part on presentations
by Richmond County's management and advisors,
(6) based in part on presentations by Richmond County's management and
advisors, the review of:
(a) the performance of the Bayonne common stock on both a historical
and prospective basis;
(b) the strategic fit between the parties;
(c) operating efficiencies that could result from the merger;
(d) the respective contributions the parties would bring to a
combined institution; and
(e) the expectation of accounting for the merger as a purchase and
the anticipated financial effects of such accounting treatment on
Richmond County's earnings.
(7) the review of the historical and prospective market prices of Richmond
County's and Bayonne's stock compared to what Richmond County was to
pay for Bayonne's stock;
(8) a comparison of the consideration to be paid to Bayonne's stockholders
to that paid in other comparable thrift mergers;
(9) the review with its legal and financial advisors of alternatives to
the merger, including the possibility of growing internally;
43
<PAGE>
(10) the belief that Bayonne has a strong financial and capital position
(11) the belief that the combined company presents a strong investment for
the future and has substantial capacity for future growth for Richmond
County stockholders;
(12) the presentation by Tucker Anthony and the written opinion of Tucker
Anthony that the exchange ratio is fair from a financial point of
view to Richmond County stockholders. See "-- The Transaction is Fair
to Richmond County's Stockholders According to Richmond County's
Investment Advisors;"
(13) the significant similarity between, and the compatibility of, Richmond
County's and Bayonne's business lines, cultures and management
philosophies;
(14) the expectation that the combined institution will continue to
provide quality service to the communities and customers served by
both companies;
(15) the board's review with its legal and financial advisors of the terms
and conditions of the merger agreement, including exchange ratio, and
the other documents executed in connection with the merger;
(16) the review by the board with its legal and financial advisors, of the
terms and conditions of the Bayonne Merger Stock Option Agreement;
(17) the board's recognition of the complementary nature of the markets
served and products offered by Richmond County and Bayonne and the
ability of Richmond County to extend its market area to include that
of Bayonne;
(18) factors affecting and relating to the overall strategic focus of
Richmond County including, opportunities for growth in deposits,
assets and earnings, (including ongoing potential acquisition
opportunities) and opportunities available to Richmond County in the
market areas where Bayonne conducts business;
(19) the anticipated, cost savings and efficiencies available from the
merger, which were estimated to be approximately $4.7 million; and
(20) the expectation that the merger would be treated as a tax-free
reorganization for federal income tax purposes (see "-- Tax-Free
Transaction for Bayonne Stockholders" below).
The board did not assign any specific or relative weights to the factors
under consideration. The board believes that the merger is fair to, and in the
best interests of, Richmond County and its stockholders. ACCORDINGLY, THE
RICHMOND COUNTY BOARD
44
<PAGE>
UNANIMOUSLY RECOMMENDS THAT RICHMOND COUNTY'S STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE BAYONNE MERGER AGREEMENT.
THE TRANSACTION IS FAIR TO RICHMOND COUNTY'S STOCKHOLDERS ACCORDING TO RICHMOND
COUNTY'S INVESTMENT ADVISOR
Tucker Anthony was retained by Richmond County in July 1998 for the purpose
of rendering a fairness opinion to the Richmond County board in connection with
Richmond County's proposed acquisition of Bayonne. Richmond County selected
Tucker Anthony for a number of reasons, including its familiarity with Richmond
County and Bayonne and their respective businesses. Richmond County also
considered Tucker Anthony's experience and reputation in the area of valuation
and financial advisory work generally, and in relation to financial institutions
specifically. Tucker Anthony makes a market in Richmond County and Bayonne
common stock. Tucker Anthony is a nationally recognized investment banking firm
and is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, private placements and valuations for corporate and other
purposes. From time to time, Tucker Anthony and its affiliates may hold long or
short positions in Bayonne common stock.
Tucker Anthony has rendered written opinions to the Richmond County board
to the effect that, as of July 19, 1998 and as of the date of this, the
consideration to be paid to the holders of Bayonne common stock in the merger
pursuant to the merger agreement is fair, from a financial point of view, to the
holders of Richmond County common stock. THE FULL TEXT OF THE FAIRNESS OPINION
DATED AS OF THE DATE OF THIS DOCUMENT, SETTING FORTH THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE REVIEW
UNDERTAKEN BY TUCKER ANTHONY, IS INCLUDED AS ANNEX C OF THIS DOCUMENT. HOLDERS
OF RICHMOND COUNTY COMMON STOCK ARE URGED TO READ THE FAIRNESS OPINION IN ITS
ENTIRETY. This opinion is directed to the Richmond County board only and does
not constitute a recommendation to any holder of Richmond County common stock as
to how such stockholder should vote at the Richmond County meeting. Tucker
Anthony has advised Richmond County that it believes that no person other than
Richmond County's Board of Directors has the legal right to rely on the Tucker
Anthony fairness opinion and that, absent any controlling precedent, Richmond
County and Tucker Anthony would resist any assertion otherwise. The engagement
letter between Richmond County and Tucker Anthony contains an express disclaimer
of the ability of any party other than the board to rely on the Tucker Anthony
fairness opinion. Richmond County and Tucker Anthony are not aware of any
controlling precedent that would create a statutory or common law right for
persons other than the board to rely on the Tucker Anthony fairness opinion.
Richmond County and Tucker Anthony base their belief that no such person may
rely on the Tucker Anthony fairness opinion on the limited nature of Tucker
Anthony's contractual duty and the absence of such controlling precedent. In
the absence of such controlling precedent, the ability of a stockholder to rely
on the Tucker Anthony fairness opinion would be resolved by a court of competent
jurisdiction. Resolution of the question of a stockholder's ability to rely on
the Tucker Anthony fairness opinion will have no effect on the rights and
responsibilities of the board under applicable state law or on the rights and
responsibilities of either Tucker Anthony or the board under federal securities
law. The July 19, 1998 opinion is substantially identical to the opinion
attached this document.
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<PAGE>
As compensation for its services as financial advisor, including issuance
of the opinions, Richmond County has agreed to pay Tucker Anthony a total of
$150,000, all of which has been paid as of the date hereof. Richmond County has
also agreed to reimburse Tucker Anthony for its out-of-pocket expenses and to
indemnify Tucker Anthony against certain liabilities arising out of its
services.
In arriving at its opinion dated as of the date hereof, Tucker Anthony,
among other things:
(1) reviewed the merger agreement;
(2) reviewed the Registration Statement on Form S-4, including this
document;
(3) reviewed certain historical financial and other information
concerning Richmond County for the five fiscal years ended
June 30, 1998 and for the quarter ended September 30, 1998,
including Richmond County's reports on Forms 10-K and 10-Q;
(4) reviewed certain historical financial and other information
concerning Bayonne for the five fiscal years ended March 31, 1998
and for the six months ended September 30, 1998, including
Bayonne's reports on Forms 10-K and 10-Q;
(5) held discussions with the senior management of Richmond County
and Bayonne with respect to their past and current financial
performance, financial condition and future prospects;
(6) reviewed certain internal financial data, projections and other
information of Richmond County and Bayonne including financial
projections approved by management;
(7) analyzed certain publicly available information of other
financial institutions that it deemed comparable or otherwise
relevant to its inquiry, and compared Richmond County and Bayonne
from a financial point of view with certain of these
institutions;
(8) compared the consideration to be paid by Richmond County pursuant
to the merger agreement with the consideration paid by acquirors
in other acquisitions of financial institutions that it deemed
comparable or otherwise relevant to its inquiry;
(9) reviewed publicly available earnings estimates, historical
trading activity and ownership data of Richmond County common
stock and Bayonne common stock; and
(10) conducted such other financial studies, analyses and
investigations and reviewed such other information as it deemed
appropriate to enable it to render its opinion.
46
<PAGE>
In its review, it also took into account an assessment of general economic,
market and financial conditions and certain industry trends and related matters.
Tucker Anthony's opinions were necessarily based upon conditions as they existed
and could be evaluated on the date thereof and the information made available to
Tucker Anthony through the date hereof.
No limitations were imposed by the Boards of Directors of Richmond County
or Bayonne upon Tucker Anthony with respect to the investigations made or
procedures followed by Tucker Anthony in its review and analysis. In its review
and analysis and in arriving at its opinions, Tucker Anthony assumed and relied
upon the accuracy and completeness of all the financial information publicly
available or provided to it by Richmond County and Bayonne, and did not attempt
to verify any of such information. Tucker Anthony assumed (1) that the financial
projections of Richmond County and Bayonne provided to it with respect to the
results of operations likely to be achieved by each company were prepared on a
basis reflecting the best currently available estimates and judgments of
Richmond County's and Bayonne's management and advisors as to future financial
performance and results, and (2) that such forecasts and estimates would be
realized in the amounts and in the time periods estimated. Tucker Anthony also
assumed, without independent verification, that the current and projected
aggregate reserves for possible loan losses for Richmond County and Bayonne were
adequate to cover such losses. Tucker Anthony did not make or obtain any
independent evaluations or appraisals of any assets or liabilities of Richmond
County, Bayonne or any of their respective subsidiaries nor did it verify any of
Richmond County's or Bayonne's books or records or review any individual loan
credit files.
On July 19, 1998, Tucker Anthony made a presentation, and subsequently
rendered a written fairness opinion, to Richmond County's board. Set forth
below is a summary of the material elements of the financial analyses performed
by Tucker Anthony in connection with rendering its written opinion of July 19,
1998. In connection with its opinion dated as of the date of this document,
Tucker Anthony performed procedures to update certain analyses and reviewed the
assumptions on which such analyses were based and the factors it considered .
Taken as a whole, Tucker Anthony believes these analyses support the conclusion
that the consideration to be paid to holders of Bayonne common stock is fair,
from a financial point of view, to the holders of Richmond County common stock.
STOCK TRADING ANALYSIS. Tucker Anthony examined the historical trading
prices, volume and market pricing multiples of Richmond County common stock and
Bayonne common stock, and compared the historical trading prices of Richmond
County common stock and Bayonne common stock in relation to movements in certain
stock indices, specifically the Standard & Poor's Major Regional Bank Index and
the Standard and Poor's Savings & Loan Index, as well as to indices of other
selected publicly traded financial institutions.
Specifically, the index of other selected publicly traded financial
institutions compared to Richmond County common stock included:
<TABLE>
<S> <C>
(1) Commonwealth Bancorp, Inc.; (7) PennFed Financial Services, Inc.;
(2) Dime Community Bancshares, Inc.; (8) Queens County Bancorp, Inc.;
(3) Flushing Financial Corporation; (9) Roslyn Bancorp, Inc.;
(4) Haven Bancorp, Inc.; (10) Staten Island Bancorp, Inc.;
(5) Ocwen Financial Corporation; (11) WSFS Financial Corporation; and
(6) Parkvale Financial Corporation; (12) York Financial Corporation.
</TABLE>
47
<PAGE>
The index of other selected publicly traded financial institutions compared
to Bayonne common stock included:
<TABLE>
<CAPTION>
<S> <C>
(1) ESB Financial Corporation; (7) Little Falls Bancorp, Inc.;
(2) Fidelity Bancorp, Inc.; (8) Pamrapo Bancorp, Inc.;
(3) First Bell Bancorp, Inc.; (9) Pulse Bancorp, Inc.;
(4) First Keystone Financial, Inc.; (10) Statewide Financial Corporation; and
(5) GA Financial, Inc.; (11) TF Financial Corporation.
(6) Harleysville Savings Bank;
</TABLE>
Tucker Anthony also compared financial data and financial ratios for these
two groups of financial institutions to Richmond County and Bayonne, as detailed
in the section "-- Analysis of Selected Publicly Traded Companies" below.
CONTRIBUTION ANALYSIS. Tucker Anthony analyzed the contribution of each of
Richmond County and Bayonne to, among other things, the stockholders' equity and
after-tax net income of the pro forma combined company. This analysis showed
that, among other factors, Bayonne would have contributed
48
<PAGE>
30.5%, 22.7%, and 22.8% of the assets, stockholders' equity, and net income of
the pro forma combined company as of and for the 12 months ended June 30, 1998,
respectively. This is compared with a proposed ownership of 25.6% of the
combined company to be held by the holders of Bayonne common stock following the
merger.
PRO FORMA MERGER ANALYSIS. Based on projections provided by Richmond
County, Tucker Anthony analyzed certain pro forma effects of the merger.
Assuming a price per share of Richmond County common stock of $18.13 (as of
July 17, 1998), this analysis indicated that, while the merger would be modestly
dilutive to tangible book value per share, the merger would be accretive to
earnings in the first full year following the close of the merger. In this
analysis Tucker Anthony assumed that Richmond County performed in accordance
with the earnings forecasts and expected synergies provided to Tucker Anthony by
Richmond County's senior management.
ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS. Tucker Anthony reviewed and
performed analysis on 38 unassisted acquisitions of thrift institutions in the
New York and surrounding states (the "Selected Market Transactions") and 28
unassisted acquisitions of thrift institutions in the U.S. with a transaction
size between $100 million and $250 million (the "Selected U.S. Transactions")
announced since January 1, 1997, comparing the target financial institutions'
capital structure and profitability to Bayonne's current results of operations
and financial condition. The Selected Market Transactions and Selected U.S.
Transactions were chosen because they represented merger and acquisition
transactions which involved target financial institutions exhibiting certain
characteristics -- including asset size, geographic proximity and business risk
- -- similar to those exhibited by Bayonne. Excluding the highest and lowest
ratios, the target financial institutions involved in the Selected Market
Transactions and the Selected U.S. Transactions had an average return on assets
for the latest 12 months prior to announcement date of 0.89% and 0.93% and an
average return on equity for the latest 12 months prior to announcement date of
9.79% and 9.39%, respectively, as compared to 0.64% and 4.36%, respectively, for
Bayonne. Set forth below is a summary of the analysis with respect to the
Selected Market Transactions and the Selected U.S. Transactions.
49
<PAGE>
<TABLE>
<CAPTION>
SELECTED MARIET SELECTED U.S.
TRANSACTIONS TRANSACTIONS
----------------------- -----------------------
BAYONNE OFFER OFFER
OFFER/(1)/ MEDIAN PERCENTILE/(2)/ MEDIAN PERCENTILE/(2)/
---------- ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Price/Trailing Twelve Months Earnings... 26.8x 22.9x 72% 21.6x 67%
Price/Book Value........................ 1.79x 2.14x 30% 1.97x 37%
Price/Adjusted Book Value /(3)/......... 2.47x 1.90x 70% 2.17x 69%
Premium to Market Price /(4)/........... 111% 111% 50% 111% 57%
</TABLE>
- ------------
(1) Based upon value of $19.03 per share of Bayonne common stock (based on the
July 17, 1998 closing price of Richmond County common stock of $18.13). If
the value of the Richmond County common stock were based on its average
closing bid price per share of $18.45 during the fifteen trading day period
prior to the announcement of the merger, implying a value of $19.38 per
share of Bayonne common stock, the corresponding multiples in the table
would be: price/trailing twelve months earnings of 27.3x; price/book value
of 1.82x; price/10% book value of 2.51x; and premium to market price of
113%.
(2) Position of the Richmond County offer in relation to percentile rankings of
the Selected Market Transactions and the Selected U.S. Transactions,
respectively.
(3) Because of the extraordinary nature of Bayonne's capital base relative to
most other financial institutions, Tucker Anthony also analyzed the terms of
the proposed transaction and the terms of the selected acquisition
transactions on an adjusted 10% book value basis. This analysis reviews
transaction statistics of premiums paid over a theoretical book value based
on adjusting the aggregate transaction value on a dollar-for-dollar basis
for differentials between actual book value and the theoretical book value
calculated at 10% of total assets.
(4) Premium to market price for Selected Market Transactions and the Selected
U.S. Transactions based on stock price one week prior to announcement;
market price for Bayonne of $17.13 per share reflects closing price on July
17, 1998.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Tucker Anthony compared
selected financial data and financial ratios of Richmond County and Bayonne to
the corresponding data and ratios of certain publicly traded thrift
institutions located in New York, New Jersey and surrounding states with total
assets comparable to Richmond County and Bayonne, respectively. The thrift
institutions included in the comparison to Richmond County were:
<TABLE>
<S> <C> <C> <C>
(1) Commonwealth Bancorp, Inc.; (7) PennFed Financial Services, Inc.;
(2) Dime Community Bancshares, Inc.; (8) Queens County Bancorp, Inc.;
(3) Flushing Financial Corporation; (9) Roslyn Bancorp, Inc.;
(4) Haven Bancorp, Inc.; (10) Staten Island Bancorp, Inc.;
(5) Ocwen Financial Corporation; (11) WSFS Financial Corporation; and
(6) Parkvale Financial Corporation; (12) York Financial Corporation.
</TABLE>
50
<PAGE>
The thrift institutions included in the comparison to Bayonne were:
<TABLE>
<S> <C> <C> <C>
(1) ESB Financial Corporation; (7) Little Falls Bancorp, Inc.;
(2) Fidelity Bancorp, Inc.; (8) Pamrapo Bancorp, Inc.;
(3) First Bell Bancorp, Inc.; (9) Pulse Bancorp, Inc.;
(4) First Keystone Financial, Inc.; (10) Statewide Financial Corporation; and
(5) GA Financial, Inc.; (11) TF Financial Corporation.
(6) Harleysville Savings Bank;
</TABLE>
The selected thrifts, as groups, exhibited certain characteristics --
including asset size, geographic proximity and business risk -- similar to those
exhibited by Richmond County and Bayonne, respectively.
The comparison of Richmond County to its selected thrift peer group showed
among other things that based on financial data as of June 30, 1998 for Richmond
County and March 31, 1998 for the selected thrift peer group:
(1) the ratio of Richmond County's net loans to assets was 40.4% compared
to an average of 59.7% for its peer group;
(2) the ratio of Richmond County's loan loss reserves to non-performing
assets was 124.2% compared to 129.3% for its peer group;
(3) the ratio of Richmond County's non-performing assets (including loans
90 days past due) to the sum of stockholders' equity and loan loss
reserves was 1.74% compared to an average of 7.70% for its peer group;
(4) the ratio of Richmond County's equity to total assets was 20.6% as
compared to an average of 11.4% for its peer group;
(5) the latest quarter annualized return on assets for Richmond County was
1.42% compared to an average of 1.06% for its peer group;
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<PAGE>
(6) the latest quarter annualized return on equity for Richmond County was
6.74%, compared to an average of 10.50% for its peer group;
(7) the ratio of Richmond County's market price to its book value per
common share was 147% compared to an average of 190% for its peer
group;
(8) the price/earnings ratio for the trailing 12 months earnings for
Richmond County was 30.5x, compared to an average of 20.3x for its peer
group; and
(9) the average latest quarter annualized dividend yield for Richmond
County was 1.3% as compared to 1.5% for its peer group.
The comparison of Bayonne to its selected thrift peer group showed among
other things that based on financial data as of June 30, 1998 for Bayonne and
March 31, 1998 for the selected thrift peer group:
(1) the ratio of Bayonne's net loans to assets was 45.4% compared to an
average of 49.4% for its peer group;
(2) the ratio of Bayonne's loan loss reserves to non-performing assets was
75.7% compared to 153.2% for its peer group;
(3) the ratio of Bayonne's non-performing assets to the sum of
stockholders' equity and loan loss reserves was 3.9% compared to an
average of 5.8% for its peer group;
(4) the ratio of Bayonne's equity to total assets was 13.8% as compared to
an average of 9.3% for its peer group;
(5) the latest quarter annualized return on assets for Bayonne was 0.61%
compared to an average of 0.85% for its peer group;
(6) the latest quarter annualized return on equity for Bayonne was 4.17%,
compared to an average of 9.46% for its peer group;
(7) the ratio of Bayonne's market price to its book value per common share
was 161% compared to an average of 162% for its peer group;
(8) the price/earnings ratio for the trailing 12 months earnings for
Bayonne was 24.2x, compared to an average of 16.4x for its peer group;
and
(9) the average latest quarter annualized dividend yield for Bayonne was
1.5% as compared to 2.0% for its peer group.
EVALUATION OF AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER. On
October 14, 1998, Richmond County and Bayonne entered into an amended and
restated agreement and plan of merger under which the merger would be accounted
for as a "purchase" rather than a "pooling of interests." At the request of
Richmond County's board,
52
<PAGE>
Tucker Anthony updated its analysis of selected acquisition transactions,
analysis of selected publicly traded companies, and pro forma merger analysis,
incorporating financial information provided to Tucker Anthony by Richmond
County management concerning the impact of purchase accounting to evaluate
whether the change in accounting treatment would change Tucker Anthony's opinion
of July 19, 1998.
On October 14, 1998, Tucker Anthony made a presentation to the Richmond
County board in which it reviewed the financial implications of the merger under
purchase and pooling of interests accounting treatments. Tucker Anthony also
updated the Richmond County board on current market conditions of financial
institutions similar to Richmond County and Bayonne and comparable merger and
acquisition activity that occurred subsequent to July 19, 1998. Among other
observations, Tucker Anthony noted that, based on management's accounting
assumptions, a change to purchase accounting would cause the merger to be
modestly less dilutive to tangible book value per share and modestly less
accretive to pro forma earnings resulting from the amortization of goodwill.
The foregoing is a summary of the material elements of the financial
analyses performed by Tucker Anthony, but it does not purport to be a complete
description of such analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
summary description. Accordingly, notwithstanding the separate factors
summarized above, Tucker Anthony believes that its analyses must be considered
as a whole and that selecting portions of its analyses and factors considered by
it, without considering all analyses and factors, or attempting to ascribe
relative weights to some or all of such analyses or factors, could create an
incomplete view of the evaluation process underlying Tucker Anthony's opinion.
In addition, Tucker Anthony may have used the various analyses for different
purposes and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Tucker Anthony's
view of the actual value of Bayonne to Richmond County. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given more weight than any other analyses.
In performing its analyses, Tucker Anthony made numerous assumptions with
respect to industry performance, general business and economic conditions, many
of which are beyond
53
<PAGE>
the control of Richmond County and Bayonne. The analyses performed by Tucker
Anthony are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than those suggested
by such analyses. Such analyses were prepared solely as a part of Tucker
Anthony's analysis of the fairness, from a financial point of view, to the
holders of Richmond County common stock of the consideration to be paid in the
merger to the holders of Bayonne common stock, and were provided to the Richmond
County board in connection with the delivery of Tucker Anthony's opinion. The
analyses do not purport to be appraisals or to reflect the prices at which
Richmond County or Bayonne might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, Tucker Anthony's opinion is just one of the many
factors taken into consideration by Richmond County's board (see "-- Background
of the Merger" and "-- Recommendation of the Richmond County Board; Richmond
County's Reasons for the Merger."
RECOMMENDATION OF THE BAYONNE BOARD; BAYONNE'S REASONS FOR THE MERGER
The Bayonne board believes that the terms of the merger agreement are fair
and in the best interests of Bayonne and its stockholders. In the course of
reaching its determination, the Bayonne board consulted with legal counsel with
respect to its legal duties, and the terms of the merger agreement. The Bayonne
board consulted with its financial advisor with respect to the financial aspects
and fairness of the transaction from a financial point of view; and with senior
management regarding, among other things, operational matters.
The following discussion of the information and factors considered by the
Bayonne board is not intended to be exhaustive, but does include all material
factors considered by the board. In reaching its decision to approve the merger
agreement, the Bayonne board considered the following:
(1) That Bayonne and Richmond County serve contiguous market areas with
similar communities and that the expanded reach of the combined company
would benefit existing customers and make the combined company more
attractive to potential customers.
(2) That Richmond County offers a broader range of products and services
and that the merger would provide Bayonne's customers with access to
these products and services without Bayonne having to undergo the
expense of introducing them on its own.
(3) The strength of Richmond County's management and the similarity of
operating philosophies between the companies.
(4) The resources of the charitable foundation established by Richmond
County in connection with the conversion of Richmond County Savings
would become available to Bayonne's communities as a result of the
merger.
(5) The financial condition, results of operations, cash flow, businesses
and prospects of Bayonne. In this regard, the Bayonne board analyzed
the options of selling Bayonne or continuing on a stand-alone
54
<PAGE>
basis. The range of values on a sale of control basis were determined
to generally exceed the present value of Bayonne shares on a stand-
alone basis.
(6) The written opinion of Sandler O'Neill that, as of July 19, 1998, the
consideration to be received by Bayonne stockholders was fair to
Bayonne stockholders from a financial point of view.
(7) The Bayonne board also considered that Sandler O'Neill provides
financial advisory services to Richmond County. See "-- The
Transaction is Fair to Bayonne's Stockholders According to Bayonne's
Investment Advisor."
(8) The current operating environment, including the continued
consolidation and increasing competition in the banking and financial
services industries and the prospect for further changes in these
industries.
(9) The other terms of the merger agreement and exhibits, including the
opportunity for Bayonne stockholders to receive shares of Richmond
County common stock in a tax-free exchange.
(10) The detailed financial analyses, pro forma and other information,
including the anticipated effects of purchase accounting on the
combined company on a prospective basis, with respect to Bayonne and
Richmond County discussed by Sandler O'Neill, as well as the Bayonne
board's knowledge of Bayonne, Richmond County and their respective
businesses.
(11) The likelihood of the merger and related transactions being approved
by the appropriate regulatory authorities, including factors such as
market share analyses, Richmond County's Community Reinvestment Act
("CRA") rating at that time and the estimated pro forma financial
impact of the transaction on Richmond County. See "-- Regulatory
Approvals Needed to Complete the Merger."
(12) The fact that the merger agreement prohibits Bayonne from initiating
or encouraging discussion with third parties relating to an
alternative transaction and that Richmond County required Bayonne to
enter into the Bayonne Merger Stock Option Agreement.
(13) That it did not solicit offers from third parties or determine whether
other institutions would be interested in acquiring Bayonne.
(14) The Bayonne board believed that a tax-free transaction pursuant to
which Bayonne stockholders receive shares of the acquiror would be
desired by most stockholders.
(15) The Bayonne board determined that the unique features of Richmond
County, the financial analysis provided by Sandler O'Neill, the pro
forma review of the combined entity, and the fact that there was no
controlling stockholder of Richmond County provided a reasonable basis
for not seeking other offers prior to recommending the proposed
transaction to Bayonne stockholders.
(16) The Bayonne Board's review of the status of Richmond County's
preparations to be Year 2000 compliant.
55
<PAGE>
In reaching its determination to approve and recommend the merger
agreement, the Bayonne board did not assign any relative or specific weights to
the foregoing factors, and individual directors may have weighed factors
differently.
The Bayonne board believes that the merger is in the best interests of
Bayonne and its stockholders. ACCORDINGLY, THE BAYONNE BOARD UNANIMOUSLY
RECOMMENDS THAT BAYONNE'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
THE TRANSACTION IS FAIR TO BAYONNE'S STOCKHOLDERS ACCORDING TO BAYONNE'S
INVESTMENT ADVISOR
By letter agreement dated as of March 10, 1998, Bayonne retained Sandler
O'Neill as an independent financial advisor in connection with Bayonne's general
strategic analyses and its consideration of possible business combinations with
a second party. Sandler O'Neill is a nationally recognized investment banking
firm whose principal business specialty is financial institutions. In the
ordinary course of its investment banking business, Sandler O'Neill is regularly
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisition and other corporate transactions.
Sandler O'Neill acted as financial advisor to Bayonne in connection with
the merger and participated in certain of the negotiations leading to the merger
agreement. At the request of the Bayonne board, representatives of Sandler
O'Neill attended the July 17, 1998 and July 19, 1998 meetings of the Bayonne
board at which the Board considered and approved the merger agreement. At the
July 19th meeting, Sandler O'Neill delivered to the Bayonne board its written
opinion that, as of such date, the Bayonne exchange ratio was fair to the
Bayonne shareholders from a financial point of view. Sandler O'Neill has also
delivered to the Bayonne board a written fairness opinion dated the date of this
document, which reflects the fact that the merger will be accounted for as a
purchase transaction and not as a pooling-of-interests, but is otherwise
substantially identical to the July 19, 1998 opinion. THE FULL TEXT OF THE
SANDLER FAIRNESS OPINION IS ATTACHED AS ANNEX D TO THIS DOCUMENT. THE SANDLER
FAIRNESS OPINION OUTLINES THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY
SANDLER O'NEILL IN RENDERING THE OPINION. THE SANDLER FAIRNESS OPINION IS
INCORPORATED BY REFERENCE INTO THIS DESCRIPTION OF THE OPINION AND THIS
DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SANDLER FAIRNESS
OPINION. BAYONNE STOCKHOLDERS ARE URGED TO CAREFULLY READ THE SANDLER FAIRNESS
OPINION IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
THE SANDLER FAIRNESS OPINION WAS DIRECTED TO THE BAYONNE BOARD AND WAS
PROVIDED TO THE BAYONNE BOARD FOR ITS INFORMATION IN CONSIDERING THE MERGER.
THE SANDLER FAIRNESS OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE
RATIO TO BAYONNE STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES NOT
ADDRESS THE UNDERLYING BUSINESS DECISION OF BAYONNE TO ENGAGE IN THE MERGER OR
ANY OTHER ASPECT OF THE MERGER AND IS NOT A RECOMMENDATION TO ANY BAYONNE
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE MEETING WITH RESPECT
TO THE MERGER OR ANY OTHER RELATED MATTER.
In rendering its July 19, 1998 opinion, Sandler O'Neill performed a variety
of financial analyses. The following is a summary of the material analyses
performed by Sandler O'Neill, but is not a complete description of all the
analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. The process,
56
<PAGE>
therefore, is not necessarily susceptible to a partial analysis or summary
description. Sandler O'Neill believes that its analyses must be considered as a
whole and that selecting portions of the factors and analyses considered without
considering all factors and analyses, or attempting to ascribe relative weights
to some or all such factors and analyses, could create an incomplete view of the
evaluation process underlying its opinion.
In performing its analyses, Sandler O'Neill made numerous assumptions with
respect to industry performance, business and economic conditions, many of
which cannot be predicted and are beyond the control of Bayonne, Richmond
County and Sandler O'Neill. The analyses performed by Sandler O'Neill are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Sandler O'Neill prepared its analyses solely for the purpose of rendering its
opinion and provided such analyses to the Bayonne board at the July 17th
meeting. Estimates on the values of companies do not purport to be appraisals
or necessarily reflect the prices at which companies or their securities may
actually be sold. Such estimates are inherently subject to uncertainty and
actual values may be materially different. Accordingly, Sandler O'Neill's
analyses do not necessarily reflect the value of Bayonne common stock or
Richmond County common stock or the prices at which Bayonne common stock or
Richmond County common stock may be sold at any time.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Richmond County common stock
on July 16, 1998 of $18.31 and the exchange ratio of 1.05, Sandler O'Neill
calculated an implied transaction value per share of Bayonne common stock of
$19.23 (the "Implied Value"). The implied aggregate transaction value was
$178.7 million, based upon the Implied Value of $19.23 and 9,359,072 fully
diluted shares of Bayonne common stock outstanding, which was determined using
the treasury stock method at the Implied Value. Based upon the Implied Value
and Bayonne's June 30, 1998 financial information, Sandler O'Neill calculated
the following ratios:
Implied Value/Tangible book value 1.77x
Implied Value/Book value 1.77x
Implied Value/LTM EPS 27.9x
Implied Value/LQA EPS 30.0x
For purposes of Sandler O'Neill's analyses, earnings per share were based on
fully diluted earnings per share. Sandler O'Neill noted that the Implied Value
represented a 13.1% premium over the July 16, 1998 closing price of Bayonne
common stock of $17.00.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Bayonne common stock and Richmond County
common stock, and the relationship between the movements in the prices of
Bayonne common stock and Richmond County common stock, respectively, to
movements in certain stock indices, including the Standard & Poor's 500 Index,
the NASDAQ Bank Index and selected composite peer groups of publicly traded
savings institutions identified as the Regional Group and Peer Group,
respectively, below. During the period August 22, 1997 through July 15, 1998,
Bayonne common stock outperformed each of the indices to which it was compared.
During the period February 18, 1998 through July 15, 1998 Richmond County common
stock slightly underperformed the Standard & Poor's 500 Index and outperformed
each of the other indices to which it was compared.
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
Bayonne and
57
<PAGE>
two different groups of savings institutions. The first group consisted of
Bayonne and the following 16 publicly traded regional savings institutions
(the "Regional Group"):
<TABLE>
<S> <C> <C> <C>
(1) Ambanc Holding Co. Inc.; (9) Lakeview Financial Corp.;
(2) Carver Bancorp Inc.; (10) Northeast PA Financial Corporation;
(3) ESB Financial Corporation; (11) Parkvale Financial Corporation;
(4) Fidelity Bancorp Inc.; (12) Peoples Bancorp Inc.;
(5) First Bell Bancorp Inc.; (13) Progress Financial Corporation;
(6) Flushing Financial Corporation; (14) Raritan Bancorp Inc.;
(7) FMS Financial Corporation; (15) Statewide Financial Corporation; and
(8) GA Financial Inc.; (16) TF Financial Corporation
</TABLE>
Sandler O'Neill also compared Bayonne to a group of 14 publicly traded
savings institutions that had a return on average equity (based on last 12
months' earnings) of greater than 14.0% and a price to tangible book value of
greater than 170% (the "Highly Valued Group"). The Highly Valued Group included
the following institutions:
<TABLE>
<S> <C> <C> <C>
(1) American Bank of Connecticut; (8) MECH Financial Inc.;
(2) CFSB Bancorp Inc.; (9) Metropolitan Financial Corp.;
(3) Coastal Financial Corporation; (10) MetroWest Bank;
(4) SMS Financial Corp.; (11) People's Bancshares Inc.;
(5) Highland Bancorp Inc.; (12) First Mutual Savings Bank;
(6) Home Federal Bancorp; (13) Progress Financial Corporation; and
(7) Lakeview Financial Corp.; (14) PVF Capital Corporation
</TABLE>
58
<PAGE>
The analysis utilized publicly available financial information for Bayonne
as of and for each of the years ended March 31, 1993 through March 31, 1998.
The analysis compared Bayonne data and the median data for each of the Regional
Group and the Highly Valued Group as of and for each of the years ended
December 31, 1993 through December 31, 1997 and as of and for the 12 months
ended March 31, 1998. The table below sets forth the comparative data as of and
for the 12 months ended March 31, 1998.
<TABLE>
<CAPTION>
HIGHLY VALUED
BAYONNE REGIONAL GROUP GROUP
--------- -------------- -------------
<S> <C> <C> <C>
Total Assets.......................... $646,058 $646,058 $648,892
Annual Growth Rate of Total Assets.... 11.97% 14.18% 17.06%
Tangible Equity/Total Assets.......... 15.27% 7.96% 7.04%
Intangible Assets/Total Equity........ 0.00% 0.99% 0.49%
Net Loans/Total Assets................ 36.45% 49.40% 71.84%
Cash & Securities/Total Assets........ 61.47% 47.55% 24.27%
Gross Loans/Total Deposits............ 56.29% 81.56% 101.62%
Total Borrowings/Total Assets......... 17.86% 20.07% 16.92%
Nonperforming Assets/Total Assets..... 0.56% 0.44% 0.62%
Loan Loss Reserve/Nonperforming Loan.. 91.77% 126.73% 111.01%
Loan Loss Reserve/Gross Loans......... 1.24% 1.05% 1.20%
Net Interest Margin................... 2.71% 3.35% 3.69%
Loan Loss Provision/Average Assets.... 0.03% 0.08% 0.22%
Non Interest Income/Average Assets.... 0.22% 0.38% 0.85%
Non Interest Expense/Average Assets... 1.68% 2.17% 2.38%
Efficiency Ratio...................... 58.63% 57.24% 58.71%
Return on Average Assets.............. 0.72% 0.88% 1.30%
Return on Average Equity.............. 5.82% 8.63% 16.78%
Price/Tangible Book Value per Share... 155.53% 164.69% 249.33%
Price/Earnings per Share.............. 26.40 18.38 15.60
Market Capitalization/Assets.......... 23.74% 15.85% 16.81%
Dividend Yield........................ NM 1.43% 0.90%
Dividend Payout Ratio................. NM 24.98% 15.95%
</TABLE>
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<PAGE>
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Richmond County and two different groups of savings institutions. The first
group consisted of Richmond County and the following 13 publicly traded
savings institutions (the "Peer Group"):
<TABLE>
<S> <C> <C> <C>
(1) Dime Community Bancshares Inc.; (8) Parkvale Financial Corp.;
(2) ESB Financial Corp.; (9) PennFed Financial Services Inc.;
(3) First Source Bancorp Inc.; (10) Peoples Bancorp Inc.;
(4) Flushing Financial Corp.; (11) Queens County Bancorp Inc.;
(5) Haven Bancorp Inc.; (12) WSFS Financial Corp.; and
(6) JSB Financial Inc.; (13) York Financial Corp.
(7) Ocwen Financial Corp.;
</TABLE>
Sandler O'Neill also compared Richmond County to a group of nine publicly
traded savings institutions that had a return on average equity of greater than
14.5%, based on last 12 months' earnings, and a price to tangible book value of
greater than 200% (the "Large Thrift Highly Valued Group"). The Large Thrift
Highly Valued Group included:
<TABLE>
<S> <C> <C> <C>
(1) Anchor BanCorp Wisconsin; (6) Metropolitan Financial Corp.;
(2) Andover Bancorp Inc.; (7) Parkvale Financial Corp.;
(3) CFSB Bancorp Inc.; (8) People's Bancshares Inc.; and
(4) D&N Financial Corp.; (9) WSFS Financial Corp.
(5) First Federal Capital Corp.;
</TABLE>
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<PAGE>
The analysis utilized publicly available financial information for Richmond
County as of and for each of the years ended June 30, 1993 through June 30, 1997
and as of and for the 12 months ended March 31, 1998. The analysis compared
Richmond County data to the median data for each of the Peer Group and the Large
Thrift Highly Valued Group as of and for each of the years ended December 31,
1993 through December 31, 1997 and as of and for the 12 months ended March 31,
1998. The table below sets forth the comparative data as of and for the 12
months ended March 31, 1998.
<TABLE>
<CAPTION>
HIGHLY VALUED
RICHMOND COUNTY REGIONAL GROUP GROUP
--------------- -------------- -------------
<S> <C> <C> <C>
Total Assets $1,463,805 $1,466,435 $1,392,342
Annual Growth Rate of Total Assets 50.78% 16.78% 8.52%
Tangible Equity/Total Assets 21.96% 9.61% 6.30%
Intangible Assets/Total Equity 0.40% 0.52% 0.80%
Net Loans/Total Assets 38.32% 56.78% 74.62%
Cash & Securities/Total Assets 59.14% 39.05% 24.17%
Gross Loans/Total Deposits 60.95% 87.23% 106.47%
Total Borrowings/Total Assets 13.66% 17.99% 22.34%
Nonperforming Assets/Total Assets 0.47% 0.48% 0.50%
Loan Loss Reserve/Nonperforming Loan 106.63% 125.21% 205.01%
Loan Loss Reserve/Gross Loans 1.17% 1.04% 0.86%
Net Interest Margin 4.06% 3.20% 3.07%
Loan Loss Provision/Average Assets 0.17% 0.07% 0.04%
Non Interest Income/Average Assets 0.27% 0.40% 0.65%
Non Interest Expense/Average Assets 1.94% 1.81% 2.14%
Efficiency Ratio 46.77% 51.10% 57.80%
Return on Average Assets 1.04% 0.95% 1.07%
Return on Average Equity 6.78% 10.14% 16.97%
Price/Tangible Book Value per Share 150.60% 178.90% 287.14%
Price/Earnings per Share 32.71 19.82 15.7
Market Capitalization/Assets 33.06% 18.20% 16.96%
Dividend Yield NM 1.59% 1.39%
Dividend Payout Ratio NM 27.03% 24.95%
</TABLE>
No company included in the above analysis is identical to Bayonne or
Richmond County. Accordingly, an analysis of comparable companies is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values or
merger transaction values, as the case may be, of Bayonne and Richmond County
and the companies to which they are being compared.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed certain
other merger or acquisition transactions announced from January 1, 1998 to July
15, 1998 involving publicly traded savings institutions as acquired institutions
with transaction values greater than $15 million. Sandler O'Neill reviewed 34
transactions announced nationwide ("Nationwide Transactions") and 11
transactions announced
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<PAGE>
in Maryland, New Jersey, New York and Pennsylvania ("Regional Transactions").
Sandler O'Neill reviewed the ratios of deal price to last twelve months'
earnings, deal price to book value, deal price to tangible book value, tangible
book premium to core deposits, deal price to total deposits and deal price to
total assets and computed high, low, mean and median ratios and premiums for the
respective groups of transactions. These multiples were applied to Bayonne's
financial information as of and for the 12 months ended March 31, 1998. As
illustrated in the following table, Sandler O'Neill derived an imputed range of
values per share of Bayonne common stock of $15.05 to $24.91 based upon the
median multiples for Nationwide Transactions and $15.00 to $22.26 based upon the
median multiples for Regional Transactions. As calculated by Sandler O'Neill,
the Implied Value of the merger to Bayonne stockholders was $19.23.
<TABLE>
<CAPTION>
Nationwide Transactions Regional Transactions
------------------------ ----------------------
Median Implied Median Implied
Multiple Value Multiple Value
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Deal price/LQA EPS 26.47x $16.94 26.39x $16.89
Deal price/Est.1999
net income 26.47x 15.05 26.39x 15.00
Deal price/Book value 2.28x 24.69 2.05x 22.26
Deal price/Tangible
book value 2.30x 24.91 2.05x 22.26
Deal price/Total deposits 33.17% 15.46 32.74% 15.26
Tangible book premium/
Core deposits 21.63% 20.43 21.47% 20.36
Deal price/Total assets 24.96% 17.74 26.73% 19.00
</TABLE>
No companies involved in the transactions included in the above analysis
are identical to Bayonne and Richmond County and no transaction included in the
above analysis is identical to the merger. Accordingly, an analysis of the
results of the foregoing analysis is not mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or merger transaction values, as the case may be, of
Bayonne and Richmond County and the companies to which they are being compared.
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<PAGE>
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Bayonne through March 31, 2003 under various circumstances,
assuming Bayonne's current dividend payout ratio and that Bayonne performed in
accordance with the earnings forecasts of its management. To approximate the
terminal value of Bayonne common stock at March 31, 2003, Sandler O'Neill
applied price to earnings multiples ranging from 12x to 27x and applied
multiples of tangible book value ranging from 100% to 350%. The dividend income
streams and terminal values were then discounted to present values using
different discount rates ranging from 9% to 15% chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of Bayonne common stock. As illustrated in the following table, this analysis
indicated an imputed range of values per share of Bayonne common stock of $6.77
to $18.62 when applying the price/earnings multiples and $7.67 to $32.15 when
applying multiples of tangible book value. As calculated by Sandler O'Neill,
the Implied Value of the merger to Bayonne stockholders was $19.23.
<TABLE>
<CAPTION>
Price/Earnings Multiples Tangible Book Value Multiples
------------------------ -----------------------------
Discount Rate 12x 27x 1.0x 3.5x
- --------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
9% $8.86 $18.62 $10.44 $32.15
11 8.09 16.94 9.41 28.72
13 7.40 15.43 8.49 25.68
15 6.77 14.06 7.67 22.98
</TABLE>
In connection with its analysis, Sandler O'Neill considered and discussed
with the Bayonne board how the present value analysis would be affected by
changes in the underlying assumptions, including variations with respect to the
growth rate of assets, net interest spread, non-interest income, non-interest
expenses and dividend payout ratio. Sandler O'Neill noted that the discounted
dividend stream and terminal value analysis is a widely used valuation
methodology, but the results of such methodology are highly dependent upon the
numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or future results.
PRO FORMA MERGER ANALYSIS. Sandler O'Neill analyzed certain potential pro
forma effects of the merger, based upon the exchange ratio of 1.05, Bayonne's
and Richmond County's current and projected income statements and balance
sheets, and assumptions regarding the economic environment, accounting and tax
treatment of the merger, charges associated with the merger, operating
efficiencies and other adjustments discussed with senior managements of Bayonne
and Richmond County. This analysis indicated that in the first full year
following the merger, the merger would be neutral to Richmond County's earnings
per share and slightly dilutive to tangible book value per share. The analysis
also indicated that, from a Bayonne stockholder's perspective, as compared to
the projected stand-alone performance of Bayonne, the merger would be accretive
to both earnings per share and tangible book value per share.
Sandler O'Neill updated its analysis following the amendment and
restatement of the agreement to reflect the fact that the merger will be
accounted for as a purchase transaction. This analysis included the projected
impact of the amortization over 15 years of the goodwill created as a result of
the merger and a projected repurchase of 10% of the pro forma number of shares
of Richmond County common stock outstanding after giving effect to the merger.
As illustrated in the following table, this analysis indicated that the merger
would be accretive to Richmond County's earnings per share and dilutive to
tangible book value per share. The analysis also indicated that, from a Bayonne
stockholder's perspective, as compared to the projected stand-alone performance
of Bayonne, the merger would be accretive to both earnings per share and
tangible book value per share. The actual results achieved by Richmond County
may vary from projected results and the variations may be material.
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<PAGE>
<TABLE>
<CAPTION>
June 30, 2000 Richmond County Bayonne
------------- ---------------- ------------
<S> <C> <C>
Stand-alone EPS $ 1.19 $ 0.83
Pro forma EPS $ 1.25 $ 1.31/(1)/
EPS accretion 5.1% 57.6%
Stand-alone
tangible book value $13.28 $11.43
Pro forma tangible book value $13.21 $13.87/(1)/
Tangible book value accretion (dilution) (0.5)% 21.4%
Stand-alone leverage capital ratio 13.8% NM
Pro forma leverage capital ratio 12.4% NM
</TABLE>
- -------------------
/(1)/ Determined by multiplying the Richmond County values by the
exchange ratio.
CONTRIBUTION ANALYSIS. Sandler O'Neill reviewed the relative contributions
to, among other things, total assets, total net loans, total deposits, total
borrowings, total equity, last quarter annualized net income and market
capitalization to be made by Bayonne and Richmond County to the combined
institution based on data at and for the 12 months ended March 31, 1998. This
analysis indicated that the implied contributions to the combined entity were as
follows:
<TABLE>
<CAPTION>
Bayonne Richmond County
-------- ----------------
<S> <C> <C>
Total assets 30.6% 69.4%
Total net loans 29.6% 70.4%
Total deposits 31.3% 68.7%
Total borrowings 36.6% 63.4%
Total equity 23.4% 76.6%
LQA net income 27.1% 72.9%
Market capitalization 24.2% 75.8%
Percentage of pro forma
shares owned 25.9% 74.1%
</TABLE>
In connection with rendering its July 19, 1998 opinion, Sandler O'Neill
reviewed, among other things:
(1) the merger agreement and exhibits thereto;
(2) the Bayonne Merger Stock Option Agreement;
(3) certain publicly available financial statements of Bayonne and other
historical financial information provided by Bayonne that Sandler
O'Neill deemed relevant;
(4) certain publicly available financial statements of Richmond County and
other historical financial information provided by Richmond County that
Sandler O'Neill deemed relevant;
(5) certain financial analyses and forecasts of Bayonne prepared by and
reviewed with management of Bayonne and the views of senior management
of Bayonne regarding Bayonne's past and current business, operations,
results thereof, financial condition and future prospects;
(6) certain financial analyses and forecasts of Richmond County prepared by
and reviewed with management of Richmond County and the views of senior
management of Richmond
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<PAGE>
County regarding Richmond County's past and current business,
operations, results thereof, financial condition and future prospects;
(7) the pro forma impact of the merger;
(8) the publicly reported historical price and trading activity for
Bayonne and Richmond County common stock, including a comparison of
certain financial and stock market information for Bayonne and
Richmond County with similar publicly available information for
certain other companies the securities of which are publicly traded;
(9) the financial terms of recent business combinations in the savings
institution industry, to the extent publicly available;
(10) the current market environment generally and the banking environment
in particular; and
(11) such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Sandler O'Neill
considered relevant.
In connection with rendering the Sandler fairness opinion, Sandler O'Neill
confirmed the appropriateness of its reliance on the analyses used to render its
July 19, 1998 opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions upon which such analyses were based
and the other factors considered in rendering its opinion. In performing such
procedures, Sandler O'Neill considered the impact on its analyses arising out of
the change in the accounting treatment of the merger from a pooling of interests
to a purchase transaction.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon the accuracy and completeness of all the financial information, analyses
and other information that was publicly available or otherwise furnished to,
reviewed by or discussed with it, and Sandler O'Neill does not assume any
responsibility or liability for independently verifying the accuracy or
completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of Bayonne or Richmond
County or any of their respective subsidiaries, or the collectibility of any
such assets, nor was it furnished with any such evaluations or appraisals.
Sandler O'Neill is not an expert in the evaluation of allowances for loan losses
and it has not made an independent evaluation of the adequacy of the allowance
for loan losses of Bayonne or Richmond County, nor has it reviewed any
individual credit files relating to Bayonne or Richmond County. With Bayonne's
consent, Sandler O'Neill has assumed that the respective allowances for loan
losses for both Bayonne and Richmond County are adequate to cover such losses
and will be adequate on a pro forma basis for the combined entity. In addition,
Sandler O'Neill has not conducted any physical inspection of the properties or
facilities of Bayonne or Richmond County. With respect to all financial
projections prepared by or reviewed with each company's management and used by
Sandler O'Neill in its analyses, Sandler O'Neill assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the respective future financial
performances of Bayonne and Richmond County and that such performances will be
achieved. Sandler O'Neill expressed no opinion as to such financial projections
or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
its opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the
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<PAGE>
covenants required to be performed by such party under such agreements and that
the conditions precedent in the merger agreement are not waived. Sandler
O'Neill also assumed, with Bayonne's consent, that there has been no material
change in Bayonne's and Richmond County's assets, financial condition, results
of operations, business or prospects since the date of the last publicly filed
financial statements available to it, that Bayonne and Richmond County will
remain as going concerns for all periods relevant to its analyses, and that the
merger will be accounted for as a purchase and will qualify as a tax-free
reorganization for federal income tax purposes.
Bayonne has agreed to pay Sandler O'Neill a transaction fee in connection
with the merger, a substantial portion of which is contingent upon the closing
of the merger. Based on the closing price of Bayonne common stock on
___________, the last practicable date prior to the printing of this document,
Bayonne will pay Sandler O'Neill a transaction fee of approximately $________,
of which approximately $________ has been paid and the balance will be paid when
the merger is closed. Sandler O'Neill has also received a fee of $50,000 for
rendering its fairness opinion. Bayonne has also agreed to reimburse Sandler
O'Neill for its reasonable out-of-pocket expenses incurred in connection with
its engagement and to indemnify Sandler O'Neill and its affiliates and their
respective partners, directors, officers, employees, agents, and controlling
persons against certain expenses and liabilities, including liabilities under
securities laws.
Sandler O'Neill has in the past provided certain other financial services
to Bayonne and has received compensation for such services. Sandler O'Neill has
in the past provided and currently provides certain financial advisory services
to Richmond County and has received, and will receive, compensation for such
services. In addition, Sandler O'Neill may in the future provide investment
banking services to Richmond County and will receive compensation for such
services. In the ordinary course of its business as a broker-dealer, Sandler
O'Neill may purchase securities from and sell securities to Bayonne and Richmond
County and may actively trade the equity securities of Bayonne and Richmond
County for its own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
BAYONNE STOCKHOLDERS WILL RECEIVE 1.05 SHARES OF RICHMOND COUNTY COMMON STOCK
FOR EACH BAYONNE SHARE
Upon completion of the merger, each share of Bayonne common stock, will be
converted into the right to receive 1.05 shares of Richmond County common stock.
However, "excluded shares," as defined on the next page, will not be so
converted. The exchange ratio may be increased by Richmond County if Bayonne
exercises its rights under the merger agreement to terminate the merger
agreement due to the price of the Richmond County common stock declining below
certain levels. See "-- Price-Based Termination." However, Richmond County is
under no obligation to increase the exchange ratio. Any decision to increase
the exchange ratio would be made by the Richmond County board. If Richmond
County elects to increase the exchange ratio, it must give Bayonne prompt
notice of that election. If Richmond County increases the exchange ratio as
called for by the merger agreement, no termination of the merger agreement
would occur.
The exchange ratio was arrived at through arm's-length negotiations between
Richmond County and Bayonne.
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<PAGE>
The exchange ratio cannot be decreased without approval of Bayonne's and
Richmond County's stockholders. If Richmond County effects a stock dividend,
reclassification, split, combination or exchange of shares of the Richmond
County common stock, an appropriate adjustment to the exchange ratio will be
made. This insures that the consideration to be received by Bayonne
stockholders will not be impacted by a dividend, stock split or the like.
The market price of Richmond County common stock will always fluctuate.
Because the number of shares of Richmond County common stock to be received by
Bayonne's stockholders in the merger is fixed (subject to possible increase as
described above) and because the market price of the Richmond County common
stock will fluctuate, the value of the shares of Richmond County common stock
that Bayonne stockholders would receive in the merger may increase or decrease
prior to and after the merger. For further information concerning the market
prices of Richmond County common stock and Bayonne common stock, see "MARKET
PRICES AND DIVIDEND INFORMATION." No assurance can be given as to what the
market price of Richmond County common stock will be before or after the merger
closes.
No fractional shares of Richmond County common stock will be issued in
connection with the merger. Instead, Richmond County will make a cash payment
to each Bayonne stockholder who would otherwise receive fractional shares. The
cash payment will equal the product of (1) the fractional portion which a
Bayonne stockholder would otherwise receive and (2) the average of the daily
closing sales prices of a share of Richmond County common stock for the 15
consecutive trading days immediately preceding the day on which the last
required regulatory approval for the merger is obtained.
Upon completion of the merger, some shares of Bayonne common stock will be
canceled and retired and no payment will be made for them. These shares are:
. shares to which the laws attach dissenters' or appraisal rights that
create a right to receive payment. Holders of those shares only have
rights provided in any such law;
. shares held directly or indirectly by Richmond County. This does not
apply to shares held in a fiduciary capacity or in satisfaction of a
debt previously contracted;
. shares held by Bayonne as treasury stock; and
. unallocated shares held in the Bayonne 1995 RRP.
Other than the options Richmond County may have the right to exercise under
the Bayonne Merger Stock Option Agreement, each outstanding and unexercised
option to purchase Bayonne common stock, will be converted into an option to
purchase Richmond County common stock.
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<PAGE>
The number of shares of Richmond County common stock to be received is equal to
the product of the number of shares of Bayonne common stock subject to Bayonne
options and the exchange ratio. The price per share of the Richmond County
common stock will equal the exercise price per share of Bayonne common stock
otherwise purchasable under the Bayonne option, divided by the exchange ratio.
PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
RICHMOND COUNTY. Shares of Richmond County capital stock issued and
outstanding immediately prior to the completion of the merger will remain issued
and outstanding and be unaffected by the merger.
BAYONNE. Within five business days after the completion of the merger, a
bank or trust company selected by Richmond County and reasonably satisfactory to
Bayonne who will mail to each former holder of record of Bayonne common stock a
letter with instructions on how to exchange Bayonne stock certificates for
Richmond County stock certificates and cash for fractional shares.
HOLDERS OF BAYONNE COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE DESIGNATED
AGENT, AND SHOULD NOT RETURN SUCH STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After you mail in these materials to the designated agent, your Richmond
County stock certificates and, where applicable, a check for your fractional
share, will be mailed back to you. The Bayonne certificates you surrendered
will be canceled.
Bayonne stockholders will receive any Richmond County dividends or other
distributions declared after the completion of the merger only if you
surrendered your Bayonne stock certificates. Only then will you be entitled to
receive all previously withheld dividends and distributions, without interest.
After the completion of the merger, no transfers of Bayonne common stock
issued and outstanding immediately prior to the completion of the merger will be
allowed. Bayonne stock certificates are presented for transfer after the
completion of the merger, they will be canceled and exchanged for Richmond
County stock certificates.
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<PAGE>
If your Bayonne stock certificates have been lost, stolen or destroyed, you
will have to prove your ownership of those certificates and that they were lost,
stolen or destroyed before you receive any consideration for your shares. The
designated agent will send you instructions on how to provide this evidence.
INTERESTS OF DIRECTORS AND OFFICERS IN THE BAYONNE MERGER THAT ARE DIFFERENT
FROM YOUR INTERESTS
Some members of Bayonne's management and the Bayonne board may have
interests in the merger that are in addition to or different from the interests
of stockholders. The Bayonne board was aware of these interests and considered
them in approving the merger agreement.
EXISTING EMPLOYMENT, CHANGE IN CONTROL AND CONSULTING AGREEMENTS. Mr.
Michael A. Nilan is President of Bayonne. He has an employment contract with
Bayonne. Because of the merger, his contract will be terminated. In exchange
for this he will receive a payment of approximately $150,000. Following the
merger, Mr. Nilan will be employed by Richmond County Savings under an agreement
described on the next page. Other senior officers of Bayonne, including Eugene
Malinowski, Bayonne's Chief Financial Officer, will receive severance payments
totalling, in the aggregate, approximately $1.1 million if their employment is
terminated in connection with or following the merger. Mr. Malinowski himself
will receive approximately $350,000. These officers will also be entitled to
continued life, health and disability insurance coverage for 36-months following
their termination of employment. Mr. Patrick F.X. Nilan's consulting agreement
with Bayonne will be terminated after the merger, in return for which he will
receive $100,000.
VESTING OF RESTRICTED STOCK. Under the Bayonne 1995 RRP, grants of
restricted stock were made to directors and officers of Bayonne. The vesting of
these shares was to occur over a period of years. However, the Bayonne 1995 RRP
provides that all unvested restricted shares of Bayonne common stock become
vested upon a change in control of Bayonne. The merger is a change in control.
Officers and directors of Bayonne currently hold 49,684 shares of unvested
restricted stock, which will be converted into shares of Richmond County common
stock at the exchange ratio. The vesting of shares of restricted stock granted
under the Bayonne Incentive Plan will not be accelerated by the merger.
However, Richmond County will assume Bayonne's obligations under these awards.
ESTABLISHMENT OF DIVISIONAL BOARD. Richmond County will create a
divisional board to advise Richmond County on deposit and lending activities in
Bayonne's market area and to maintain and develop customer relationships.
Richmond County will appoint all of the present members of the Bayonne board who
wish to serve to the divisional board. The divisional board will be maintained
until April 30, 2003 or later, at the discretion of the Richmond County board.
Each member of the divisional board will receive an annual retainer of $12,000
and a $1,000 attendance fee for each meeting attended.
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<PAGE>
APPOINTMENT TO RICHMOND COUNTY BOARD OF DIRECTORS. Following the
completion of the merger, Richmond County will increase the Richmond County
board by one member and appoint Patrick F.X. Nilan to fill the newly created
vacancy. Mr. Patrick F.X. Nilan's term will expire in 2000. For his services
as a member of the Richmond County board, Mr. Nilan will receive the customary
Richmond County board fees and retainers. He will not receive fees for service
on the divisional board while a member of the Richmond County board.
NEW EMPLOYMENT AGREEMENTS. Following the merger, Michael A. Nilan will
enter into an employment agreement with Richmond County Savings. He will serve
as a senior officer of Richmond County Savings for the three years following the
merger. His initial base salary under the agreement will be $150,000. He will
also receive a bonus of $150,000 when he executes his new employment agreement.
Mr. Nilan will also receive compensation for not competing with Richmond County
during the term of his agreement and for the loss of benefits he would have
received under Bayonne's retirement programs that are being lost due to the
merger.
BAYONNE STOCK OPTIONS. Options to purchase shares of Bayonne common stock
under the Bayonne 1995 Stock Option Plan or the Bayonne Incentive Plan will be
converted into options to purchase Richmond County common stock. As of
September 30, 1998, the directors and executive officers of Bayonne held options
to purchase a total of 460,783 shares of Bayonne common stock.
INDEMNIFICATION. Richmond County has also agreed as to indemnify and hold
harmless each present and former director, officer and employee of Bayonne and
its subsidiaries and each officer or employee of Bayonne and its subsidiaries
that is serving or has served as a director or trustee of another entity at
Bayonne's request or direction. These people will be indemnified against any
costs, expenses judgments, fines, losses, claims, or liabilities incurred in
connection with any claim, suit, proceeding or investigation relating to matters
existing or occurring at or prior to the completion of the merger. Richmond
County also agreed to advance these persons costs they incur to the fullest
extent the costs would have been advanced to them if they were a director,
officer, or employee of Bayonne under the Delaware General Corporation Law
("DGCL"). The indemnification will last for six years following the merger.
Moreover, Richmond County will maintain Bayonne's existing directors' and
officers' insurance policy. In the alternative, Richmond County will provide a
policy providing comparable coverage and amounts on terms no less favorable to
the persons currently covered by Bayonne's existing policy. This coverage will
be maintained for three years after the merger.
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<PAGE>
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the merger, Richmond County will increase its board by one member
and will appoint Patrick F.X. Nilan to fill the vacancy. Mr. Nilan's term as a
member of the Richmond County board will expire in the year 2000. For his
services as a member of the Richmond County board, Mr. Nilan will be paid
customary board fee. In addition, Richmond County will establish a divisional
board with respect to deposit and lending activities in Bayonne's market area
and to maintain and develop customer relationships. A discussion of the
divisional board is on page __.
Also following the merger, the parties intend to merge Richmond County
Savings and First Savings. The surviving bank will be the Richmond County
Savings Bank.
Richmond County expects to achieve significant consolidation efficiencies
following the consummation of the merger, although there can be no assurance
that the anticipated efficiencies will be achieved. The efficiencies are
expected to be achieved primarily through the elimination of duplicative
compensation costs and computer system costs. A merger integration committee,
consisting of senior management members of Richmond County and Bayonne, is in
the process of establishing a definitive plan, including a timetable, to achieve
the cost reductions.
Following the merger, Richmond County intends to continue to utilize a
stock repurchase program, subject to regulatory limitations or conditions,
economic and market conditions and a review by the board and management of the
anticipated effects of such a program. Such a program may affect Richmond
County's ability to utilize pooling-of-interests accounting in any potential
acquisitions, although, like other public companies, Richmond County will retain
the ability to terminate the stock repurchase plan and revise all or a portion
of these repurchased shares in order to utilize the pooling-of-interest method
of accounting for future acquisitions.
EMPLOYEE MATTERS
Each First Savings employee whose employment is not specifically terminated
will become an employee of Richmond County or Richmond County Savings,
respectively. However:
(1) Bayonne's continuing employees will not be, or act as, officers of
Richmond County or Richmond County Savings, unless elected or appointed
to that position by Richmond County or Richmond County Savings.
(2) With the exception of Mr. Michael A. Nilan, all of Bayonne's continuing
employees who remain following the completion of the merger will be
employed at the will of Richmond County or Richmond County Savings.
(3) With the exception of Mr. Michael A. Nilan, no employee of Bayonne will
become a contractual employee of Richmond County or Richmond County
Savings unless the
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contract is in writing with Richmond County or Richmond County
Savings.
(4) Each Bayonne's continuing employees who is a participant in the Bayonne
401(k) Plan will become fully vested in his or her account balance in
the Bayonne 401(k) Plan. The Bayonne 401(k) Plan will either be merged
into the Richmond County Savings Bank 401(k) Savings Plan in RSI
Retirement Trust following, or terminated immediately prior to, on, or
after the completion of the merger. This determination will be made by
Richmond County Savings. Bayonne's continuing employeess participating
in the Bayonne 401(k) Plan will become participants in the Richmond
County Savings 401(k) Plan.
(5) Richmond County will honor existing employment agreements, including
the change in control provisions of those agreements and in certain
benefit plans. Richmond County will also honor the payment of benefits
by Bayonne under the agreements and plans to the extent these
obligations have been previously disclosed to Richmond County. Payments
under the Bayonne employment agreements may be made by Bayonne
immediately prior to the completion of the merger.
(6) Except as otherwise provided in paragraphs (4) and (5) above,
appropriate steps shall be taken to terminate all Bayonne employee
plans around the time the merger closes. Except as provided in
paragraph (4), each Bayonne continuing employees 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 ESOP and the Richmond County Savings 401(k) Plan,
service with Bayonne or First Savings will be treated as service with
Richmond County or Richmond County Savings to determine eligibility to
participate, vesting and entitlement to benefits. Service will not be
recognized to the extent that it would result in a duplication of
benefits. For purposes of the Richmond County ESOP or Richmond County
Savings 401(k) Plan, Bayonne's continuing employees will be treated as
newly-hired employees of Richmond County or Richmond County Savings as
of the completion of the merger and credit for service will begin
accruing as of that date .
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CONDITIONS TO THE MERGER
The obligations of Richmond County and Bayonne to close the merger are
conditioned on the following being satisfied at or prior to the completion of
the merger:
(1) Richmond County's and Bayonne's stockholders must approve the merger
agreement;
(2) the requisite regulatory approvals, consents and waivers must be
obtained and all statutory waiting periods must have expired;
(3) any necessary material third party consents, waivers or approvals must
be obtained or made;
(4) no approval or consent will have imposed any condition or requirement
that would materially and adversely impact the economic or business
benefits to either party that, had the condition or requirement been
known, the party would not have entered into the merger agreement;
(5) no party to the merger will be subject to any order, decree or
injunction that prohibits closing any of the merger's transactions;
(6) no statute, rule or regulation will prohibit completion of the
merger's transactions;
(7) the Registration Statement will have been declared effective by the SEC
and the SEC will not be taking actions to stop the merger from
proceeding;
(8) all required approvals by state securities or "blue sky" authorities
will have been obtained; and
(9) Richmond County will issue its shares in exchange for the shares of
Bayonne
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common stock. Such shares will be listed on the Nasdaq National
Market.
The obligations of Richmond County and Bayonne to complete the merger are
also conditioned on the following:
(1) All parties will have performed their respective obligations under the
merger agreement;
(2) Subject to prior disclosure of any necessary qualifications, the
representations and warranties made by the parties in the merger
agreement will be materially true when the merger closes. Each party
will furnish the other with a certificate attesting to this fact;
(3) Each party's stockholders and boards will have taken all actions they
are required to under the merger agreement and each will furnish the
other with copies of the appropriate corporate records reflecting this
fact;
(4) Richmond County and Bayonne will have obtained all necessary material
consents or approvals to permit Richmond County to assume Bayonne's
contracts, leases and other agreements;
(5) Richmond County and Bayonne will have received certificates from
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appropriate authorities as to the corporate existence and good
standing of one another and their respective subsidiaries;
(6) Richmond County and Bayonne will have received an opinion from their
respective counsel dated as of the completion of the merger, that the
merger will be treated for federal income tax purposes as a
reorganization within the meaning of the Internal Revenue Code and that
accordingly:
(a) no gain or loss will be recognized by Richmond County, Richmond
County Savings, Bayonne or First Savings as a result of the
merger;
(b) besides cash received for fractional shares, no gain or loss will
be recognized by Bayonne's stockholders who exchange their Bayonne
stock for Richmond County's stock;
(c) the tax basis of stock received by Bayonne's stockholders in the
merger will be the same as the tax basis of their Bayonne stock.
This tax basis will be reduced by any amount allocable to a
fractional share interest for which cash is received;
(d) the holding period of Richmond County common stock received by
Bayonne's stockholders will include the holding period of their
Bayonne stock. However, Bayonne's stockholders must have first
held their Bayonne stock as a capital asset at the the merger's
conclusion.
The parties have received these opinions which will be updated at the
completion of the merger.
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(d) the holding period of Richmond County common stock received by
each stockholder in the Bayonne's stockholders receive Bayonne
Merger will include the holding period of their Bayonne Common
stock exchanged therefor, provided that such stockholder held
such. However, Bayonne's stockholders must first have held their
Bayonne Common stock as a capital asset on the Bayonne Effective
Date completion of the merger; and
(7) Richmond County will have provided a designated agent (a) certificates
representing at least the aggregate number of shares of Richmond County
stock to be issued to Bayonne's stockholders, and (b) sufficient cash
to pay Bayonne stockholders for their fractional share interest.
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We cannot guarantee when, or whether, the regulatory consents and
approvals necessary to complete the merger will be obtained or whether all of
the other conditions to the merger will be satisfied or waived by the party
permitted to do so. See "-- Regulatory Approvals Needed to Complete the
Merger" below. If the merger is not completed on or before April 30, 1999, the
merger agreement may be terminated by Richmond County's or Bayonne's board. If,
on that date, all necessary regulatory or governmental approvals, consents or
waivers required to complete the merger will not have been obtained but all
other conditions have been fulfilled, the deadline will be July 31, 1999.
However, the failure to complete the merger by that date cannot be due to the
breach of the merger agreement by the party seeking to terminate.
REGULATORY APPROVALS NEEDED TO COMPLETE THE MERGER
Completion of the merger and the bank merger are subject to a number of
regulatory approvals and consents. The bank merger is subject to the prior
approval of the FDIC under 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
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or otherwise be anticompetitive. In addition, as discussed below, a waiting
period of up to 30 days must be satisfied prior to consummation of the bank
merger after FDIC approval. Richmond County filed an application with the FDIC
on December 7, 1998.
Further, the New York State Banking Law, the bank merger is subject to the
prior approval of the Superintendent of Banks of New York State. Richmond
County filed an application for approval of the bank merger with the
Superintendent on December 7, 1998. In determining whether to approve the
application for the merger of Bayonne with and into Richmond County, the
Superintendent will consider, among other factors, whether the bank merger would
be consistent with adequate or sound banking and would not result in
concentration of assets beyond limits consistent with effective competition.
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 and to maintain
public confidence in the business of banking and protect the public interest and
the interests of depositors, creditors, and stockholders. Such factors will be
considered by the Superintendent in connection with Richmond County's
application.
A savings and loan holding company is prohibited under the Home Owners'
Loan Act, as amended ("HOLA") from acquiring, directly or indirectly, another
savings and loan holding company or a savings association without the prior
written approval of the Office of Thrift Supervision. Accordingly, Richmond
County has filed an application with the OTS for approval of the Bayonne merger.
In evaluating applications by holding companies to acquire savings institutions,
the OTS must consider the financial and managerial resources and future
prospects of the company and institution involved, the effect of the acquisition
on the risk to the insurance funds, the convenience and needs of the community
and competitive factors. Like the FDIC, the OTS may not approve any proposed
acquisition if it will result in a monopoly or otherwise be anticompetitive.
In order to complete the bank merger, First Savings will merge with a
Federal interim savings bank or convert to a savings bank, which will then
merge into Richmond County Savings. The merger of First Savings into the
Federal interim savings bank is subject to the approval of the OTS and the
Commissioner of the New Jersey Department of Banking and Insurance. First
Savings has filed applications with the OTS and the Commissioner.
Under the CRA, the FDIC and OTS must take into account the record of
performance of Richmond County Savings and First Savings in meeting the credit
needs of the entire community, including low- and moderate-income neighborhoods,
served by each institution. As part of the review process, the banking agencies
frequently receive comments and protests from community groups and others. See
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"REGULATION AND SUPERVISION -- Community Reinvestment Act."
In addition, a period of up to 30 days must expire following approval by
the FDIC and OTS within which period the United States Department of Justice may
file objections to the merger under the federal antitrust laws. While Richmond
County believes that the likelihood of such action by the Department of Justice
is remote in this case, there can be no assurance that the Department of Justice
will not initiate such proceeding, or that the Attorney General of the State of
New York will not challenge the Bayonne merger, or if such proceeding is
instituted or challenge is made, as to the result thereof.
The merger and bank merger cannot proceed in the absence of the requisite
regulatory approvals. See "-- Conditions to the Merger" and "-- Waiving and
Amending Provisions in the Merger Agreement or Terminating the Merger
Agreement." There can be no assurance that such regulatory approvals will be
obtained, and if obtained, there can be no assurance as to the date of any such
approval. There can also be no assurance that any such approvals will not
contain a condition or requirement which causes such approvals to fail to
satisfy the condition set forth in the merger agreement and described below
under "-- Conditions to the Merger." There can likewise be no assurance that
the Department of Justice or the Attorney General of the State of New York will
not challenge the 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 merger, except as described above. Should
any other approvals be required, it is presently contemplated that such
approvals would be sought. There can be no assurance that any other approvals,
if required, will be obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which do not include review of the merger from
the standpoint of the adequacy of the consideration to be received by Bayonne
stockholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Except as expressly provided for in the merger agreement and except to the
extent required by law or regulation or by regulatory authorities, Richmond
County and Bayonne have agreed that, during the period from July 19, 1998 to the
completion of the merger, Richmond County, Bayonne and their respective
subsidiaries will use commercially reasonable efforts to:
. conduct their business in the regular, ordinary and usual course
consistent with past practice;
. maintain and preserve intact their business organization, properties,
leases, employees and advantageous business relationships and retain
the services of their officers and key employees;
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. take no action which would materially adversely affect or delay the
ability of Richmond County or Bayonne to perform their respective
covenants and agreements on a timely basis under the merger agreement;
. take no action which would adversely affect or delay the ability of
Richmond County, Richmond County Savings, Bayonne or First Savings to
obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated by
the merger agreement; and
. take no action that results in or is reasonably likely to have a
materially adverse effect on Richmond County or Bayonne.
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 a whole. However, any such effect resulting
from any changes in laws or generally accepted accounting principles ("GAAP"),
or interpretations thereof, or changes in the general level of market interest
rates, will not be considered in determining if a material adverse effect has
occurred; or (2) the failure of certain representations and warranties to be
materially true.
Further, except as otherwise provided in the merger agreement, during the
period July 19, 1998 to the completion of the merger, Bayonne has agreed that
neither it nor any of its subsidiaries will
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take certain actions unless permitted to by Richmond County or required to by
law. These include:
(1) changing their governing documents;
(2) issuing any shares of capital stock, changing the terms of any
outstanding stock options or warrants, or issuing, granting or selling
any option, warrant, call, or commitment, relating to the authorized
or issued capital stock of Bayonne. This restriction does not apply to
the exercise of stock options or warrants outstanding as of July 19,
1998;
(3) other than regular quarterly dividends, declaring or paying any
dividend or distribution, or acquiring any shares of its capital stock
or any securities or obligations convertible into its capital stock.
Bayonne also will change its regular quarterly dividend record dates
and payment dates so that they are the same as Richmond
County's.Bayonne's stockholders cannot receive two dividends from
either Bayonne or from Bayonne and Richmond County in any one quarter
as a result of the merger.Bayonne may pay a cash dividend as permitted
by the merger agreement;
(4) other than in the ordinary course of business consistent with past
practice, disposing of any of its material properties, leases or
assets to anyone other than to its wholly owned subsidiary, or
cancelling any such indebtedness;
(5) unless required by law or as specifically provided for in the merger
agreement, increasing the compensation or fringe benefits of any of
its employees or directors, other than general increases for non-
officer employees in the ordinary course of business consistent with
past practice. Any such increase can not cause more than a 5% increase
in the total annual compensation expenses for such person for the
twelve month period ended March 31, 1998. Additionally, any increase
must not represent an increase of more than 5% over such person's
annual base salary at March 31, 1998. Further, unless approved in
advance by Richmond County, Bayonne can not pay any reasonable "stay
in place" pay to retain key
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employees. It also can not pay or agree to pay any pension or
retirement allowance not required to be paid by any existing plan or
agreement to any such employees or directors. Bayonne is also
prohibited from voluntarily accelerating the vesting of any stock
options or other compensation, making discretionary contributions to
any Bayonne Employee Plan, or hiring any employee with annual total
compensation of more than $35,000. The merger agreement also prevents
Bayonne from entering into any employment contracts, or terminating or
materially increasing the costs to Bayonne or any subsidiary of any of
their employee plans;
(6) except as contemplated by the merger agreement, changing its method of
accounting as in effect at March 31, 1998;
(7) settling any claims of Bayonne or any of its subsidiaries in excess of
$50,000 or imposing material restrictions upon on the operations of
Bayonne or any of its subsidiaries;
(8) acquiring or agreeing to acquire any business or business assets to
Bayonne, except to satisfy debts previously contracted;
(9) except for those loans existing at July 19, 1998 which were previously
disclosed to Richmond County and real estate or construction loans
secured by one- to four-family homes, making any real estate loans
secured by undeveloped land or real estate located outside of New
Jersey;
(10) establishing or committing to the establishment of any new branch or
other office facilities other than those for which all regulatory
approvals have been obtained except as previously disclosed to
Richmond County;
(11) unless in the ordinary course of business consistent with past
practice or, as agreed to in the merger agreement, making any
investment of more than $50,000 in any entity;
(12) investing in any debt security 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 under OTS mandates or
securities of the Federal Home
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Loan Bank ("FHLB"). Any debt security that is purchased must be done
in the ordinary course of business consistent with past practice;
(13) entering into contracts that require annual payments of more than
$20,000. This restriction does not apply to exceptions specifically
described in the merger agreement;
(14) creating loan, lease or credit obligations, except (a) in conformity
with existing lending practices in amounts not to exceed $500,000 to
any individual borrower or (b) loans or advances that Bayonne has a
binding obligation to make as of July 19, 1998 and a description of
which has been provided to Richmond County;
(15) incurring any additional borrowings beyond those disclosed to Richmond
County. This restriction does not apply to FHLB borrowings of six
months or less and reverse repurchase agreements consistent with past
practice. Bayonne is also restricted from pledging any of its assets
to secure any borrowings other than as required as of July 19, 1998 or
permitted under the merger agreement. Deposits are not considered
borrowings;
(16) making any capital expenditures in excess of $20,000 under binding
commitments existing on July 19, 1998 that have been previously
disclosed to Richmond County. This restriction does not apply to
expenditures necessary to maintain existing assets in good repair or
to make payment of necessary taxes;
(17) other than securities of the FHLB that are purchased in the ordinary
course of business consistent with past practice, organizing,
capitalizing, lending or otherwise investing in any subsidiary;
(18) adding new members to the senior executive officer team or the
Bayonne board after July 19, 1998; and
(19) agreeing or making any commitment to take any action that is described
above.
At Richmond County's request, Bayonne will cause First Savings to change
its loan, litigation or real estate valuation policies and practices 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 anything that would prevent completion of the
merger. It will not occur earlier than 30 days prior to the completion of the
---
merger.
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REPRESENTATIONS AND WARRANTIES MADE BY RICHMOND COUNTY AND BAYONNE IN THE MERGER
AGREEMENT
Both Richmond County and Bayonne have made customary representations and
warranties relating to their businesses. For detailed information on such these
representations and warranties, see the merger agreement attached as Annex A.
Such representations and warranties must remain true in all material respects
through the completion of the merger unless such change does not have a material
negative impact on the party's business, financial condition or results of
operations. See "-- Conditions to the Merger."
WHAT HAPPENS IF A THIRD PARTY OFFERS TO BUY BAYONNE
Bayonne has agreed not to seek to have an outside third party try to buy a
material interest in Bayonne or its subsidiaries. An offer to buy at least 15%
of Bayonne's or First Savings' assets, at least 10% of Bayonne's stock, or a
public announcement by Bayonne to enter into an agreement to do this would be
considered an "acquisition proposal."
However, the Bayonne board may enter into discussions or negotiations with
anyone who makes an unsolicited written, bona fide proposal to acquire Bayonne
-----------
that is a "superior proposal." A "superior proposal" is one about which
Bayonne's financial advisors opine in writing is superior to this merger from a
financial point of view to Bayonne's stockholders. For the Bayonne board to
enter into negotiations on a superior proposal, it would also have to first
determine that it was their fiduciary duty to enter into such negotiations.
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If Bayonne does enter into negotiations with a third party regarding a
superior proposal, it has to furnish Richmond County with notice of its intended
actions and enter into a confidentiality agreement with the third party.
The Bayonne board may also withdraw or modify its recommendation for the
merger and enter into a superior proposal if, after consulting with independent
legal counsel, the board determines in good faith that such action is necessary
for it to comply with its fiduciary duties to stockholders.
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WAIVING AND AMENDING PROVISIONS IN, OR TERMINATING THE MERGER AGREEMENT
Prior to the completion of the merger, waived, amended or modified by the
parties. However, after the vote by the stockholders of Bayonne or Richmond
County, no amendment or modification may be made that would reduce the amount to
be received by Bayonne's stockholders under the terms of the merger.
The merger agreement may also be terminated at any time prior to the
completion of the merger, either before or after approval of the matters
presented in connection with the merger by the stockholders of both Richmond
County and Bayonne by:
(1) the mutual consent of both boards;
(2) either party's board if the stockholders of Richmond County or Bayonne
do not approve the merger agreement. However, a party can only
terminate the merger agreement if it has complied in all material
respects with its obligations to solicit the support of its
stockholders for the merger and has complied, in all material respects,
with its representations and warranties;
(3) either party if a governmental approval, consent or waiver has been
denied or a governmental authority has prohibited the merger or part of
the merger from being completed;
(4) either party's board if the merger is not completed by April 30, 1999.
However, if, as of April 30, 1999, all necessary regulatory or
governmental approvals, consents or waivers requi red to complete the
merger have not been obtained, but all other conditions
---
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to the completion of the merger have been fulfilled, the termination
----
date will be extended to July 31, 1999. The failure to complete the
merger cannot be due to the breach of any representation, warranty or
covenant contained in the merger agreement by the party seeking to
terminate;
(5) either party, if the other's board does not publicly recommend in this
document that its stockholders approve the merger agreement or if
either board withdraws, modifies or amends their recommendation in a
manner materially adverse to the other party; (6) either party if
there has occurred an event since July 19, 1998 that has or will have
a material adverse effect on the other party. Each party must grant
the other 30 calendar days to cure the adverse effect of the event;
(6) either party if there has occurred an event since July 9, 1998 that
has or will have a material adverse effect on the other party. Each
party must grant the other 30 calendar days to cure the adverse effect
of the event;
(7) either party if the other has failed to perform a material obligation,
or if the other party has materially and incurably breached a
covenant, condition or representation of the merger agreement.
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(8) Bayonne, if its board determines that it must accept a superior
proposal made by a third party to acquire more than 65% of the combined
voting power of the shares of outstanding Bayonne common stock.
However, that prior to any such termination, Bayonne must negotiate in
good faith with Richmond County to attempt to make this merger work; or
(9) by Bayonne as discussed below under "-- Price-Based Termination of the
Merger Agreement."
PRICE-BASED TERMINATION OF THE MERGER AGREEMENT
The merger agreement provides that if the "Richmond County Market Value" on
the "Valuation Date" is less than $15.41 and the "Richmond County Ratio" is less
than the "Index Ratio," then Bayonne, may terminate the merger agreement. This
termination can occur during the five days following the Valuation Date.
However, no termination will occur if Richmond County agrees to increase
exchange Ratio. The increase must equal the lesser of (a) 16.177 divided by the
Richmond County Market Value, and (b) the Index Ratio multiplied by 1.05, the
product of which is divided by the Richmond County Ratio.
The "Richmond County Market Value" means the average of the daily closing
sales prices of Richmond County stock for the 15 consecutive trading days
immediately preceding the Valuation Date. The "Richmond County Ratio" means the
number obtained by dividing the Richmond County Market Value on the Valuation
Date by the "Initial Richmond County Market Value." The "Index Ratio" means the
number obtained by dividing the "Final Index Price" by the "Initial Index Price"
and then subtracting 0.15. The "Final Index Price" means the sum of the average
of the daily closing sales prices of a share of common stock of each of 14
financial institution holding companies identified in the merger agreement which
continue to be publicly traded and as to which there shall be not have been a
publicly announced acquisition transaction (the "Index Group"), multiplied by
their respective weighted percentages, as set forth in the merger agreement, for
the 15 trading days ending on the Valuation Date. The "Initial Index Price"
means the sum of the per share closing prices of the common stock of each
company comprising the Index Group on July 17, 1998, multiplied by their
respective weighted percentages.
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NASDAQ NATIONAL MARKET LISTING
Richmond County 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 merger to be approved
for quotation on the Nasdaq National Market prior to or at the completion of
the merger. The obligations of the parties to complete the merger are
subject to approval for quotation on the Nasdaq National Market of such shares.
See "-- Conditions to the Merger" above.
ACCOUNTING TREATMENT OF THE MERGER
Under the merger agreement, the merger will be accounted for under the
purchase method of accounting in accordance with GAAP. This means that Richmond
County and Bayonne will be treated as one company as of the date of the
combination, and that Richmond County will record the fair market value of
Bayonne's assets less liabilities on its financial statements. Any difference
between purchase price and the fair value of the identifiable net assets is
recorded as goodwill. The income statements incorporate the recorded income of
Bayonne's operations beginning at the completion of the merger.
The unaudited pro forma condensed combined financial information contained
in this document has been prepared using the purchase accounting method to
account for the merger. See "UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS."
TAX-FREE TRANSACTION FOR BAYONNE STOCKHOLDERS
The following is a discussion of the material federal income tax
consequences of the merger to Richmond County, Bayonne and holders of Bayonne
common stock. The discussion is based upon the Internal Revenue Code, Treasury
regulations, Internal Revenue Service rulings, and judicial and administrative
decisions in effect as of the date of this document. This discussion assumes
that Bayonne common stock is held as a "capital asset" within the meaning of
Section 1221 of the Code. To be a "capital asset," property must generally be
held for investment. In addition, this discussion does not address all of the
tax consequences that may be relevant to a holder of Bayonne common stock in
light of his or her particular circumstances or to holders subject to special
rules, such as foreign persons, financial institutions, tax-exempt
organizations, mergers 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 completion of the merger. In rendering their opinions,
counsel will require and rely upon representations contained in certificates of
officers of Richmond County, Bayonne and others.
HOLDERS OF BAYONNE COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER.
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It is a condition to the obligation of Richmond County and Bayonne to
complete the merger that the parties each will have received an opinion of
their respective counsel, dated as of the completion of the merger that the
merger will be treated as a reorganization within the meaning of the Internal
Revenue Code. We have already received opinions to this effect, and these
opinions will be updated when we complete the merger. If either party waives the
requirement of receiving a tax opinion and there is a material change in tax
consequences to Richmond County stockholders or Bayonne stockholders, you will
be notified of such an event and given the opportunity to confirm or change your
vote. Because the merger will be treated as a reorganization:
(1) none of the companies involved in the merger will recognize a gain or
a loss;
(2) no shareholders of Bayonne will recognize a gain or a loss for
exchanging their Bayonne shares for Richmond County shares except for
cash received instead of fractional shares; and
(3) Bayonne shareholders will not have their individual tax basis or
holding periods affected by exchanging their Bayonne shares for
Richmond County shares, except to the extent cash is received instead
of fractional shares.
SELLING THE RICHMOND COUNTY COMMON STOCK YOU RECEIVE IN THE MERGER
The shares of Richmond County common stock to be issued in the merger will
be registered under the Securities Act of 1933 and will be freely transferable
under the Securities Act of 1933 except for shares issued to any Bayonne
stockholder who may be deemed to be an "affiliate" of Bayonne for purposes of
Rule 145 under the Securities Act. Affiliates of Bayonne may not sell their
shares of Richmond County common stock acquired in connection with the merger
except pursuant to an effective registration
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statement under the Securities Act of 1933 covering such shares or in compliance
with Rule 145 or another applicable exemption from the registration requirements
of the Securities Act of 1933. This document does not cover any resales of
Richmond County common stock received in the merger by persons who may be deemed
to be affiliates of Bayonne. Bayonne has obtained from each person who is an
affiliate of Bayonne, and has delivered to Richmond County, a written agreement
intended to ensure compliance with the Securities Act of 1933.
YOU DO NOT HAVE APPRAISAL RIGHTS IN THE MERGER
The DGCL provides that stockholders of a corporation in a merger generally
are not entitled to appraisal rights if the shares of stock they own are, as of
the record date, either listed on a national securities exchange or designated
as a national market system security on the Nasdaq National Market, or held of
record by more than 2,000 stockholders, with certain exceptions not applicable
in the merger. Bayonne stockholders are not entitled to appraisal rights
generally because the shares of Bayonne common stock are listed on the Nasdaq
National Market. Stockholders are not entitled to appraisal rights in connection
with the merger because the shares of Richmond County common stock to be issued
in the merger are shares of the surviving corporation in the merger and will be
listed on the Nasdaq National Market at the completion of the merger, subject to
official notice of issuance. In addition, there are more than 2,000 holders of
record of Richmond County common stock.
WHO PAYS FOR WHAT
All costs and expenses incurred in connection with the merger will be paid
by the party incurring such expense. However, Richmond County shall bear the
expenses incurred in connection with printing and mailing this document
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and filing fees associated with the requisite registrations and approvals
required to consummate the merger.
WHEN WILL THE MERGER BE COMPLETED
The merger will become effective at the 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 within 14 days of the satisfaction or waiver of certain conditions to the
merger, unless another date is agreed to in writing by Richmond County and
Bayonne. See "-- Conditions to the Merger." The closing of the transactions
contemplated by the merger agreement will take place on the date of such filing.
It is expected that a period of time will elapse between the Richmond County
meeting and the Bayonne meeting and the completion of the merger while the
parties seek to obtain the regulatory approvals required to complete the 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 merger or, if
such a challenge is made, the result thereof. See "-- Regulatory Approvals
Needed to Complete the Merger." The merger agreement may be terminated by either
party if, among other reasons, the merger has not been consummated on or before
April 30, 1999. However, if, as of April 30, 1999, all necessary regulatory or
governmental approvals, consents or waivers required to complete the merger will
not have been obtained but all other conditions have been fulfilled, then this
deadline will be July 31, 1999. See "-- Waiving and Amending Provisions in, or
Terminating the Merger Agreement.
CERTAIN RELATED TRANSACTIONS
BAYONNE MERGER STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the Bayonne
Merger Stock Option Agreement, which is attached to this document as Annex B.
The following summary is qualified in its entirety by reference to the
Bayonne Merger Stock Option Agreement. Execution of the Bayonne Merger Stock
Option Agreement was a condition to the parties entering into the merger
agreement.
Concurrently with the execution of the merger agreement, Richmond County
and Bayonne entered into the Bayonne Merger Stock Option Agreement. The Bayonne
Merger Stock Option Agreement is designed to enhance the likelihood that the
merger will be successfully completed. Richmond County insisted on the
agreement for that reason. Under the Bayonne Merger Stock Option Agreement,
Bayonne granted Richmond County the option to purchase up to 1,809,804
authorized but unissued shares of Bayonne common stock. This represents
approximately 19.9% of the issued and outstanding shares of Bayonne common stock
on July 19, 1998. The option price of is $15.50 per share, subject to
adjustment in certain circumstances.
So long as (1) Richmond County is not in material breach of the agreements
or covenants contained in the merger agreement or the Bayonne Merger Stock
Option Agreement and (2) no preliminary or permanent injunction or other order
against the delivery of the shares covered by the Bayonne Merger Stock Option
issued by any court
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is in effect, Richmond County may exercise the Bayonne Merger Stock Option, in
whole or in part, at any time following the occurrence of a purchase event. A
"purchase event" occurs when Bayonne or First Savings enters into an agreement,
or has recommended or publicly announced an intention to merge with or sell to a
third party a material amount of its stock or assets.
However, the Bayonne Merger Stock Option will terminate upon the earliest
to occur of:
(a) the completion of the merger;
(b) termination of the merger agreement prior to the occurrence of a
purchase event or a preliminary purchase event;
(c) 12 months after the termination of the merger agreement
other than pursuant to a purchase event or preliminary purchase
event;
(d) 12 months after the termination of the merger agreement by
Richmond County in accordance with the terms of the merger
agreement; and
(e) 12 months after the first occurrence of a purchase event.
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A "preliminary purchase event" occurs when a third party undertakes to
acquire a substantial ownership interest in Bayonne or its subsidiaries. It
also applies if Bayonne's stockholders do not approve the merger, the Bayonne
meeting is not held or the Bayonne board withdraws its support for the merger,
and any of these things occur after a third party discloses an intention to buy
a material interest in Bayonne or its subsidiaries. A preliminary purchase
event can also occur if a third party makes a legitimate proposal to buy a
material interest in Bayonne or its subsidiaries, after which Bayonne breaches
an obligation under the merger agreement. Finally, a preliminary purchase event
can occur if a third party files an application or notice with the OTS, or other
federal or state bank regulatory authority, for approval to merge with Bayonne
or First Savings, buy at least 20% of their assets, or buy 15% of their stock.
Bayonne must notify Richmond County promptly in writing of the occurrence
of any purchase event or preliminary purchase event.
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EFFECT OF THE BAYONNE MERGER STOCK OPTION AGREEMENT. The Bayonne Merger
Stock Option Agreement is intended to increase the likelihood that the merger
will be completed in accordance with the terms of the merger agreement.
Consequently, certain aspects of the Bayonne Merger Stock Option Agreement may
have the effect of discouraging persons who might now or prior to the completion
of the merger be interested in acquiring all of or a significant interest in
Bayonne from considering or proposing such an acquisition. The acquisition of
Bayonne or an interest therein, or an agreement to acquire all or part of
Bayonne, could cause the Bayonne Merger Stock Option to become exercisable. The
existence of the Bayonne Merger Stock Option Agreement could significantly
increase the cost to a potential acquiror of acquiring Bayonne compared to its
cost had the Bayonne Merger Stock Option Agreement not been entered into. Such
increased cost might discourage a potential acquiror from considering or
proposing an acquisition. Moreover, following consultation with Bayonne's
independent accountant, Bayonne's management believes that the exercise of the
Bayonne Merger Stock Option is likely to prohibit any acquiror from accounting
for an acquisition of Bayonne using the pooling-of-interests accounting method
for a period of two years following such exercise. Accordingly, the existence of
the Bayonne Merger Stock Option Agreement may deter significantly, or completely
preclude, an acquisition of Bayonne by certain other banking organizations. The
Bayonne board took this factor into account before approving the Bayonne Merger
Stock Option Agreement. See "THE BAYONNE MERGER -- Recommendation of the
Bayonne Board; Bayonne's Reasons for the Merger."
BAYONNE BANK MERGER AGREEMENT
In connection with the merger, Richmond County Savings and First
Savings have entered into the bank merger agreement pursuant to which First
Savings and Richmond County Savings will merge, with Richmond County Savings
Bank being the surviving bank. The Bayonne bank merger agreement may be
terminated by mutual consent of the parties
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at any time and will be terminated automatically if the merger agreement is
terminated. In order to facilitate the bank merger, First Savings will merge
with a Federal interim savings bank, which will then merge with and into
Richmond County Savings.
THE IRONBOUND MERGER
In a separate and unrelated transaction, Richmond County is also acquiring
Ironbound Bankcorp, NJ. Ironbound is a New Jersey bank holding company that was
organized in 1997. Ironbound's wholly owned subsidiary, Ironbound Bank, is a New
Jersey State-chartered commercial bank that operates three commercial banking
offices in the New Jersey Counties of Union and Essex. Ironbound Bank has
operated since 1988. Ironbound's bank deposits are insured by the FDIC under the
Bank Insurance Fund. At September 30, 1998, Ironbound had total assets of $115.3
million, deposits of $102.8 million, and stockholders' equity of $11.5 million.
Ironbound's principal offices are located at 36 Pacific Street at New York
Avenue, Newark, New Jersey 07105, and its telephone number is (973) 589-3800.
After the Ironbound merger, Ironbound will be merged with and into Richmond
County, and Ironbound stockholders will become stockholders of Richmond County.
It is intended that the Ironbound merger will be completed in the first quarter
of 1999. Immediately following the completion of the Ironbound merger, Richmond
County Savings and Ironbound Bank will also merge. Richmond County Savings Bank
will be the name of the surviving bank. THE RICHMOND COUNTY BOARD HAS
UNANIMOUSLY APPROVED THE IRONBOUND MERGER. THE IRONBOUND MERGER DOES NOT REQUIRE
THE APPROVAL OF THE RICHMOND COUNTY STOCKHOLDERS.
REGULATION AND SUPERVISION
GENERAL
Richmond County Savings is a New York State-chartered stock savings bank
and its deposit accounts are insured up to applicable limits by the FDIC under
the Bank Insurance Fund. Richmond County Savings is subject to extensive
regulation by the Superintendent and the New York Banking Board (the "NYBB" and
collectively with the Superintendent, the "NYBD"), as its chartering agency,
and by the FDIC, as the deposit insurer. Richmond County Savings must file
reports with the NYBD and the FDIC concerning its activities and financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as establishing branches and mergers with, or
acquisitions of, other depository institutions. There are periodic examinations
by the NYBD and the FDIC to assess Richmond County's compliance with various
regulatory requirements and financial condition. Certain of the regulatory
requirements applicable to Richmond County and to Richmond County Savings are
referred to below or elsewhere herein. This description of the statutory
provisions and regulations applicable to Richmond County and Richmond County
Savings does not purport to be complete, and is qualified in its entirety by
reference to such statutes and regulations.
NEW YORK STATE LAW
Richmond County Savings derives its lending, investment and other authority
primarily from the applicable provisions of NYBL and the regulations of the
NYBD, as limited by FDIC regulations. See "-- Investment Activities." Under
these laws and regulations, savings banks, including Richmond County Savings,
may invest in real estate mortgages, consumer and commercial loans, certain
types of debt securities, including certain corporate debt securities and
obligations of federal, state and local governments
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and agencies, certain types of corporate equity securities and certain other
assets. Under the statutory authority for investing in equity securities, a
savings bank may directly invest up to 7.5% of its assets in certain corporate
stock and may also invest up to 7.5% of its assets in certain mutual fund
securities. Investment in the stock of a single corporation is limited to the
lesser of 2% of the outstanding stock of such corporation or 1% of the savings
bank's assets, except as set forth below. Such equity securities must meet
certain tests of financial performance. A savings bank's lending powers are not
subject to percentage of asset limitations, although there are limits applicable
to single borrowers. A savings bank may also, pursuant to the "leeway"
authority, make investments not otherwise authorized under the NYBL. This
authority permits investments not otherwise authorized of up to 1% of the
savings bank's assets in any single investment, subject to certain restrictions,
and to an aggregate limit for all such investments of up to 5% of assets.
Additionally, in lieu of investing in such securities in accordance with and
reliance upon the specific investment authority set forth in the NYBL, savings
banks are authorized to elect to invest under a "prudent person" standard in a
wider range of debt and equity securities as compared to the types of
investments permissible under such specific investment authority. However, in
the event a savings bank elects to utilize the "prudent person" standard, it
will be unable to avail itself of the other provisions of the NYBL and
regulations which set forth specific investment authority. A New York State-
chartered stock savings bank may also exercise trust powers upon approval of the
NYBD.
New York State-chartered savings banks may also invest in subsidiaries
under their service corporation investment power. A savings bank may use this
power to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities that may be authorized by the
NYBB. Investment by a savings bank in the stock, capital notes and debentures
of its service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may not
exceed 10% of the savings bank's assets.
The exercise by an FDIC-insured New York State-chartered savings bank of
the lending and investment powers of a savings bank under the NYBL is limited by
FDIC regulations and other federal law and regulations. In particular, the
applicable provisions of the NYBL and regulations governing the investment
authority and activities of an FDIC insured state-chartered savings bank have
been effectively limited by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant
thereto. See "-- Investment Activities."
With certain limited exceptions, a New York State-chartered savings bank
may not make loans or extend unsecured credit for commercial, corporate or
business purposes (including lease financing) to a single borrower, the
aggregate amount of which would be in excess of 15% of the bank's net worth.
Richmond County Savings currently complies with all applicable loans-to-one-
borrower limitations.
Under the NYBL, a New York State-chartered stock savings bank may declare
and pay dividends out of its net profits, unless there is an impairment of
capital. However, 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.
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-
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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 and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and other intangible assets. Tier I
generally excludes auction note issues, mortgage servicing rights and purchased
credit card 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. The minimum Tier I leverage ratio is the ratio of Tier
I capital to adjusted total average balance of assets as specified in the
regulations. These regulations provide for a minimum Tier I leverage ratio of
3% for banks that meet certain specified criteria, including that they have the
highest examination rating and are not experiencing or anticipating significant
growth. All other banks are required to maintain a Tier I leverage ratio of 3%
plus an additional cushion of at least 100 to 200 basis points. The federal
banking agencies, including the FDIC, have established a uniform minimum Tier I
leverage ratio of 4% for all but the highest rated banks. The FDIC may,
however, set higher leverage and risk-based capital requirements on individual
institutions when particular circumstances warrant. Banks experiencing or
anticipating significant growth are expected to maintain capital ratios,
including tangible capital positions, well above the minimum levels.
The following is a summary of Richmond County Savings' regulatory capital
ratios at September 30, 1998:
<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 First Savings' regulatory capital ratios at
September 30, 1998:
<TABLE>
<S> <C>
Tier I Risk-Based Capital 27.30%
Total Risked-Based Capital 28.45
Leverage Capital 12.24
</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
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so long as such exceptions are reviewed and justified appropriately. The
guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
DIVIDEND LIMITATIONS. The FDIC has authority to use its enforcement powers
to prohibit a bank from paying dividends if, in its opinion, the payment of
dividends would constitute an unsafe or unsound practice. Federal law prohibits
the payment of dividends by a bank that will result in the bank failing to meet
applicable minimum capital requirements on a pro forma basis. Additionally,
Richmond County Savings, as a subsidiary of a savings and loan holding company,
is required to provide the OTS with 30 days prior written notice before
declaring any dividend. The plan of conversion adopted by Richmond County
Savings' in connection with its conversion to stock form also restricts the
institution's payment of dividends in the event the dividend would impair the
liquidation account established in connection with the conversion. In addition,
the liquidation account established by First Savings in connection with
Bayonne's second-step conversion may not be impaired by the payment of
dividends. 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
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 Bank Insurance
Fund. 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 merging with its subsidiaries engaged
in activities not permitted for national bank subsidiaries. All non-subsidiary
equity investments, unless otherwise authorized or approved by the FDIC, must
have been divested by December 19, 1996, pursuant to a FDIC approved divestiture
plan unless such investments were grandfathered by the FDIC. Richmond County
Savings received grandfathering authority from the FDIC in February 1993 to
invest in listed stocks and/or registered shares subject to the maximum
permissible investment of 100% of Tier I capital, as specified by the FDIC's
regulations, or the maximum amount permitted by the NYBL, whichever is less.
Such grandfathering authority is subject to termination upon the FDIC's
determination that such investments pose a safety and soundness risk to Richmond
County Savings or in the event Richmond County Savings converts its charter,
other than a mutual to stock conversion, or undergoes a change in control. As of
September 30, 1998, Richmond County Savings had $47.2 million of securities
which were permissible under such grandfathering authority.
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TRANSACTIONS WITH AFFILIATES
Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
nonbanking subsidiary of the bank. In a holding company context, at a minimum,
the parent holding company of a savings bank and any companies which are
controlled by such parent holding company are affiliates of the savings bank.
The Board of Governors of the Federal Reserve System (the "FRB") has proposed
regulations that would treat as an affiliate any subsidiary of a savings bank
that engages in activities not permissible for the parent savings bank to engage
in directly. Generally, Section 23A limits the extent to which the savings bank
or its subsidiaries may engage in "covered transactions" with any one affiliate
to an amount equal to 10% of such savings bank's capital stock and surplus, and
contains an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus. The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate; the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate; the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person; or
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to any director, executive officer and
stockholder who controls, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total unimpaired capital and
unimpaired surplus. Section 22(h) also prohibits loans above amounts prescribed
by the appropriate federal banking agency to directors, executive officers, and
stockholders who control 10% or more of voting securities of a stock savings
bank, and their respective related interests, unless such loan is approved in
advance by a majority of the board of directors of the savings bank. Any
"interested" director may not participate in the voting. The loan amount,
which includes all other outstanding loans to such person, as to which such
prior board of director approval is required, is the greater of $25,000 or 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.
THE FDIC'S ENFORCEMENT AUTHORITY
The FDIC has extensive enforcement authority over insured savings banks,
including Richmond County Savings. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue cease and
desist orders and to remove directors and officers. In general, these
enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.
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The FDIC also has authority under federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances.
INSURANCE OF DEPOSIT ACCOUNTS
An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned by the FDIC. Deposits of Richmond
County Savings are presently insured by the Bank Insurance Fund. Assessment
rates for Bank Insurance Fund deposits, exclusive of assessments for Financing
Corporation ("FICO") bonds described below, currently range from 0 basis points
to 27 basis points. The FDIC is authorized to raise the assessment rates in
certain circumstances, including to maintain or achieve the designated reserve
ratio of 1.25%, which requirement the Bank Insurance Fund 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 Bank Insurance Fund insured institutions like
Richmond County Savings to assist in the payment of FICO bonds.
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
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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
Bank Insurance Fund deposits are also assessed for payments on bonds issued
by FICO, which were issued in the late 1980's to recapitalize the predecessor
Savings Association Insurance Fund. For the third quarter of 1998, the FICO
assessment rates, on an annual basis, are 1.22 basis points for Bank Insurance
Fund assessable deposits and 6.10 basis points for Savings Association Insurance
Fund assessable deposits. Full pro rata sharing of the FICO payments by Bank
Insurance Fund members will occur on the earlier of January 1, 2000 or the date
the Bank Insurance Fund and Savings Association Insurance Fund are merged.
FEDERAL RESERVE SYSTEM
The FRB regulations require depository institutions to maintain non-
interest-earning reserves against their transaction accounts (primarily NOW and
regular checking accounts). The FRB regulations generally require that reserves
be maintained against aggregate transaction accounts as follows: for that
portion of transaction accounts aggregating $47.8 million or less (subject to
adjustment by the FRB) the reserve requirement is 3%; and for accounts greater
than $47.8 million, the reserve requirement is $1.4 million plus 10% (subject to
adjustment by the FRB between 8% and 14%) against that portion of total
transaction accounts in excess of $47.8 million. The first $4.7 million of
otherwise reservable balances (subject to adjustments by the FRB) are exempted
from the reserve requirements. Richmond County Savings is in compliance with
the foregoing requirements. Because required reserves must be maintained in the
form of either vault cash, a non-interest-bearing account at a Federal Reserve
Bank or a pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce Richmond County Savings' interest-earning assets.
COMMUNITY REINVESTMENT ACT
NEW YORK STATE REGULATION. Richmond County Savings is also subject to
provisions of the NYBL that impose continuing and affirmative obligations upon
banking institutions organized in New York State to serve the credit needs of
its local community ("NYCRA"), which are substantially similar to those imposed
by the CRA. Under 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.
FEDERAL REGULATION. Under the CRA, as implemented by FDIC regulations, a
savings bank has a continuing and affirmative obligation consistent with its
safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the FDIC to assess the institution's record of meeting
the credit needs of its community and to
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take such record into account in its evaluation of certain applications by such
institution. The FDIC utilizes a four-tier descriptive rating system in its CRA
evaluations. Public disclosure is made of such evaluations.
HOLDING COMPANY REGULATION
FEDERAL REGULATION. As a unitary savings and loan holding company,
Richmond County generally is not restricted under existing laws as to the types
of business activities in which it may engage. Upon any non-supervisory
acquisition by Richmond County of another savings association to be held as a
separate subsidiary, Richmond County would become a multiple savings and loan
holding company and would be subject to extensive limitations on the types of
business activities in which it could engage. The HOLA limits the activities of
a multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act of 1956, as amended (the
"BHC Act"), subject to the prior approval of the OTS, and to other activities
authorized by OTS regulations. Multiple savings and loan holding companies are
prohibited from acquiring or retaining, with certain exceptions, more than 5% of
the voting shares of a non-subsidiary holding company or other company engaged
in activities other than those permitted by the HOLA.
Recently enacted legislation provides that the Bank Insurance Fund and the
Savings Association Insurance Fund would have merged on January 1, 1999 if there
were no more savings associations as of that date. Several bills were
introduced in the Congress that would have eliminated the federal thrift charter
and the OTS, but no such legislation was enacted in 1998. Richmond County
Savings in unable to predict whether legislation on this matter 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.
103
<PAGE>
In order to elect and continue to be regulated as a savings and loan
holding company by the OTS, 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" in certain "qualified thrift investments"
in at least 9 months out of each 12 month period. "Portfolio assets" are 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. "Qualified thrift investments" are primarily residential mortgages
and related investments. A holding company of a savings institution that fails
the QTL test must either convert to a bank holding company and thereby become
subject to the regulation and supervision of the FRB or operate under certain
restrictions. As of June 30, 1998, Richmond County Savings maintained in
excess of 65% its portfolio assets in qualified thrift investments. Richmond
County Savings also met the QTL test in each of the prior 12 months and,
therefore, met the QTL test. Recent legislative amendments have broadened the
scope of "qualified thrift investments" that go toward meeting the QTL test to
fully include credit card loans, student loans and small business loans. A
savings association may also satisfy the QTL test by qualifying as a "domestic
building and loan association" as defined in the Internal Revenue 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 merge or
consolidate with a subsidiary of a bank holding company;
(3) any bank holding company acquires ownership or control of more than 5%
of the voting stock of a banking institution;
(4) any bank holding company or subsidiary 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
104
<PAGE>
their affiliation with securities underwriting or brokerage firms and
other bank holding companies and limitations regarding loans obtained
from its subsidiaries.
INTERSTATE BANKING AND BRANCHING
Richmond County, as a savings and loan holding company, is limited under
HOLA with respect to its acquisition of a savings association located in a state
other than New York. In general, a savings and loan holding company may not
acquire an additional savings association subsidiary that is located in a state
other than the home state of its first savings association subsidiary unless
such an interstate acquisition is permitted by the statutes of such other state.
Many states permit such interstate acquisitions if the statutes of the home
state of the acquiring savings and loan holding company satisfy various
reciprocity conditions. New York is one of a number of states that permit out-
of-state bank and savings and loan holding companies to acquire New York savings
banks and savings associations.
In contrast, bank holding companies are generally authorized to acquire
banking subsidiaries in more than one state irrespective of any state law
restrictions on such acquisitions. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, which was enacted on September 29, 1994,
permits approval under the BHC Act of the acquisition of a bank located outside
of the holding company's home state regardless of whether the acquisition is
permitted under the law of the state of the acquired bank. The FRB may not
approve an acquisition under the BHC Act that would result in the acquiring
holding company controlling more than 10% of the deposits in the United States
or more than 30% of the deposits in any particular state.
In the past, branching across state lines was not generally available to a
state bank such as Richmond County Savings. Out-of-state branches of savings
banks are authorized under the NYBL, but similar authority does not exist
generally under the laws of most other states. The Interstate Banking Act
permitted, beginning June 1, 1997, the responsible federal banking agencies to
approve merger transactions between banks located in different states,
regardless of whether the merger would be prohibited under the law of the two
states. The Interstate Banking Act also permitted a state to "opt in" to the
provisions of the Interstate Banking Act prior to June 1, 1997, and permitted a
state to "opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation, beginning June 1, 1997, before that date. Accordingly,
the Interstate Banking Act permits a bank, such as Richmond County Savings, to
acquire branches in a state other than New York unless the other state has opted
out of the Interstate Banking Act. The Interstate Banking Act also authorizes
de novo branching into another state if the host state enacts a law expressly
permitting out-of-state banks to establish such branches within its borders.
The Interstate Banking Act may facilitate the further consolidation of the
banking industry. The effect of the Interstate Banking Act on Richmond County
Savings, if any, is likely to occur as banking institutions, state legislators,
and bank regulators respond to the new federal regulatory structure. The states
will have to establish appropriate corporate law, tax and regulatory structures
to adjust to the growth of new interstate banks.
105
<PAGE>
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, issuable in one or more series with such terms and at
such times and for such consideration as the Richmond County board determines.
As of July 19, 1998, 26,423,550 shares of Richmond County common stock and no
shares of Richmond County preferred stock had been issued.
As of September 30, 1998, 3,699,297 shares of Richmond County common stock
had been reserved for issuance pursuant to the Richmond County Incentive Plan.
The following description contains a summary of all the material features
of the capital stock of Richmond County.
COMMON STOCK
The outstanding shares of Richmond County common stock are fully paid and
nonassessable. Except as discussed below, holders of 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 common stock are not
entitled to cumulative voting rights with respect to the election of directors.
The 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 common stock, 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. Richmond County's Certificate of Incorporation
authorizes the Richmond County board (1) to make all determinations necessary to
implement and apply the limit, including determining whether persons or entities
are acting in concert, and (2) to demand that any person who is reasonably
believed to beneficially own stock in excess of the limit to supply information
to Richmond County to enable the Richmond County board to implement and apply
the limit.
Subject to the preferences of Richmond County preferred stock, holders of
Richmond County common stock are entitled to dividends declared by the Richmond
County board. In the event of liquidation, common stockholders are entitled 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 are to 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 stockholders. In addition, Richmond
County's Bylaws provide that the power to fill vacancies is vested in the
Richmond County board. The overall effect of such provisions may be to prevent a
person or entity from seeking to acquire control of Richmond County
106
<PAGE>
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
Preferred stock may be issued with such designations, powers, preferences
and rights as the Richmond County board may from time to time determine. The
board can, without stockholder approval, issue 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 preferred stock.
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
Richmond County and Bayonne are both Delaware corporations subject to
the provisions of the DGCL. If the merger is completed, the holders of Bayonne
common stock, whose rights are currently protected by the DGCL and governed
under the Bayonne Certificate of Incorporation and the Bayonne Bylaws will, at
the completion of the merger, become stockholders of Richmond County and
continue to have rights protected by DGCL Law but governed under the Richmond
County Certificate of Incorporation and Richmond County Bylaws. There are no
material differences between the rights of the holders of Bayonne common stock
and the rights of holders of Richmond County common stock. Copies of such
governing instruments of Richmond County and Bayonne are available, without
charge, to any person, including any beneficial owner, to whom this document is
delivered, on written or oral request, by following the instructions listed
under "WHERE YOU CAN FIND MORE INFORMATION."
107
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
The following statements contain selected condensed financial information
for Richmond County and Bayonne and Ironbound, on an unaudited pro forma
condensed combined consolidated basis giving effect to the Bayonne merger and
Ironbound merger applying the purchase method of accounting. The purchase method
of accounting is described on page __. The pro forma condensed statements of
income reflecting the Bayonne merger and Ironbound merger assume the
acquisitions of Bayonne and Ironbound were completed 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 fiscal year
end with Richmond County's June 30 year end.
The unaudited pro forma condensed balance sheet presents the combined
financial position of Richmond County and Bayonne as of September 30, 1998. The
unaudited pro forma condensed balance sheet reflects (1) the acquisition of
Bayonne and the acquisition of Ironbound applying the purchase method of
accounting; and (2) certain adjustments that are directly attributable to the
Bayonne merger and the Ironbound merger, including allocation of the purchase
price for both mergers. The pro forma condensed balance sheet assumes that the
acquisitions of Bayonne and Ironbound were completed 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 statements does not reflect either the cost savings or the
revenue enhancements that may or may not be achieved.
108
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
AT SEPTEMBER 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks........................... $ 22,764 $ 3,042 $ (4,862)/(2)/ $ 25,025 $ 4,070
4,081/(3)/
Federal funds sold................................ 4,200 5 4,205 12,318
Securities held-to-maturity....................... -- 11,708 220/(3)/ 11,928 43,129
Securities available for sale, net................ 831,670 324,457 1,156,127 10,718
Loans receivable:
Real estate mortgage loans................... 765,799 278,719 (804)/(3)/ 1,043,714 38,467
Other loans.................................. 16,679 33,105 49,784 3,335
Less allowance for loan losses............... (7,920) (3,035) (10,955) (857)
---------- -------- -------- ---------- --------
Total loans receivable, net....................... 774,558 308,789 (804) 1,082,543 40,945
Federal Home Loan Bank of
New York stock.................................. 20,375 10,511 30,886 --
Banking premises and equipment, net............... 13,530 5,524 881/(3)/ 19,935 2,601
Accrued interest receivable....................... 11,514 3,901 15,415 785
Excess of cost over fair value of net
assets acquired and other intangibles........ -- -- 28,560/(4)/ 28,560 --
Other real estate owned........................... 340 501 841 149
Other assets...................................... 13,664 4,219 17,883 587
---------- -------- -------- ---------- --------
Total assets................................. $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302
========== ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits..................................... $ 953,506 $420,749 $ (906)/(3)/ $1,373,349 $102,828
Borrowings................................... 400,000 146,750 1,832/(3)/ 548,582 --
Accrued expenses and other liabilities....... 9,283 10,006 (380)/(3)/ 18,675 945
(234)/(3)/
---------- -------- -------- ---------- --------
Total liabilities............................ 1,362,789 577,505 312 1,940,606 103,773
Stockholders' equity:
Preferred stock.............................. -- -- -- --
Common stock................................. 264 91 (91)/(8)/ 360 5,213
96/(2)/ --
Additional paid-in-capital................... 254,288 60,995 (60,995)/(8)/ 379,928 4,301
125,640/(2)/
Retained earnings-substantially
restricted................................. 107,529 44,999 (44,999)/(8)/ 107,529 2,631
Unallocated common stock held
by the ESOP................................ (33,274) (4,081) 4,081/(8)/ (33,274) --
Unamortized Management Retention
Plan shares................................ -- (2,987) 2,987/(8)/ (2,820) --
(2,820)/(3)/ --
Treasury stock............................... -- -- -- (672)
Comprehensive income:
Unrealized gain (loss) on
securities available-for-sale,
net of taxes............................... 1,019 (3,865) 3,865/(8)/ 1,019 56
---------- -------- -------- ---------- --------
Total stockholders' equity........................ 329,826 95,152 27,764 452,742 11,529
Total liabilities and stockholders'
equity....................................... $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302
========== ======== ======== ========== ========
<CAPTION>
----------------------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
----------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks........................... $ (2,031)/(5)/ $ 27,064
Federal funds sold................................ 16,523
Securities held-to-maturity....................... 92/(6)/ 55,149
Securities available for sale, net................ 1,166,845
Loans receivable:
Real estate mortgage loans................... (250)/(6)/ 1,081,931
Other loans.................................. 53,119
Less allowance for loan losses............... (11,812)
-------- ----------
Total loans receivable, net....................... (250) 1,123,238
Federal Home Loan Bank of
New York stock.................................. 30,886
Banking premises and equipment, net............... 100/(6)/ 22,636
Accrued interest receivable....................... 16,200
Excess of cost over fair value of net
assets acquired and other intangibles........ 16,130/(7)/ 44,690
Other real estate owned........................... 990
Other assets...................................... 18,470
-------- ----------
Total assets................................. $ 14,041 $2,522,691
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits..................................... $ (69)/(6)/ $1,476,108
Borrowings................................... 548,582
Accrued expenses and other liabilities....... 4/(6)/ 19,624
--
-------- ----------
Total liabilities............................ (65) 2,044,314
Stockholders' equity:
Preferred stock.............................. --
Common stock................................. (5,213)/(8)/ 374
14/(5)/
Additional paid-in-capital................... (4,301)/(8)/ 405,549
25,621/(5)/
Retained earnings-substantially
restricted................................. (2,631)/(8)/ 107,529
Unallocated common stock held
by the ESOP................................ (33,274)
Unamortized Management Retention
Plan shares................................ (2,820)
--
Treasury stock............................... 672/(8)/ --
Comprehensive income:
Unrealized gain (loss) on
securities available-for-sale,
net of taxes............................... (56)/(8)/ 1,019
-------- ----------
Total stockholders' equity................... 14,106 478,377
Total liabilities and stockholders'
equity....................................... $ 14,041 $2,522,691
======== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
109
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income............................. $ 27,662 $ 11,137 (2)/(9)/ $ 38,797 $ 1,950
Interest expense............................ 12,599 6,735 (58)/(9)/ 19,391 697
----------- ---------- ------- ----------- ----------
Net interest income......................... 15,063 4,402 (60) 19,406 1,253
Provision for loan losses................... 750 75 -- 825 --
----------- ---------- ------- ----------- ----------
Net interest income after
provision for loan losses................. 14,313 4,327 (60) 18,581 1,253
Non-interest income......................... 1,844 538 -- 2,382 172
Non-interest expense........................ 7,632 2,768 476/(4)//(11)/ 10,876 902
----------- ---------- ------- ----------- ----------
Income before income taxes.................. 8,525 2,097 (536) 10,087 523
Provision for income taxes.................. 3,171 776 (18) 3,929/(12)/ 186
----------- ---------- ------- ----------- ----------
Net income.................................. $ 5,354 $ 1,321 $ (518) $ 6,158 $ 337
=========== ========== ======= =========== ==========
Weighted average shares outstanding:
Basic.................................. 24,362,800 9,041,000 33,938,302 997,158
Diluted................................ 24,362,800 9,174,637 34,078,621 1,031,527
Earnings per share:
Basic.................................. $ 0.22 $ 0.15 $ 0.18 $ 0.34
Diluted................................ $ 0.22 $ 0.15 $ 0.18 $ 0.34
<CAPTION>
---------------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
---------------------------------------
<S> <C> <C>
Interest income............................. $(28)/(10)/ $ 40,719
Interest expense............................ (2)(10) 20,086
-------- -----------
Net interest income......................... (26) 20,633
Provision for loan losses................... -- 825
-------- -----------
Net interest income after
provision for loan losses................. (26) 19,808
Non-interest income......................... -- 2,554
Non-interest expense........................ 269/(7)//(11)/ 12,047
-------- -----------
Income before income taxes.................. (295) 10,315
Provision for income taxes.................. (178) 3,937/(12)/
-------- -----------
Net income.................................. $ (117) $ 6,378
======== ===========
Weighted average shares outstanding:
Basic.................................. 35,384,181
Diluted................................ 35,558,869
Earnings per share:
Basic.................................. $ 0.18
Diluted................................ $ 0.18
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
110
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
IRONBOUND BANKCORP, NJ
BAYONNE BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
RICHMOND
COUNTY/
RICHMOND PRO FORMA BAYONNE
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income............................ $ 86,754 $ 40,860 $ (9)/(9)/ $ 127,605 $ 7,695
Interest expense........................... 37,512 24,872 229/(9)/ 62,613 2,610
----------- ---------- ------- ----------- ----------
Net interest income........................ 49,242 15,988 (238) 64,992 5,085
Provision for loan losses.................. 2,200 180 -- 2,380 --
----------- ---------- ------- ----------- ----------
Net interest income after
provision for loan losses................. 47,042 15,808 (238) 62,612 5,085
Non-interest income........................ 3,601 1,343 -- 4,944 723
Contribution to the Foundation............. 19,558 -- -- 19,558 --
Non-interest expense....................... 24,488 10,170 1,904 36,562 3,843
----------- ---------- ------- ----------- ----------
Income before income taxes................. 6,597 6,981 (2,142) 11,436 1,965
Provision (benefit) for income taxes....... 2,071 2,602 (484) 4,189/(12)/ 705
----------- ---------- ------- ----------- ----------
Net income................................. $ 4,526 $ 4,379 $(1,658) $ 7,247 $ 1,260
=========== ========== ======= =========== ==========
Weighted average shares outstanding:
Basic..................................... 24,328,143 8,865,966 33,903,645 1,035,461
Diluted................................... 24,328,143 8,963,512 34,006,069 1,058,163
Earnings (loss) per share:
Basic..................................... $(0.16) $0.49 $0.21 $ 1.22
Diluted................................... $(0.16) $0.49 $0.21 $ 1.19
<CAPTION>
-----------------------------------
ALL COMBINED
PRO FORMA TRANSACTIONS
ADJUSTMENTS PRO FORMA
-----------------------------------
<S>........................................ <C> <C>
Interest income............................ $ (110)/(10)/ $ 135,190
Interest expense........................... (9)/(10)/ 65,214
--------- -----------
Net interest income........................ (101) 69,976
Provision for loan losses.................. -- 2,380
--------- -----------
Net interest income after
provision for loan losses................. (101) 67,596
Non-interest income........................ -- 5,667
Contribution to the Foundation............. -- 19,558
Non-interest expense....................... 1,075 41,480
--------- -----------
Income before income taxes................. (1,176) 12,225
Provision (benefit) for income taxes....... (457) 4,177/(12)/
--------- -----------
Net income................................. $ (719) $ 8,048
========= ===========
Weighted average shares outstanding:
Basic..................................... 35,349,524
Diluted................................... 35,474,650
Earnings (loss) per share:
Basic..................................... $ 0.23
Diluted................................... $ 0.23
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
111
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
BAYONNE BANCSHARES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements as of September 30, 1998 has been prepared as if the Bayonne merger
had been consummated on that date. The Unaudited Pro Forma Condensed Combined
Consolidated Statement of Income for the fiscal year ended June 30, 1998 and the
three months ended September 30, 1998 were prepared as if the Bayonne merger and
the Ironbound merger had been consummated on July 1, 1997. The Unaudited Pro
Forma Combined Condensed Financial Statements are based on the historical
financial statements of Richmond County, Bayonne and Ironbound after giving
effect to the Bayonne merger and the Ironbound merger under the purchase method
of accounting and the assumptions and adjustments in the notes that follow.
Assumptions relating to the pro forma adjustments set forth in the
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements are
summarized as follows:
Estimated fair values - Estimated fair values for securities held-to-
maturity, loans, deposits and borrowings were obtained from Bayonne's 1998
Annual Report to Stockholders -- Footnote number 15 of "Notes to
Consolidated Financial Statements" -- Fair Value of Financial Instruments
and Ironbound's 1997 Annual Report to Stockholders -- 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 amendments to the 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>
112
<PAGE>
(3) Purchase accounting adjustments recorded for the Bayonne transaction were
as follows:
<TABLE>
<S> <C>
Bayonne net assets-historical at September 30, 1998............................................... $ 95,152
Adjustments to Bayonne's statement of condition:
Termination of the Bayonne ESOP (Payoff of intercompany
loan payable)............................................................................... 4,081
Termination of the Bayonne ESOP (Payoff of loan payable with third
party)...................................................................................... 380
Merging of the Bayonne 1995 RRP shares into the Richmond County
Management Retention Plan Trust............................................................. 2,820
Fair value adjustments:
Securities held-to-maturity................................................................... 220
Loans receivable.............................................................................. (804)
Premises and equipment, net................................................................... 881
Deposits...................................................................................... 906
Borrowings.................................................................................... (1,832)
---------
Subtotal - net fair value adjustments........................................................... (629)
Tax effects of fair value adjustments........................................................... 234
---------
Total net adjustments to net assets acquired.................................................... 6,886
---------
Net assets acquired............................................................................. $ 102,038
=========
</TABLE>
(4) Excess of cost over fair value of net assets acquired for the
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 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>
113
<PAGE>
(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>
(7) Excess of cost over fair value of net assets acquired for the Ironbound
merger was calculated as follows:
<TABLE>
<S> <C>
Total cost........................................................................................ $ 27,666
Net assets acquired............................................................................... (11,536)
--------
Total excess of cost over fair value of net assets acquired
generated from the Ironbound merger............................................................ $ 16,130
========
</TABLE>
(8) Purchase accounting adjustments to eliminate Bayonne's and Ironbound's
stockholders' equity accounts.
114
<PAGE>
(9) Pro forma adjustments to interest income and interest expense were
calculated for the merger as follows:
<TABLE>
<CAPTION>
For The For The
Fiscal Year Fiscal Year
Ended 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 Fiscal Year
Ended 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>
115
<PAGE>
(11) The amortization of the excess of cost over the fair value of net assets
acquired for the merger and Ironbound merger is assumed straight-line over
a period of 15 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
Richmond County Savings conversion on February 18, 1998 by the weighted
average number of common shares outstanding. Diluted earnings per common
share is circulated using the same method as basic earnings per common
share, but reflects potential dilution of common stock equivalents. Basic
and diluted weighted average number of common stock and common stock
equivalents utilized for the calculation of earnings per share for the
periods presented were calculated using Richmond County's historical
weighted average common stock and common stock equivalents plus 9,575,502
and 1,445,879, and common stock equivalents, when dilutive, issued to
Bayonne and Ironbound stockholders, respectively, under the terms of the
Bayonne merger and the Ironbound merger.
(14) The following table summarizes the estimated impact of the amortization and
accretion of the purchase accounting adjustments made in connection with
the Bayonne merger and Ironbound merger on Richmond County's results of
operations for the five years:
<TABLE>
<CAPTION>
PROJECTED FUTURE
AMOUNTS FOR
THE EXCESS OF COST
FISCAL YEARS OVER FAIR VALUE NET NET DECREASE
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>
116
<PAGE>
ADDITIONAL MATTERS TO BE CONSIDERED AT THE BAYONNE MEETING
PROPOSAL NO. 2 FOR BAYONNE STOCKHOLDERS: ELECTION OF BAYONNE DIRECTORS
The Bayonne board currently consists of six directors and is divided into
three classes. Each of the six members of the Bayonne board also presently
serves as a director of First Savings. Mr. Sam P. Lamparello, who served as a
director of both Bayonne and First Savings, passed away in February 1998. The
Bayonne board subsequently reduced the size of the Bayonne board from seven to
six members. Directors are elected for staggered terms of three years each, with
the term of office of only one of the three classes of directors expiring each
year. Directors serve until their successors are elected and qualified.
The two nominees proposed for election at the meeting are Patrick F.X.
Nilan and Joseph L. Wisniewski. No person being nominated as a director is
being proposed for election pursuant to any agreement or understanding between
any such person and Bayonne.
In the event that any such nominee is unable to serve, or declines to serve
for any reason, it is intended that the proxies will be voted for the election
of such other person as may be designated by the present Bayonne board. The
Bayonne board has no reason to believe that any of the persons named will be
unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEES IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD,
IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
PROPOSED BY THE BAYONNE BOARD.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
DIRECTOR NOMINEES NAMED IN THIS DOCUMENT.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS OF BAYONNE
The following table lists, as of the Bayonne record date, the names of the
nominees and continuing directors of Bayonne; their ages; a brief description of
their recent business experience, including present occupations and employment;
certain directorships held by each; the year in which each became a director and
the year in which their terms (or in the case of the nominees, their proposed
terms), as director of Bayonne expire. The table also lists the amount of
Bayonne common stock and the percent thereof beneficially owned by each director
and all directors and executive officers as a group as of the Bayonne record
date.
117
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE/(1)/ DIRECTOR
- ----------------------- --- ---------- -------------
<S> <C> <C> <C>
NOMINEES
Patrick F.X. Nilan 68 1963 2001
Chairman of the Board of Bayonne and First
Savings. Mr. Nilan served as President and
Chief Executive Officer of First Savings until
his retirement in June 1997.
Joseph L. Wisniewski 67 1967 2001
Retired Senior Vice President of First Savings.
Mr. Wisniewski was employed by First Savings
in various capacities from 1956 until his
retirement in August 1996.
CONTINUING DIRECTORS
James F. Sisk 59 1983 2000
Mr. Sisk was the Public Safety Director of the
City of Bayonne until June 1998. He served as
the Chief of Police of the City of Bayonne until
1996.
Patrick D. Conaghan 61 1986 1999
Partner in the law firm of Conaghan & Conaghan.
Frederick G. Whelpley 77 1973 1999
Retired Chief Executive Officer of Bayonne
Hospital.
Michael A. Nilan 34 1997 1999
President and Chief Executive Officer of
Bayonne since February 1997 and First Savings
since July 1997. Mr. Nilan was employed by
First Savings in various capacities prior to
assuming the positions of President and Chief
Executive Officer of Bayonne and First Savings.
</TABLE>
118
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE/(1)/ DIRECTOR
- ----------------------- --- ---------- -------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
Eugene V. Malinowski, C.P.A. 58 -- --
Vice President and Chief Financial Officer of
Bayonne and First Savings. Prior to joining First
Savings, Mr. Malinowski was Vice President,
Chief Operating Officer and Chief Financial
Officer of a long distance telephone reseller,
and prior to that was Executive Vice President
and Chief Financial Officer of a commercial bank.
</TABLE>
_______________________
(1) Includes years of service as a Director of First Savings.
119
<PAGE>
COMPENSATION COMMITTEE AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Michael A. Nilan, President and Chief Executive Officer of Bayonne and First
Savings, participated in deliberations of the Compensation Committee of the
Bayonne board concerning executive officer compensation during the past fiscal
year. Additionally, Patrick F.X. Nilan, who retired as President and Chief
Executive Officer of First Savings during fiscal 1998, also participated in
deliberations concerning executive officer compensation. Neither Michael A.
Nilan nor Patrick F.X. Nilan participated in deliberations concerning their own
individual compensation for fiscal 1998.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. In connection with Bayonne's second-step conversion, and as
a result of the transition to operating as a publicly owned company, the Bayonne
board determined to restructure the compensation of directors to emphasize
stock-based incentives and reduce the reliance on cash-based compensation.
Accordingly, in 1997, the Bayonne board reduced the quarterly retainer for non-
employee directors by 50% and the fees paid to non-employee directors for each
meeting attended by 33 1/3%. Non-employee directors presently receive $1,000 for
each board of directors meeting attended, plus a $3,000 retainer each quarter.
The Chairman of the Board receives $1,330 for each board of directors meeting
attended, plus a quarterly retainer of $3,750. Non-employee directors serving on
the Asset/Liability Committee and the Audit Committee are paid $250 for each
meeting attended, and non-employee directors serving on the Security and
Investment Committee are paid $500 monthly.
In 1987, First Savings, prior to its reorganization into the mutual holding
company form of organization, entered into annuity compensation agreements with
each of First Savings' current directors. First Savings paid all of its
obligations under the agreements in 1987, and therefore, the agreements do not
represent a current expense for First Savings. Pursuant to the agreements, First
Savings currently pays each outside director an annual benefit of $16,000. The
payments will continue to be made over the lifetime of each outside director
with no fewer than 120 monthly payments, which commenced in 1992, to be made to
each director or his beneficiary, and are in addition to other fees received by
directors. These agreements are fully funded by Presidential Life Insurance
Company and First Savings is a mere conduit for payments to each outside
director.
CONSULTING AGREEMENT. Bayonne and Patrick F.X. Nilan entered into a three
year consulting agreement subsequent to Mr. Nilan's retirement as President and
Chief Executive Officer of First Savings. Under the agreement, Mr. Nilan will
provide advice with respect to all areas in which Bayonne or First Savings does
business and in which Mr. Nilan has special knowledge, skill and expertise,
utilize his business and industry contacts to assist with the implementation of
First Savings' business plan, represent Bayonne and First Savings at civic and
community functions, and advise Bayonne and First Savings on strategic planning
matters, government affairs, industry trends and economic factors affecting
First Savings' business and future prospects. Mr. Nilan is paid a fee of
$100,000 annually for his services.
INCENTIVE PLAN. Bayonne's stockholders approved the Bayonne Incentive Plan
under which all directors of Bayonne and First Savings are eligible to receive
stock-based compensation awards. Under the Bayonne Incentive Plan, each outside
director of Bayonne and First Savings was granted non-statutory stock options to
purchase 24,346 shares of Bayonne common stock with "limited rights", and
awards of 9,738 shares of Bayonne common stock on April 27, 1998, which vest in
five equal installments commencing April 27, 1999. The limited rights provide,
in the event of a change in control, a lump sum cash payment equal to the
difference between the exercise price of the related option and the fair market
value of the shares of Bayonne common stock subject to the option on the date of
exercise, less any applicable tax withholding. The non-statutory stock option
awards vest in five equal annual installments commencing on April 27, 1999, and
have an exercise price of $16.31. All options granted under the Bayonne
Incentive Plan expire ten years from the date of grant. In the event an outside
director ceases service due to death or disability, all directors' awards will
immediately vest or become exercisable and all stock options will remain
exercisable for a period of three years.
120
<PAGE>
EXECUTIVE COMPENSATION
Unless specifically stated, the report of the Compensation Committee of
Bayonne and the stock performance graph have not, are not, and will not, be
filed under the Securities Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the SEC, Bayonne is required to provide certain data and
information in regard to the compensation and benefits provided to Bayonne's
Chief Executive Officer and other executive officers of Bayonne for the fiscal
year ended March 31, 1998. The disclosure requirements for the Chief Executive
Officer and other executive officers include a report explaining the rationale
and considerations that led to fundamental compensation decisions affecting
those individuals.
The following policies and procedures were utilized to determine executive
compensation levels for fiscal 1998. As a result of the second-step conversion
and other operational changes, subjective qualitative measures were more heavily
relied upon by the compensation committee than quantitative measures.
COMPENSATION POLICIES AND PROCEDURES. The Compensation Committee consists of
the entire Bayonne board. It is responsible for administering the compensation
and benefit programs for the executive officers and employees of Bayonne and
First Savings and to make recommendations regarding the amount and composition
of compensation paid to the executive officers. Members of the committee who
are employees of Bayonne or First Savings, however, do not participate in the
committee's determination of their own compensation package.
The committee's goal is to establish executive compensation policies that:
. Link the interests of management and stockholders;
. Link executive compensation with the long-term performance of Bayonne
and its subsidiaries;
. Attract, retain and reward highly qualified and productive persons;
. Link compensation to individual performance; and
. Establish compensation levels that are internally equitable and
externally competitive with comparable financial institutions.
The compensation program developed by the committee to achieve these goals
consists primarily of:
. a base salary;
. an annual bonus; and
. stock-based compensation. In addition, executive officers participate
in other benefit plans available to all employees, including a
retirement plan, the Bayonne ESOP, and the Bayonne 401(k) Plan.
121
<PAGE>
As a result of Bayonne's second-step conversion into the stock holding
company structure, the committee revised the executive compensation policies to
reflect the status of Bayonne as a public company. The committee believes that
the compensation policies it has established contributed to the success of
Bayonne in making the transition to a publicly owned company, as well as to the
increase in net income and earnings per share, recorded by Bayonne for the year
ended March 31, 1998.
BASE SALARY. The committee annually reviews and evaluates base salary for
all executive officers, and in conducting such reviews places primary
consideration upon First Savings' overall objectives and performance, peer group
comparisons and individual performance. In addition, salary levels reflect an
individual officer's responsibilities and experience and the committee's
evaluation of competitive marketplace conditions.
Salary levels recommended by the committee are intended to be consistent
and competitive with the practices of comparable financial institutions and each
executive's level of responsibility. The committee generally utilizes internal
and/or external surveys of compensation paid to executive officers performing
similar duties for depository institutions and their holding companies with
particular focus on the level of compensation paid by comparable institutions in
the metropolitan New York region. For the fiscal year ended March 31, 1998, the
committee utilized an internal survey prepared by an independent compensation
consultant.
Although the committee's recommendations are discretionary and no specific
formula is used for decision making, salary determinations reflect the overall
performance of Bayonne and First Savings and the performance of the individual
executive officer. In addition, for the fiscal year ended March 31, 1998, the
committee gave consideration to the adjustments required to be made by each
executive officer in response to the transition of Bayonne to a publicly owned
entity in determining the appropriate salary levels.
ANNUAL INCENTIVES. In determining annual bonus awards, the committee
considers the entire compensation package of each executive officer. Although
all determinations by the committee regarding bonuses paid to executive officers
are discretionary and no specific formula is used for awarding bonuses, the
primary factors considered include the profitability of Bayonne and First
Savings, the level of responsibility of each executive officer and their
contribution to the financial performance of Bayonne and First Savings. No
particular weighting of the factors considered by the compensation committee is
used to calculate bonuses.
STOCK-BASED COMPENSATION. Bayonne maintains stock benefit plans, discussed
in more detail below, for the purpose of providing long-term incentives to its
employees, including executive officers, through the award of stock options and
restricted stock awards. The committee believes that stock options and
restricted stock awards align the interests of management with stockholders
because the executive officers receive value if the market value of the Bayonne
common stock increases. Under Bayonne's stock option plans, the exercise price
of options granted to executive officers is equal to or greater than the market
value of the Bayonne common stock on the date of grant. Therefore, the options
have value only to the extent the share price of the Bayonne common stock
increases. Furthermore, although the committee has discretion to determine the
terms of options and stock awards granted to executive officers and other
employees of Bayonne and First Savings, options and stock awards granted under
Bayonne's plans typically vest in equal annual installments over a period of
five years, which provides incentive to management to maximize both short-term
and long-term stockholder value. The committee considered past awards of stock
options and restricted stock awards, as well as possible future awards, in
determining the overall compensation package of each executive officer.
BAYONNE 1995 STOCK OPTION PLAN. During the fiscal year ended March 31,
1996, First Savings adopted the Bayonne 1995 Stock Option Plan, which was
subsequently adopted by Bayonne. Subsequent to the adoption of the Bayonne 1995
Stock Option Plan, all of the executive officers of First Savings received
122
<PAGE>
grants of options to purchase shares of First Savings common stock, which
options commenced vesting in equal annual installments of 20% on August 9, 1996.
Upon consummation of the second-step conversion, Bayonne adopted the Bayonne
1995 Stock Option Plan and each option to purchase First Savings common stock
under such plan was exchanged for 2.933 options to purchase Bayonne common
stock. The compensation committee did not make any additional awards under the
Bayonne 1995 Stock Option Plan during fiscal 1998.
BAYONNE 1995 RRP. First Savings adopted the Bayonne 1995 RRP and made
awards of restricted stock to all of the executive officers of First Savings in
July 1995. The awards commenced vesting in equal annual installments of 20% on
July 28, 1996. Upon completion of the second-step conversion, Bayonne adopted
the Bayonne 1995 RRP, and all previously awarded, but unvested shares of First
Savings common stock and any shares that had not yet been awarded were converted
into 2.933 shares of Bayonne common stock. The committee did not make any
additional awards under the Bayonne 1995 RRP during fiscal 1998.
BAYONNE INCENTIVE PLAN. Due in part to Bayonne's transition to a publicly
owned company and the desire of the Bayonne board to link executive compensation
to the performance of the Bayonne common stock, the Bayonne board adopted the
Bayonne Incentive Plan, which the stockholders approved on March 27, 1998.
Pursuant to the Bayonne Incentive Plan, executive officers and other employees
of Bayonne and First Savings are eligible to receive grants of stock options to
purchase shares of Bayonne common stock with limited rights and stock awards.
Subject to certain adjustments to prevent dilution of stock options and stock
awards granted to participants, the maximum number of shares reserved for
purchase pursuant to the exercise of options and option-related awards that may
be granted under the Bayonne Incentive Plan is 486,919 shares. The maximum
number of the shares reserved for stock awards is 194,768 shares.
A committee of non-employee directors of Bayonne makes awards under the
Bayonne Incentive Plan and determines the terms of all awards. Options granted
may be intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code. Incentive stock options afford tax benefits to the
recipient upon compliance with certain conditions set forth in the Internal
Revenue Code and do not result in tax deductions for Bayonne. The limited rights
provide, in the event of a change in control, a lump sum cash payment equal to
the difference between the exercise price of the related option and the fair
market value of the shares of Bayonne common stock subject to the option on the
date of exercise, less any applicable tax withholding. In no event may options
be exercised more than ten years from the date of grant. The committee of
outside directors that administers the Bayonne Incentive Plan may condition the
vesting of options and stock awards granted under the plan on the attainment of
predetermined performance goals.
No awards were made under the Bayonne Incentive Plan during fiscal 1998.
Prior to granting awards under the Bayonne Incentive Plan, Bayonne retained an
independent compensation consultant to review the current compensation of
executive officers and to make recommendations as to awards to such officers
under the Incentive Plan. Following review and consideration of the
compensation consultant's report, the committee determined on April 27, 1998, to
grant both stock options and stock awards pursuant to the Bayonne Incentive Plan
to certain executive officers of Bayonne and First Savings. All of the stock
options and stock awards initially granted will vest in equal annual
installments of 20% commencing on April 27, 1999.
CHIEF EXECUTIVE OFFICER. Michael A. Nilan entered into an employment
agreement with First Savings during fiscal 1998 that provides for a base salary
of $150,000. In addition, Mr. Nilan was paid a bonus of $2,000 for fiscal 1998
and participated in the benefit plans available to all officers and employees of
Bayonne and First Savings. No specific formula was used in connection with the
Compensation Committee's decisions regarding Mr. Nilan's base salary, bonus and
other compensation, nor did the committee set specified compensation levels
based on the achievement of particular
123
<PAGE>
quantifiable objectives or financial goals of Bayonne and First Savings.
Rather, the committee considered the overall financial performance of Bayonne
and First Savings, the responsibilities and experience of Mr. Nilan and the
individual contributions made by Mr. Nilan. Specifically, the factors considered
by the committee in determining Mr. Nilan's overall compensation package
included:
. The profits recorded by Bayonne and First Savings for fiscal year
1998;
. The increase in the market value of Bayonne's common stock;
. The successful implementation of Bayonne's strategic business plan
and the continued operation of First Savings in a safe and sound
manner;
. Actions taken by Mr. Nilan to facilitate the transition of Bayonne to
a publicly owned entity; and
. Mr. Nilan's active participation on behalf of Bayonne and First
Savings in civic and community events.
THE COMPENSATION COMMITTEE
Patrick F.X. Nilan
Joseph L. Wisniewski
James F. Sisk
Patrick D. Conaghan
Frederick G. Whelpley
Michael A. Nilan
124
<PAGE>
SUMMARY COMPENSATION TABLE. The following table shows, for the year ended
March 31, 1998, the cash compensation paid, as well as certain other
compensation paid or accrued for that year to the Chief Executive Officers of
Bayonne and by the next four most highly compensated officers of Bayonne and
First Savings in fiscal year 1998. No other executive officer of Bayonne or
First Savings earned and/or received salary and bonus in excess of $100,000 in
fiscal year 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL -----------------------------------
COMPENSATION/(1)/ AWARDS PAYOUTS
--------------------------------------- -------------------------- ---------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR ($)/(1)/ ($) ($) ($)/(2)/ (#)/(3)/ ($) ($)
- --------------------------- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael A. Nilan/(5)/...... 1998 $ 150,000 $ 2,000 -- -- -- -- $82,229/(4)/
President and Chief 1997 99,000 5,000 -- -- -- -- 36,354
Executive Officer
Patrick F.X. Nilan......... 1998 $ 217,625 $ --- -- -- -- -- $98,229/(4)/
Chairman of Bayonne and 1997 470,000 37,500 -- -- -- -- 82,008
First Savings; former 1996 432,597 75,000 -- 176,540 33,950 -- 38,203
President and
Chief Executive Officer of
First Savings
Eugene V. Malinowski....... 1998 $ 116,000 $10,000 -- -- -- -- $ --
Vice President and Chief
Financial Officer
</TABLE>
- -----------------
(1) Includes compensation deferred at the election of the officer pursuant to
the Bayonne 401(k) Plan. Salary for Patrick F.X. Nilan includes $106,250
received for services as President and Chief Executive Officer of First
Savings through June 30, 1997, $36,375 in directors fees, and $75,000 in
fees for services as a consultant to Bayonne and First Savings.
(2) Messrs. Michael A. and Patrick F.X. Nilan were awarded 2,852 and 13,580
shares of First Savings common stock , respectively, pursuant to the Bayonne
1995 RRP. The awards were granted on July 28, 1995, and had a fair market
value of $13.00, based upon the closing price per share of First Savings
common stock on the date of grant. Awards granted under the Bayonne 1995
RRP vest in equal installments at a rate of 20% per year commencing on July
28, 1996, unless otherwise determined by the Bayonne board. Awards will be
100% vested upon termination of employment due to death, disability or
following a change in control. Upon consummation of the second-step
conversion, Bayonne adopted the Bayonne 1995 RRP as a plan of Bayonne and
issued Bayonne common stock in lieu of First Savings common stock to the
Bayonne 1995 RRP in accordance with its terms. As of the effective date of
the second-step conversion, rights outstanding under the Plan were assumed
by Bayonne and constitute rights only for shares of Bayonne common stock,
with each such right being for a number of shares of Bayonne common stock
equal to the number of shares of First Savings common stock that were
available thereunder immediately prior to such effective date multiplied by
the exchange ratio of 2.933. The price of each right has been adjusted to
reflect the Plan exchange ratio so that the aggregate purchase price of the
right is unaffected, but there is no change in the other terms and
conditions of the rights. Accordingly, at March 31, 1998, the number of
shares awarded to Messrs. Michael A. and Patrick F.X. Nilan pursuant to the
Bayonne 1995 RRP, as adjusted for the second-step conversion, was 8,365 and
39,830, respectively, with a market value of $124,429 and $592,471,
respectively, based upon the closing price of the Bayonne common stock on
that date of $14.875 per share.
(3) Messrs. Michael A. and Patrick F.X. Nilan were awarded options to purchase
3,449 and 33,950 shares of First Savings common stock, respectively, on
August 9, 1995 pursuant to the Bayonne 1995 Stock Option Plan. Under the
Bayonne 1995 Stock Option Plan, options commenced vesting in five equal
annual installments on August 9, 1996, with an exercise price of $13.00.
Upon completion of the second-step conversion, Bayonne adopted the Bayonne
1995 Stock Option Plan and agreed to issue shares of its common stock in
lieu of First Savings common stock in accordance with the terms of such
plan. Accordingly, the number of options awarded to Messrs. Michael A. and
Patrick F.X. Nilan under the Bayonne 1995 Stock Option Plan, as adjusted for
the second-step conversion, was 10,115 and 99,575, respectively. The
adjusted exercise price of the options is $4.43. All of the options awarded
to Patrick F.X. Nilan immediately vested upon his retirement on June 30,
1997.
(4) Includes $16,000 received by Patrick F.X. Nilan pursuant to First Savings
annuity compensation agreements. Includes the value of 10,029 and 13,429
shares allocated to Michael A. Nilan and Patrick F.X. Nilan, respectively,
under the Bayonne ESOP as of March 31, 1998. Does not include amounts
contributed by First Savings pursuant to First Savings' noncontributory
defined benefit plan, First Savings' nonqualified supplemental executive
retirement income-deferred compensation agreements, automobile insurance on
personal vehicles used instead of automobiles supplied by First Savings, nor
reimbursement of mileage while on company business.
(5) Michael A. Nilan was appointed President and Chief Executive Officer of
Bayonne on February 6, 1997.
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<PAGE>
EMPLOYMENT AGREEMENTS. Subsequent to the second-step conversion, Bayonne
and First Savings entered into employment agreements with Mr. Michael A. Nilan.
The employment agreements are intended to ensure that Bayonne and First Savings
will be able to maintain a stable and competent management base after the
second-step conversion.
Mr. Nilan's employment agreement provides that, commencing on the first
anniversary date and continuing each anniversary date thereafter, the board of
directors of First Savings will review the agreement and Mr. Nilan's
performance for purposes of determining whether to extend the agreement for an
additional year. The agreement automatically extends daily, such that the new
term is the same as the original term unless written notice of non-renewal is
given by the Bayonne board after conducting a performance evaluation of Mr.
Nilan. The base salary for Mr. Nilan under the employment agreement is
$150,000. In addition to the base salary, the employment agreements provide
for, among other things, participation in stock benefit plans and other fringe
benefits applicable to executive personnel. The employment agreements provides
for termination by Bayonne or First Savings for cause, as defined in the
agreements, at any time. In the event Bayonne or First Savings chooses to
terminate Mr. Nilan's employment for reasons other than for cause, or in the
event of Mr. Nilan's resignation from Bayonne or First Savings upon:
(1) failure to re-elect him to his current offices;
(2) a material change in his functions, duties or responsibilities;
(3) a relocation of his principal place of employment by more than 25
miles;
(4) liquidation or dissolution of Bayonne or First Savings; or
(5) a breach of the agreement by Bayonne or First Savings, Mr. Nilan or, in
the event of death, his beneficiary, is entitled to receive the
remaining base salary payments due to him and the contributions that
would have been made on his behalf to any employee benefit plans of
Bayonne or First Savings during the remaining term of the agreements.
Bayonne or First Savings will also continue and pay for Mr. Nilan's
life, health and disability coverage for the remaining term of the
employment agreements.
The employment agreements provide for severance payments in the event of a
change in control. If voluntary or involuntary termination follows a "change in
control" of Bayonne or First Savings, as defined in the employment agreements,
Mr. Nilan or, in the event of death, his beneficiary, will be entitled to a
payment equal to the greater of (1) the payments due for the remaining term of
the agreement; or (2) a severance payment equal to three times the average of
the five preceding taxable years' compensation. Bayonne and First Savings would
also continue Mr. Nilan's life, health, and disability coverage for 36 months.
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Payments to Mr. Nilan under his employment agreement will be guaranteed by
Bayonne in the event that payments or benefits are not paid by First Savings.
Payments under the Bayonne employment agreement will be made by Bayonne. All
reasonable costs and legal fees paid or incurred by Mr. Nilan pursuant to any
dispute or question of interpretation relating to the employment agreements will
be paid by Bayonne or First Savings if Mr. Nilan is successful on the merits
pursuant to a legal judgment, arbitration or settlement. The employment
agreements also provide that Bayonne and First Savings will indemnify Mr.
Nilan to the fullest extent allowable under federal and Delaware law,
respectively. In the event of a change in control of Bayonne or First Savings,
the total amount of payments that would be due under the employment agreements,
based solely on cash compensation paid to Mr. Nilan over the past three fiscal
years and excluding any benefits under any employee benefit plan that may be
payable, would be approximately $237,000. The merger constitutes a change in
control under the terms of the employment agreements.
CHANGE IN CONTROL AGREEMENTS. Subsequent to the second-step conversion,
Bayonne and First Savings entered into change in control agreements with Mr.
Malinowski and three executive officers of First Savings and Bayonne entered
into change in control agreements with Mr. Malinowski and another executive
officer. The agreements have terms of three years. The agreements provide that
commencing on the first anniversary date and continuing on each anniversary
thereafter, First Savings' agreements may be renewed by the Bayonne board for an
additional year while the term of Bayonne's agreements are extended on a daily
basis unless written notice of non-renewal is given by the Bayonne board. The
agreements with Bayonne also provide that in the event voluntary or involuntary
termination follows a change in control of First Savings or Bayonne, the officer
is entitled to receive a severance payment equal to three times the officer's
average annual compensation for the five years preceding termination, depending
on the term of the officers' agreement. First Savings' agreements have a similar
change in control provision; however, the officer would only be entitled to
receive a severance payment under one agreement. Bayonne and First Savings will
also continue, and pay for, the officer's life, health and disability coverage
for 36 months following termination. Payments to the officer under First
Savings' agreements will be guaranteed by Bayonne in the event that payments or
benefits are not paid by First Savings. In the event of a change in control of
First Savings or Bayonne, the total payments that would be due under the
agreements, based solely on the cash compensation paid to the officers covered
by the agreements over the past three fiscal years and excluding any benefits
under any employee benefit plans that may be payable, would be approximately
$1.1 million. The merger constitutes a change in control under the terms of the
agreements.
RETIREMENT PLAN. First Savings maintains a retirement plan pursuant to
which all employees age 21 or older who have worked at First Savings for a
period of six months are eligible to accrue benefits. First Savings annually
contributes an amount to the retirement plan necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
ERISA. The retirement plan operates on a plan year beginning December 15 each
year. Immediately following the execution of the merger agreement, Bayonne took
all appropriate steps to "freeze" benefit accruals under the retirement plan.
At the normal retirement age of 65 (or the fifth anniversary of plan
participation, if later), the plan is designed to provide a life annuity
guaranteed for ten years. The retirement benefit provided is an amount equal to
2% of a participant's average monthly salary, multiplied by the total number of
years of service from the date of employment to normal retirement date. This
amount is reduced by approximately .63% of average monthly salary up to the
covered compensation wage base (as defined in the retirement plan) multiplied by
the total number of years of service (up to a maximum of 35 years).
Notwithstanding the
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above formula, the retirement plan will pay a minimum monthly benefit equal to
2% of monthly salary, times years of service up to ten years of service.
Retirement benefits are also payable upon retirement due to early and late
retirement, disability or death. A reduced benefit is payable upon early
retirement at or after age 55 and the completion of ten years of service with
First Savings. Upon termination of employment other than as specified above, a
participant is eligible to receive his vested accrued benefit as a retirement
annuity commencing on such participant's normal date. Benefits are payable in
various annuity forms with the normal form being an annuity for the
participant's life, with a minimum guarantee of payments for five years. For the
plan year ended December 14, 1998, First Savings made a contribution to the
retirement plan of $259,000.
The following table indicates the annual retirement benefit that would be
payable under the retirement plan upon retirement at age 65 in calendar year
1997, expressed in the form of a life annuity with a five year guaranteed
payment for the final average salary and benefit service classification
specified below. Benefits payable under the retirement plan are not subject to
a deduction for social security or other amounts.
<TABLE>
<CAPTION>
HIGH 5 YEAR FINAL YEARS OF BENEFIT SERVICE
AVERAGE ----------------------------------------------------------------------------------------------------
EARNINGS/(1)/ 5 10 15 20 25 30 35 40
- ------------------- --------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 2,000 $ 4,000 $ 4,125 $ 5,500 $ 6,875 $ 8,250 $ 9,625 $ 11,625
$ 40,000 4,000 8,000 9,188 12,250 15,313 18,375 21,438 25,438
$ 60,000 6,000 12,000 15,188 20,250 25,313 30,375 35,438 41,438
$ 80,000 8,000 16,000 21,188 28,250 35,313 42,375 49,438 57,438
$100,000 10,000 20,000 27,188 36,250 45,313 54,375 63,438 73,438
$150,000 15,000 30,000 42,188 56,250 70,313 84,375 98,438 113,438
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
</TABLE>
- -------------
(1) High five-year average monthly earnings means the average of a participant's
monthly earnings in the five consecutive years yielding the highest such
average while a participant in the retirement plan. For participants with
less than five years of service, it is the average of monthly earnings for
all complete calendar years of participation.
(2) Limited due to maximum earnings limits under Section 401(a)(17) of the
Internal Revenue Code.
As of December 14, 1997, officers Michael A. Nilan, Patrick F.X. Nilan and
Eugene V. Malinowski had 11, 37 and one year of credit service, respectively,
and accrued benefits under the retirement plan equal to annual retirement
benefits of $16,061, $149,436 and $0, respectively. Mr. Patrick F.X. Nilan
retired from First Savings on June 30, 1997 and received a lump sum benefit
payment of $1.6 million under the retirement plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME-DEFERRED COMPENSATION AGREEMENTS.
First Savings has previously maintained supplemental executive retirement
agreements for certain executives of First Savings and their beneficiaries whose
benefits from the tax-qualified defined benefit plan maintained by First Savings
were reduced by reason of (1) the annual limitation on benefits and
contributions imposed by Section 415 of the Internal Revenue Code and (2) the
limitation imposed by Section 401(a)(17) of the Internal Revenue Code with
respect to compensation that can be taken into consideration in the
determination
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<PAGE>
of benefits. The lump sum payments represented the present value of the
executives' accrued annual benefits under the supplemental executive retirement
agreements based on a current actuarial valuation. First Savings determined that
paying the participants in a lump sum would benefit First Savings over time by
saving the annual accruals that would otherwise be required to fund the
supplemental executive retirement agreements. First Savings has discontinued
this plan.
OPTION EXERCISES AND YEAR-END VALUE. This table contains information
about exercised and unexercisable options during the fiscal year ended March 31,
1998 for Bayonne's Chief Executive Officer and the next four highest paid
executive officers of Bayonne.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
ACQUIRED YEAR-END/(1)/ YEAR-END/(2)/
UPON VALUE ------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------- ------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Michael A. Nilan - - 4,046/6,069 $42,260/$63,390
Patrick F.X. Nilan 62,391 $518,762/(3)/ 37,184/0 $ 388,387/$0
</TABLE>
- ------------------------
(1) Represents the number of options for Bayonne common stock held as of
March 31, 1998.
(2) Equals the difference between the $4.43 exercise price of such options and
the aggregate fair market value of the shares of Bayonne common stock that
would be received upon exercise, assuming such exercise occurred on March
31, 1998, at which date the last sale of the Bayonne common stock, as quoted
on the Nasdaq National Market, was at $14.875 per share.
(3) The market price of the Bayonne common stock on September 30, 1997, the date
Mr. Patrick F.X. Nilan exercised 42,476 options, was $12.625, and the market
price of the Bayonne common stock on February 10, 1998, the date Mr. Patrick
F.X. Nilan exercised 19,915 options, was $13.00.
TRANSACTIONS WITH CERTAIN RELATED PERSONS. All loans made by First
Savings to its directors and executive officers are made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features. First
Savings is permitted to offer loans to executive officers and directors on terms
not available to the public, but available to other employees, in accordance
with recently modified federal regulations. Under First Savings' existing
policy, any loan to an executive officer or director, must be approved, in
advance, by a majority of the disinterested members of the Bayonne board.
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STOCK PERFORMANCE GRAPH
The following graph shows a comparison of total stockholder return on
Bayonne's common stock, based on the market price of the Bayonne common stock
with the cumulative total return of companies in The Nasdaq Market Index and the
Nasdaq Stock Bank for the period beginning on January 9, 1995, the day Bayonne's
common stock began trading, through December 31, 1998. The data was supplied by
Media General Financial Services.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
AMONG BAYONNE BANCSHARES, INC.,
NASDAQ MARKET INDEX AND MG GROUP INDEX
[ PERFORMANCE GRAPH APPEARS HERE ]
<TABLE>
<CAPTION>
BAYONNE NASDAQ NASDAQ
Measurement Period BANCSHARES, STOCK MARKET
(Fiscal Year Covered) INC. BANK INDEX
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-01/09/95 $100.00 $100.00 $100.00
FYE 12/29/1995 $159.98 $146.13 $129.71
FYE 12/31/1996 $220.48 $185.56 $161.18
FYE 12/31/1997 $132.21 $312.37 $197.16
FYE 12/31/1998 $167.58 $270.69 $278.08
Notes:
A. The lines represent yearly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous day.
C. If the yearly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level in all series was set to $100.00 in 1995.
</TABLE>
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PROPOSAL NO. 3 FOR BAYONNE STOCKHOLDERS: RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
Bayonne's independent auditors for the fiscal year ended March 31, 1998
were KPMG LLP. The Bayonne board has reappointed KPMG LLP to continue as
independent auditors for First Savings and Bayonne for the year ending March 31,
1999, subject to ratification of such appointment by the stockholders.
Representatives of KPMG LLP will be present at the meeting. They will be
given an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from stockholders present at the
meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE
INDEPENDENT AUDITORS OF BAYONNE.
THE BAYONNE BOARD RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF BAYONNE.
ADDITIONAL INFORMATION
IF YOU WANT TO HAVE A STOCKHOLDER PROPOSAL INCLUDED IN BAYONNE'S PROXY
STATEMENT RELATING TO THE 1999 ANNUAL STOCKHOLDERS' MEETING
To be considered for inclusion in Bayonne's proxy statement and form of
proxy relating to the 1999 Bayonne Meeting of Stockholders, which will be held
if the merger is not completed, a stockholder proposal must be received by the
Corporate Secretary of Bayonne at the address set forth on the first page of
this document not later than _____ __, 1999. Any such proposal will be subject
to 17 C.F.R. (S) 240.14a-8 of the Rules and Regulations under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT A BAYONNE MEETING
The Bylaws of Bayonne set forth the procedures by which a stockholder may
properly bring business before a meeting of stockholders. The Bylaws of Bayonne
provide an advance notice procedure for a stockholder to properly bring business
before an annual meeting. The stockholder must give written advance notice to
the Corporate Secretary of Bayonne not less than 90 days before the date
originally fixed for such meeting. However, if less than 100 days notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, to be timely, notice must be received not later than the close of
business on the tenth day following the date on which Bayonne's notice to
stockholders of the annual meeting date was mailed or such public disclosure was
made. The advance notice by stockholders must include the stockholder's name and
address, as they appear on Bayonne's record of stockholders, a brief description
of the proposed business, the reason for conducting such business at the annual
meeting, the class and number of shares of Bayonne's capital stock that are
beneficially owned by such stockholder and any material interest of such
stockholder in the proposed business. In the case of nominations to the Bayonne
board, certain information regarding the nominee must be provided. Nothing in
this paragraph shall be deemed to require Bayonne to include in its proxy
statement or the proxy relating to any annual meeting any
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<PAGE>
stockholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
LEGAL MATTERS
The validity of the shares of Richmond County common stock which will be
issued in the merger will be passed upon for Richmond County by Muldoon, Murphy
& Faucette LLP, Washington, D.C. In addition, Muldoon, Murphy & Faucette LLP,
Washington, D.C., will pass upon the tax-free nature of the merger for Richmond
County and McCarter & English, LLP will pass on the tax-free nature of the
merger for Bayonne.
EXPERTS
The consolidated financial statements of Richmond County and subsidiary as
of June 30, 1998 and 1997, and for each of the years in the three-year period
ended June 30, 1998, incorporated by reference in the 1998 Richmond County Form
10-K and incorporated by reference herein and in the Registration Statement of
which this document is a part, have been so incorporated by reference in
reliance upon the report of Ernst & Young LLP, independent public accountants,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Bayonne and subsidiaries as of
March 31, 1998 and 1997, and for each of the years in the three-year period
ended March 31, 1998 incorporated by reference in the 1998 Bayonne Form 10-K/A,
and incorporated by reference herein and in the Registration Statement of which
this document is a part, have been so incorporated by reference in reliance upon
the report of KPMG LLP, independent public accountants, incorporated by
reference in the 1998 Bayonne Form 10-K, and any amendments to that document,
and incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
STOCKHOLDER PROPOSALS
Any proposal of a stockholder intended to be presented at the 1999 Annual
Meeting of Richmond County must be received by Richmond County Financial Corp.
at 1214 Castleton Avenue, Staten Island, New York 10310 no later than
________________ to be eligible for inclusion in the proxy statement and form of
proxy. Any such proposal shall be subject to 17 C.F.R. (S)240.14a-8 promulgated
by the SEC under the Exchange Act.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as adjudged liable to the corporation. Any
such indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Registrant has also entered into employment agreements with certain
executive officers, which agreements require that the Registrant maintain a
directors' and officers' liability policy for the benefit of such officers and
that the Registrant will indemnify such officers to the fullest extent permitted
by law.
In addition, pursuant to the merger agreement, the Registrant has
agreed that, for a period of six years following the effective time of the
Merger, the Registrant will indemnify and hold harmless each present and former
director and officer of Bayonne or its direct or indirect subsidiaries, and each
officer or employee of Bayonne or its direct or indirect subsidiaries who is
serving or has served as a director or trustee of another entity expressly at
Bayonne's request or direction, with respect to matters existing or occurring
prior to the effective time of the merger. The Registrant has also agreed in the
merger agreement to maintain for a period of three years following the effective
time of the merger the directors' and officers' liability insurance coverage
maintained by Bayonne (or substantially equivalent coverage under substitute
policies) with respect to any claims arising out of any actions or omissions
occurring prior to the effective time of the merger.
II-1
<PAGE>
In accordance with the DGCL (being Chapter 1 of Title 8 of the Delaware
Code), Articles 10 and 11 of the Registrant's Certificate of Incorporation
provide as follows:
TENTH:
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or
an Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgment, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith; provided, however, that, except
as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter and "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Section A and B of this Article TENTH shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
II-2
<PAGE>
an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable
standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article TENTH or otherwise shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
subsidiary or Affiliate or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General
Corporation Law.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
II-3
<PAGE>
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
Item 21. Exhibits and Financial Statement, Schedules.
(a) Exhibits.
2.1 Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc. is included as Annex A to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
3.1 Certificate of Incorporation of Richmond County Financial Corp. (1).
3.2 Bylaws of Richmond County Financial Corp. (1).
4.1 Richmond County Financial Corp. Specimen Stock Certificate (1).
5.1 Opinion of Muldoon, Murphy & Faucette LLP regarding legality.
8.1 Opinion of Muldoon, Murphy & Faucette LLP regarding tax matters.
8.2 Opinion of McCarter & English, LLP regarding tax matters.
10.1 Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp. is
included as Annex B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement.*
10.2 Form of Employment Agreement between Richmond County Savings Bank and
certain executive officers and Form of Employment Agreement between
Richmond County Financial Corp. and certain executive officers (1).
10.3 Form of Change in Control Agreement between Richmond County Savings
Bank and certain executive officers and Form of Change in Control
Agreement between Richmond County Financial Corp. and certain
executive officers (1).
10.4 Richmond County Savings Bank Employee Severance Compensation Plan (1).
10.5 Management's Supplemental Executive Retirement Plan (1).
10.6 Employee Stock Ownership Plan and Trust (1).
10.7 Proposed Amended Richmond County Financial Corp. 1998 Stock-Based
Incentive Plan is included as Annex E to the Joint Proxy
Statement/Prospectus which is part of the Registration Statement.
11.0 Statement Re: Computation of Per Share Earnings (3).
23.1 Consent of Muldoon, Murphy & Faucette LLP (included in Exhibit 5.1
hereto).
II-4
<PAGE>
23.2 Consent of Muldoon, Murphy & Faucette LLP (included in Exhibit 8.1
hereto).
23.3 Consent of McCarter & English, LLP (included in Exhibit 8.2 hereto).
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond County
Financial Corp.
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors for Bayonne
Bancshares, Inc.
23.6 Consent of Tucker Anthony Incorporated.*
23.7 Consent of Sandler O'Neill & Partners, L.P.*
24.1 Powers of Attorney (see the signature page to this Form S-4
Registration Statement).
27.0 Financial Data Schedule.
99.1 Opinion of Tucker Anthony Incorporated is included as Annex C to the
Joint Proxy Statement/Prospectus which is part of this Registration
Statement.*
99.2 Opinion of Sandler O'Neill & Partners, L.P. is included as Annex D to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
99.3 Consent of Person to be Named as Director of Richmond County Financial
Corp.*
99.4 Richmond County Financial Corp, Proxy Card.
99.5 Bayonne Bancshares, Inc. Proxy Card.*
____________________
* Previously filed.
(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:
II-5
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) ((S) 230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act , each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act , each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder,
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act , the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(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
II-6
<PAGE>
requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415 of
the Securities Act , will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act , each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act , each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Borough of Staten Island, State of
New York, on January 8, 1999.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
-----------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 8, 1999.
We, the undersigned officers and directors of Richmond County
Financial Corp. hereby severally and individually constitute and appoint Michael
F. Manzulli, the true and lawful attorney and agent (with full power of
substitution and resubstitution in each case) of each of us to execute in the
name, place and stead of each of us (individually and in any capacity stated
below) any and all amendments to this Registration Statement and all instruments
necessary or advisable in connection therewith and to file the same with the
Securities and Exchange Commission, said attorney and agent to have power to act
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person and we hereby ratify and confirm our
signatures as they may be signed by or said attorney and agent to any and all
such amendments and instruments.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Michael F. Manzulli Chairman of the Board and
- ---------------------------- Chief Executive Officer
Michael F. Manzulli (principal executive officer)
/s/ Anthony E. Burke President, Chief Operating Officer
- ---------------------------- and Director
Anthony E. Burke
/s/ Thomas R. Cangemi Senior Vice President, Chief Financial
- ---------------------------- Officer, Treasurer and Secretary
Thomas R. Cangemi (principal financial and accounting officer)
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C>
/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
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
2.1 Amended and Restated Agreement and Plan of Merger, amended and
restated as of October 14, 1998, by and between Richmond County
Financial Corp. and Bayonne Bancshares, Inc. is included as Annex A to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
3.1 Certificate of Incorporation of Richmond County Financial Corp. (1).
3.2 Bylaws of Richmond County Financial Corp. (1).
4.1 Richmond County Financial Corp. Specimen Stock Certificate (1).
5.1 Opinion of Muldoon, Murphy & Faucette LLP regarding legality.
8.1 Opinion of Muldoon, Murphy & Faucette LLP regarding tax matters.
8.2 Opinion of McCarter & English, LLP regarding tax matters.
10.1 Stock Option Agreement, dated as of July 19, 1998, by and between
Bayonne Bancshares, Inc. and Richmond County Financial Corp. is
included as Annex B to the Joint Proxy Statement/Prospectus which is
part of this Registration Statement.*
10.2 Form of Employment Agreement between Richmond County Savings Bank and
certain executive officers and Form of Employment Agreement between
Richmond County Financial Corp. and certain executive officers (1).
10.3 Form of Change in Control Agreement between Richmond County Savings
Bank and certain executive officers and Form of Change in Control
Agreement between Richmond County Financial Corp. and certain
executive officers (1).
10.4 Richmond County Savings Bank Employee Severance Compensation Plan (1).
10.5 Management's Supplemental Executive Retirement Plan (1).
10.6 Employee Stock Ownership Plan and Trust (1).
10.7 Proposed Amended Richmond County Financial Corp. 1998 Stock-Based
Incentive Plan is included as Annex E to the Joint Proxy
Statement/Prospectus which is part of this Registration Statement.
11.0 Statement Re: Computation of Per Share Earnings (3).
23.1 Consent of Muldoon, Murphy & Faucette LLP (included in Exhibit 5.1
hereto).
23.2 Consent of Muldoon, Murphy & Faucette LLP (included in Exhibit 8.1
hereto).
<PAGE>
23.3 Consent of McCarter & English, LLP (included in Exhibit 8.2 hereto).
23.4 Consent of Ernst & Young LLP, Independent Auditors for Richmond County
Financial Corp.
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors for Bayonne
Bancshares, Inc.
23.6 Consent of Tucker Anthony Incorporated.*
23.7 Consent of Sandler O'Neill & Partners, L.P.*
24.1 Powers of Attorney (see the signature page to this Form S-4
Registration Statement).
27.0 Financial Data Schedule.
99.1 Opinion of Tucker Anthony Incorporated is included as Annex C to the
Joint Proxy Statement/Prospectus which is part of this Registration
Statement.*
99.2 Opinion of Sandler O'Neill & Partners, L.P. is included as Annex D to
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.*
99.3 Consent of Person to be Named as Director of Richmond County Financial
Corp.*
99.4 Richmond County Financial Corp. Proxy Card.
99.5 Bayonne Bancshares, Inc. Proxy Card. *
____________________
* Previously filed.
(1) Incorporated by reference into this document from the Exhibits filed
with the Registration Statement on Form S-1 and any amendments
thereto, Registration No. 333-37009 filed with the SEC on October 2,
1997.
(2) Incorporated by reference into this document from the Appendix to the
Proxy Statement for the Annual Meeting of Stockholders held on
September 28, 1998, filed with the SEC on August 28, 1998.
(3) Incorporated by reference into this document from Richmond County's
Annual Report for the year ended June 30, 1998, filed with the SEC on
August 27, 1998.
<PAGE>
ANNEX E
RICHMOND COUNTY FINANCIAL CORP.
1998 STOCK-BASED INCENTIVE PLAN
(as amended and restated)
1. DEFINITIONS.
-----------
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Holding Company, as such terms are defined in Sections 424(e) and 424(f)
of the Code.
(b) "Award" means, individually or collectively, a grant under the Plan of
Non-Statutory Stock Options, Incentive Stock Options, Stock Awards, Limited
Option Rights, and Limited Stock Rights.
(c) "Award Agreement" means an agreement evidencing and setting forth the
terms of an Award.
(d) "Bank" means Richmond County Savings Bank.
(e) "Board of Directors" means the board of directors of the Holding
Company.
(f) "Change in Control" of the Holding Company or the Bank means an event
of a nature that: (i) would be required to be reported in response to Item 1(a)
of the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 12 or 15(d) of the Exchange Act; or (ii) results in a "change in
control" of the Bank or the Holding Company within the meaning of the Change in
Bank Control Act and the Rules and Regulations promulgated by the Federal
Deposit Insurance Corporation ("FDIC") at 12 C.F.R. (S) 303.4(a), with respect
to the Bank, and the Rules and Regulations promulgated by the Office of Thrift
Supervision ("OTS") (or its predecessor agency), with respect to the Holding
Company; or (iii) without limitation such a Change in Control shall be deemed to
have occurred at such time as (A) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of voting
securities of the Bank or the Holding Company representing 20% or more of the
Bank's or the Holding Company's outstanding voting securities or right to
acquire such securities except for any voting securities of the bank purchased
by the Holding Company and any voting securities purchased by any employee
benefit plan of the Holding Company or its Affiliates, or (B) individuals who
constitute the Board of Directors on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by a Nominating Committee solely composed of members
which are Incumbent Board members, shall be, for purposes of this clause (B),
considered as though he were a member of the Incumbent Board, or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Holding Company or similar transaction occurs or is
effectuated in which the Bank or Holding Company is not the resulting entity, or
(D) a proxy statement has been distributed soliciting proxies from stockholders
of the Holding Company, by someone other than the current management of the
Holding Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Holding Company or Bank with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Bank or the
Holding Company shall be distributed, or (E) a tender offer is made for 20% or
more of the voting securities of the Bank or Holding Company then outstanding.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee designated by the Board of Directors,
pursuant to Section 2 of the Plan, to administer the Plan.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share.
<PAGE>
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits for under a long-term
disability plan of the Holding Company or an Affiliate, or in the absence of
such a long-term disability plan or coverage under such a plan, "Disability"
shall mean a physical or mental condition which, in the sole discretion of the
Committee, is reasonably expected to be of indefinite duration and to
substantially prevent the Participant from fulfilling his duties or
responsibilities to the Holding Company or an Affiliate.
(l) "Effective Date" means September 29, 1998, subject to Section 18 of the
Plan.
(m) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are employed by the Holding Company or an Affiliate
shall be considered Employees under the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Exercise Price" means the price at which a Participant may purchase a
share of Common Stock pursuant to an Option.
(p) "Fair Market Value" means the market price of Common Stock, determined
by the Committee as follows:
(i) If the Common Stock was traded on the date in question on The
Nasdaq Stock Market then the Fair Market Value shall be equal
to the closing price reported for such date;
(ii) If the Common Stock was traded on a stock exchange on the date
in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions
report for such date; and
(iii) If neither of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in The Wall Street Journal. The
-----------------------
Committee's determination of Fair Market Value shall be conclusive and binding
on all persons.
(q) "Holding Company" means Richmond County Financial Corp.
(r) "Incentive Stock Option" means a stock option granted to a Participant,
pursuant to Section 7 of the Plan, that is intended to meet the requirements of
Section 422 of the Code.
(s) "Non-Statutory Stock Option" means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended to be
and is not identified as an Incentive Stock Option or a stock option granted
under the Plan which is intended to be and is identified as an Incentive Stock
Option but which does not meet the requirements of Section 422 of the Code.
(t) "Option" means an Incentive Stock Option or Non-Statutory Stock Option.
(u) "Outside Director" means a member of the board(s) of directors of the
Holding Company or an Affiliate who is not also an Employee of the Holding
Company or an Affiliate.
(v) "Participant" means any person who holds an outstanding Award.
E-2
<PAGE>
(w) "Performance Award" means an Award granted to a Participant pursuant
to Section 9 of the Plan.
(x) "Plan" means this Richmond County Financial Corp. 1998 Stock-Based
Incentive Plan, as amended and restated.
(y) "Retirement" means retirement from employment with the Holding Company
or an Affiliate in accordance with the then current retirement policies of the
Holding Company or Affiliate, as applicable. "Retirement" with respect to an
Outside Director means the termination of service from the board(s) of directors
of the Holding Company and any Affiliate following written notice to such
board(s) of directors of the Outside Director's intention to retire.
(z) "Stock Award" means an Award granted to a Participant pursuant to
Section 8 of the Plan.
(aa) "Termination for Cause" shall mean, in the case of an Outside
Director, removal from the board(s) of directors of the Holding Company and its
Affiliates in accordance with the applicable by-laws of the Holding Company and
its Affiliates or, in the case of an Employee, as defined under any employment
agreement with the Holding Company or an Affiliate; provided, however, that if
no employment agreement exists with respect to the Employee, Termination for
Cause shall mean termination of employment because of a material loss to the
Holding Company or an Affiliate, as determined by and in the sole discretion of
the Board of Directors or its designee(s).
(bb) "Trust" means a trust established by the Board of Directors in
connection with this Plan to hold Common Stock or other property for the
purposes set forth in the Plan.
(cc) "Trustee" means any person or entity approved by the Board of
Directors or its designee(s) to hold any of the Trust assets.
2. ADMINISTRATION.
--------------
(a) The Committee shall administer the Plan. The Committee shall consist
of two or more disinterested directors of the Holding Company, who shall be
appointed by the Board of Directors. A member of the Board of Directors shall
be deemed to be "disinterested" only if he satisfies (i) such requirements as
the Securities and Exchange Commission may establish for non-employee directors
administering plans intended to qualify for exemption under Rule 16b-3 (or its
successor) under the Exchange Act and (ii) such requirements as the Internal
Revenue Service may establish for outside directors acting under plans intended
to qualify for exemption under Section 162(m)(4)(C) of the Code. The Board of
Directors may also appoint one or more separate committees of the Board of
Directors, each composed of one or more directors of the Holding Company or an
Affiliate who need not be disinterested and who may grant Awards and administer
the Plan with respect to Employees and Outside Directors who are not considered
officers or directors of the Holding Company under Section 16 of the Exchange
Act or for whom Awards are not intended to satisfy the provisions of Section
162(m) of the Code.
(b) The Committee shall (i) select the Employees and Outside Directors who
are to receive Awards under the Plan, (ii) determine the type, number, vesting
requirements and other features and conditions of such Awards, (iii) interpret
the Plan and Award Agreements in all respects and (iv) make all other decisions
relating to the operation of the Plan. The Committee may adopt such rules or
guidelines as it deems appropriate to implement the Plan. The Committee's
determinations under the Plan shall be final and binding on all persons.
(c) Each Award shall be evidenced by a written agreement ("Award
Agreement") containing such provisions as may be required by the Plan and
otherwise approved by the Committee. Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Participant, and every Participant, upon acceptance of an Award Agreement, shall
be bound by the terms and restrictions of the Plan and the Award Agreement. The
terms of each Award Agreement shall be in accordance with the Plan, but each
Award Agreement may include any additional provisions and restrictions
determined by the Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms of the Plan. In
particular and at a
E-3
<PAGE>
minimum, the Committee shall set forth in each Award Agreement (i) the type of
Award granted; (ii) the Exercise Price of any Option; (iii) the number of shares
subject to the Award; (iv) the expiration date of the Award; (v) the manner,
time and rate (cumulative or otherwise) of exercise or vesting of such Award;
and (vi) the restrictions, if any, placed upon such Award, or upon shares which
may be issued upon exercise of such Award. The Chairman of the Committee and
such other directors and officers as shall be designated by the Committee is
hereby authorized to execute Award Agreements on behalf of the Company or an
Affiliate and to cause them to be delivered to the recipients of Awards.
(d) The Committee may delegate all authority for: (i) the determination of
forms of payment to be made by or received by the Plan and (ii) the execution of
any Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management of the
Holding Company or an Affiliate for determinations to be made pursuant to the
Plan, including the satisfaction of any conditions of a Performance Award.
However, only the Committee or a portion of the Committee may certify the
attainment of any conditions of a Performance Award intended to satisfy the
requirements of Section 162(m) of the Code.
3. TYPES OF AWARDS AND RELATED RIGHTS.
----------------------------------
The following Awards may be granted under the Plan:
(a) Non-Statutory Stock Options.
(b) Incentive Stock Options.
(c) Stock Awards.
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 15 of the Plan, the maximum
number of shares reserved for Awards under the Plan is 3,699,297, which number
shall not exceed 14% of the outstanding shares of the Common Stock determined
immediately as of the Effective Date. Subject to adjustment as provided in
Section 15 of the Plan, the maximum number of shares reserved hereby for
purchase pursuant to the exercise of Options, including Incentive Stock Options,
and Option-related Awards granted under the Plan is 2,642,355, which number
shall not exceed 10% of the outstanding shares of Common Stock as of the
Effective Date. The maximum number of the shares reserved for Stock Awards is
1,056,942, which number shall not exceed 4% of the outstanding shares of Common
Stock as of the Effective Date. The shares of Common Stock issued under the Plan
may be either authorized but unissued shares or authorized shares previously
issued and acquired or reacquired by the Trustee or the Holding Company,
respectively. To the extent that Options and Stock Awards are granted under the
Plan, the shares underlying such Awards will be unavailable for any other use
including future grants under the Plan except that, to the extent that Stock
Awards or Options terminate, expire or are forfeited without having vested or
without having been exercised (in the case of Limited Option Rights and Limited
Stock Rights, exercised for cash), new Awards may be made with respect to these
shares.
5. ELIGIBILITY.
-----------
Subject to the terms of the Plan, all full-time Employees and Outside
Directors shall be eligible to receive Awards under the Plan. In addition, the
Committee may grant eligibility to consultants and advisors of the Holding
Company or an Affiliate, as it sees fit.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Non-Statutory Stock Options to eligible individuals upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
E-4
<PAGE>
(a) Exercise Price. The Committee shall determine the Exercise Price of
--------------
each Non-Statutory Stock Option. However, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Terms of Non-statutory Stock Options. The Committee shall determine
------------------------------------
the term during which a Participant may exercise a Non-Statutory Stock Option,
but in no event may a Participant exercise a Non-Statutory Stock Option, in
whole or in part, more than ten (10) years from the Date of Grant. The Committee
shall also determine the date on which each Non-Statutory Stock Option, or any
part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Non-Statutory Stock Option.
The shares of Common Stock underlying each Non-Statutory Stock Option may be
purchased in whole or in part by the Participant at any time during the term of
such Non-Statutory Stock Option, or any portion thereof, once the Non-Statutory
Stock Option becomes exercisable.
(c) Non-Transferability. Unless otherwise determined by the Committee in
-------------------
accordance with this Section 6(c), a Participant may not transfer, assign,
hypothecate, or dispose of in any manner, other than by will or the laws of
intestate succession, a Non-Statutory Stock Option. The Committee may, however,
in its sole discretion, permit transferability or assignment of a Non-Statutory
Stock Option if such transfer or assignment is, in its sole determination, for
valid estate planning purposes and such transfer or assignment is permitted
under the Code and Rule 16b-3 under the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes, but is not
limited to: (a) a transfer to a revocable intervivos trust as to which the
Participant is both the settlor and trustee, (b) a transfer for no consideration
to: (i) any member of the Participant's Immediate Family, (ii) any trust solely
for the benefit of members of the Participant's Immediate Family, (iii) any
partnership whose only partners are members of the Participant's Immediate
Family, and (iv) any limited liability corporation or corporate entity whose
only members or equity owners are members of the Participant's Immediate Family,
or (c) a transfer to the Richmond County Savings Foundation. For purposes of
this Section 6(c), "Immediate Family" includes, but is not necessarily limited
to, a Participant's parents, grandparents, spouse, children, grandchildren,
siblings (including half bothers and sisters), and individuals who are family
members by adoption. Nothing contained in this Section 6(c) shall be construed
to require the Committee to give its approval to any transfer or assignment of
any Non-Statutory Stock Option or portion thereof, and approval to transfer or
assign any Non-Statutory Stock Option or portion thereof does not mean that such
approval will be given with respect to any other Non-Statutory Stock Option or
portion thereof. The transferee or assignee of any Non-Statutory Stock Option
shall be subject to all of the terms and conditions applicable to such Non-
Statutory Stock Option immediately prior to the transfer or assignment and shall
be subject to any other conditions proscribed by the Committee with respect to
such Non-Statutory Stock Option.
(d) Termination of Employment or Service (General). Unless otherwise
----------------------------------------------
determined by the Committee, upon the termination of a Participant's employment
or other service for any reason other than Retirement, Disability or death,
or Termination for Cause, the Participant may exercise only those Non-Statutory
Stock Options that were immediately exercisable by the Participant at the date
of such termination and only for a period of three (3) months following the date
of such termination.
(e) Termination of Employment or Service (Retirement). Unless otherwise
-------------------------------------------------
determined by the Committee, in the event of a Participant's Retirement, the
Participant may exercise only those Non-Statutory Stock Options that were
immediately exercisable by the Participant at the date of Retirement and only
for a period of one (1) year from the date of Retirement.
(f) Termination of Employment or Service (Disability or death). Unless
----------------------------------------------------------
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or other service due to Disability or death, all Non-
Statutory Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period one (1) year following the date
of such termination.
(g) Termination of Employment or Service (Termination for Cause). Unless
------------------------------------------------------------
otherwise determined by the Committee, in the event of a Participant's
Termination for Cause, all rights with respect to the Participant's Non-
Statutory Stock Options shall expire immediately upon the effective date of such
Termination for Cause.
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<PAGE>
(h) Acceleration Upon a Change in Control. In the event of a Change in
-------------------------------------
Control all Non-Statutory Stock Options held by a Participant as of the date of
the Change in Control shall immediately become exercisable and shall remain
exercisable until the expiration of the term of the Non-Statutory Stock Options.
(i) Payment. Payment due to a Participant upon the exercise of a Non-
-------
Statutory Stock Option shall be made in the form of shares of Common Stock.
(j) Maximum Individual Award. No individual Employee shall be granted an
------------------------
amount of Non-Statutory Stock Options which exceeds 25% of all Options eligible
to be granted under the Plan within any 60-month period.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee upon such terms and conditions as
it may determine to the extent such terms and conditions are consistent with the
following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
--------------
each Incentive Stock Option. However, the Exercise Price shall not be less than
100% of the Fair Market Value of the Common Stock on the Date of Grant;
provided, however, that if at the time an Incentive Stock Option is granted, the
Employee owns or is treated as owning, for purposes of Section 422 of the Code,
Common Stock representing more than 10% of the total combined voting securities
of the Holding Company ("10% Owner"), the Exercise Price shall not be less than
110% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Amounts of Incentive Stock Options. To the extent the aggregate Fair
----------------------------------
Market Value of shares of Common Stock with respect to which Incentive Stock
Options that are exercisable for the first time by an Employee during any
calendar year under the Plan and any other stock option plan of the Holding
Company or an Affiliate exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options in excess of such limit
shall be treated as Non-Statutory Stock Options. Fair Market Value shall be
determined as of the Date of Grant with respect to each such Incentive Stock
Option.
(c) Terms of Incentive Stock Options. The Committee shall determine the
--------------------------------
term during which a Participant may exercise an Incentive Stock Option, but in
no event may a Participant exercise an Incentive Stock Option, in whole or in
part, more than ten (10) years from the Date of Grant; provided, however, that
if at the time an Incentive Stock Option is granted to an Employee who is a 10%
Owner, the Incentive Stock Option granted to such Employee shall not be
exercisable after the expiration of five (5) years from the Date of Grant. The
Committee shall also determine the date on which each Incentive Stock Option, or
any part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Incentive Stock Option. The
shares of Common Stock underlying each Incentive Stock Option may be purchased
in whole or in part at any time during the term of such Incentive Stock Option
after such Option becomes exercisable.
(d) Non-Transferability. No Incentive Stock Option shall be transferable
-------------------
except by will or the laws of descent and distribution and is exercisable,
during his lifetime, only by the Employee to whom the Committee grants the
Incentive Stock Option. The designation of a beneficiary does not constitute a
transfer of an Incentive Stock Option.
(e) Termination of Employment (General). Unless otherwise determined by
-----------------------------------
the Committee, upon the termination of a Participant's employment or other
service for any reason other than Retirement, Disability or death, or
Termination for Cause, the Participant may exercise only those Incentive Stock
Options that were immediately exercisable by the Participant at the date of such
termination and only for a period of three (3) months following the date of such
termination.
(f) Termination of Employment(Retirement). Unless otherwise determined by
-------------------------------------
the Committee, in the event of a Participant's Retirement, the Participant may
exercise only those Incentive Stock Options that were
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<PAGE>
immediately exercisable by the Participant at the date of Retirement and only
for a period of one (1) year from the date of Retirement.
(g) Termination of Employment (Disability or Death). Unless otherwise
-----------------------------------------------
determined by the Committee, in the event of the termination of a Participant's
employment or other service due to Disability or death, all Incentive Stock
Options held by such Participant shall immediately become exercisable and remain
exercisable for a period one (1) year following the date of such termination.
(h) Termination of Employment (Termination for Cause). Unless otherwise
-------------------------------------------------
determined by the Committee, in the event of an Employee's Termination for
Cause, all rights under such Employee's Incentive Stock Options shall expire
immediately upon the effective date of such Termination for Cause.
(i) Acceleration Upon a Change in Control. In the event of a Change in
-------------------------------------
Control all Incentive Stock Options held by a Participant as of the date of the
Change in Control shall immediately become exercisable and shall remain
exercisable until the expiration of the term of the Incentive Stock Options.
Any Option originally designated as an Incentive Stock Option shall be treated
as a Non-Statutory Stock Options to the extent the Option does not otherwise
qualify as an Incentive Stock Option pursuant to Section 422 of the Code.
(j) Payment. Payment due to a Participant upon the exercise of an
-------
Incentive Stock Option shall be made in the form of shares of Common Stock.
(k) Maximum Individual Award. No individual Employee shall be granted an
------------------------
amount of Incentive Stock Options which exceeds 25% of all Options eligible to
be granted under the Plan within any 60-month period.
(l) Disqualifying Dispositions. Each Award Agreement with respect to an
--------------------------
Incentive Stock Option shall require the Participant to notify the Committee of
any disposition of shares of Common Stock issued pursuant to the exercise of
such Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), within 10 days of such
disposition.
8. STOCK AWARDS.
------------
The Committee may make grants of Stock Awards, which shall consist of the
grant of some number of shares of Common Stock, to a Participant upon such terms
and conditions as it may determine to the extent such terms and conditions are
consistent with the following provisions:
(a) Grants of the Stock Awards. Stock Awards may only be made in whole
---------------------------
shares of Common Stock. Stock Awards may only be granted from shares reserved
under the Plan and available for award at the time the Stock Award is made to
the Participant.
(b) Terms of the Stock Awards. The Committee shall determine the dates on
-------------------------
which Stock Awards granted to a Participant shall vest and any terms or
conditions which must be satisfied prior to the vesting of any Stock Award or
portion thereof. Any such terms or conditions shall be determined by the
Committee as of the Date of Grant.
(c) Termination of Employment or Service (General). Unless otherwise
----------------------------------------------
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Retirement, Disability or death, or
Termination for Cause, any Stock Awards in which the Participant has not become
vested as of the date of such termination shall be forfeited and any rights the
Participant had to such Stock Awards shall become null and void.
(d) Termination of Employment or Service (Retirement). Unless otherwise
-------------------------------------------------
determined by the Committee, in the event of a Participant's Retirement, any
Stock Awards in which the Participant has not become
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<PAGE>
vested as of the date of Retirement shall be forfeited and any rights the
Participant had to such unvested Stock Awards shall become null and void.
(e) Termination of Employment or Service (Disability or death). Unless
----------------------------------------------------------
otherwise determined by the Committee, in the event of a termination of the
Participant's service due to Disability or death all unvested Stock Awards held
by such Participant shall immediately vest as of the date of such termination.
(f) Termination of Employment or Service (Termination for Cause). Unless
------------------------------------------------------------
otherwise determined by the Committee, or in the event of the Participant's
Termination for Cause, all Stock Awards in which the Participant had not become
vested as of the effective date of such Termination for Cause shall be forfeited
and any rights such Participant had to such unvested Stock Awards shall become
null and void.
(g) Acceleration Upon a Change in Control. In the event of a Change in
-------------------------------------
Control all unvested Stock Awards held by a Participant shall immediately vest.
(h) Maximum Individual Award. No individual Employee shall be granted an
------------------------
amount of Stock Awards which exceeds 25% of all Stock Awards eligible to be
granted under the Plan within any 60-month period.
(i) Issuance of Certificates. Unless otherwise held in Trust and
------------------------
registered in the name of the Trustee, reasonably promptly after the Date of
Grant with respect to shares of Common Stock pursuant to a Stock Award, the
Holding Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such Stock Award was granted, evidencing such
shares; provided, that the Holding Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions against
transfer) contained in the Richmond County Financial Corp. 1998 Stock-
Based Incentive Plan and Award Agreement entered into between the
registered owner of such shares and Richmond County Financial Corp. or
its Affiliates. A copy of the Plan and Award Agreement is on file in
the office of the Corporate Secretary of Richmond County Financial
Corp. located at 1214 Castleton Avenue, Staten Island, New York 10310.
Such legend shall not be removed until the Participant becomes vested in such
shares pursuant to the terms of the Plan and Award Agreement. Each certificate
issued pursuant to this Section 8(i), in connection with a Stock Award, shall be
held by the Holding Company or its Affiliates, unless the Committee determines
otherwise.
(j) Non-Transferability. Except to the extent permitted by the Code, the
-------------------
rules promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(i) The recipient of a Stock Award shall not sell, transfer, assign,
pledge, or otherwise encumber shares subject to the Stock Award
until full vesting of such shares has occurred. For purposes of
this section, the separation of beneficial ownership and legal
title through the use of any "swap" transaction is deemed to be a
prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and except in the
event of the Participant's death or pursuant to a domestic
relations order, a Stock Award is not transferable and may be
earned in his lifetime only by the Participant to whom it is
granted. Upon the death of a Participant, a Stock Award is
transferable by will or the laws of descent and distribution. The
designation of a beneficiary shall not constitute a transfer.
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<PAGE>
(iii) If a recipient of a Stock Award is subject to the provisions of
Section 16 of the Exchange Act, shares of Common Stock subject to
such Stock Award may not, without the written consent of the
Committee (which consent may be given in the Award Agreement), be
sold or otherwise disposed of within six (6) months following the
date of grant of the Stock Award.
(k) Accrual of Dividends. To the extent Stock Awards are held in Trust and
--------------------
registered in the name of the Trustee, unless otherwise specified by the Trust
agreement whenever shares of Common Stock underlying a Stock Award are
distributed to a Participant or beneficiary thereof under the Plan, such
Participant or beneficiary shall also be entitled to receive, with respect to
each such share distributed, a payment equal to any cash dividends and the
number of shares of Common Stock equal to any stock dividends, declared and paid
with respect to a share of the Common Stock if the record date for determining
shareholders entitled to receive such dividends falls between the date the
relevant Stock Award was granted and the date the relevant Stock Award or
installment thereof is issued. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any dividends paid
out on the shares related to the Stock Award.
(l) Voting of Stock Awards. After a Stock Award has been granted but for
----------------------
which the shares covered by such Stock Award have not yet been vested, earned
and distributed to the Participant pursuant to the Plan, the Participant shall
be entitled to vote or to direct the Trustee to vote, as the case may be, such
shares of Common Stock which the Stock Award covers subject to the rules and
procedures adopted by the Committee for this purpose and in a manner consistent
with the Trust agreement.
(m) Payment. Payment due to a Participant upon the redemption of a Stock
-------
Award shall be made in the form of shares of Common Stock.
9. PERFORMANCE AWARDS.
------------------
(a) The Committee may determine to make any Award under the Plan contingent
upon the satisfaction of any conditions related to the performance of the
Holding Company, an Affiliate of the Participant. Each Performance Award shall
be evidenced in the Award Agreement, which shall set forth the applicable
conditions, the maximum amounts payable and such other terms and conditions as
are applicable to the Performance Award. Unless otherwise determined by the
Committee, each Performance Award shall be granted and administered to comply
with the requirements of Section 162(m) of the Code and subject to the following
provisions:
(b) Any Performance Award shall be made not later than 90 days after the
start of the period for which the Performance Award relates and shall be made
prior to the completion of 25% of such period. All determinations regarding the
achievement of any applicable conditions will be made by the Committee. The
Committee may not increase during a year the amount of a Performance Award that
would otherwise be payable upon satisfaction of the conditions but may reduce or
eliminate the payments as provided for in the Award Agreement.
(c) Nothing contained in the Plan will be deemed in any way to limit or
restrict the Committee from making any Award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
(d) A Participant who receives a Performance Award payable in Common Stock
shall have no rights as a shareholder until the Company Stock is issued pursuant
to the terms of the Award Agreement. The Common Stock may be issued without
cash consideration.
(e) A Participant's interest in a Performance Award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
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<PAGE>
(f) No Award or portion thereof that is subject to the satisfaction of any
condition shall be distributed or considered to be earned or vested until the
Committee certifies in writing that the conditions to which the distribution,
earning or vesting of such Award is subject have been achieved.
10. DEFERRED PAYMENTS.
-----------------
The Committee, in its discretion, may permit a Participant to elect to
defer receipt of all or any part of any cash or stock payment under the Plan, or
the Committee may determine to defer receipt by some or all Participants, of all
or part of any such payment. The Committee shall determine the terms and
conditions of any such deferral, including the period of deferral, the manner of
deferral, and the method for measuring appreciation on deferred amounts until
their payout.
11. METHOD OF EXERCISE OF OPTIONS.
-----------------------------
Subject to any applicable Award Agreement, any Option may be exercised by
the Participant in whole or in part at such time or times, and the Participant
may make payment of the Exercise Price in such form or forms permitted by the
Committee, including, without limitation, payment by delivery of cash, Common
Stock or other consideration (including, where permitted by law and the
Committee, Awards) having a Fair Market Value on the exercise date equal to the
total Exercise Price, or by any combination of cash, shares of Common Stock and
other consideration, including exercise by means of a cashless exercise
arrangement with a qualifying broker-dealer, as the Committee may specify in the
applicable Award Agreement.
12. RIGHTS OF PARTICIPANTS.
----------------------
No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock. Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Holding Company or an Affiliate or interferes in any way with the
right of the Holding Company or an Affiliate to terminate a Participant's
services.
13. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Award to which the Participant
would then be entitled. Such designation will be made upon forms supplied by
and delivered to the Holding Company and may be revoked in writing. If a
Participant fails effectively to designate a beneficiary, then the Participant's
estate will be deemed to be the beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities underlying Awards already made under the Plan;
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<PAGE>
(c) adjustments in the Exercise Price of outstanding Incentive and/or
Non-statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All Awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company.
15. TAX WITHHOLDING.
---------------
(a) Whenever under this Plan, cash or shares of Common Stock are to be
delivered upon exercise or payment of an Award or any other event with respect
to rights and benefits hereunder, the Committee shall be entitled to require as
a condition of delivery (i) that the Participant remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) that the withholding of such sums come from compensation otherwise
due to the Participant or from any shares of Common Stock due to the Participant
under this Plan or (iii) any combination of the foregoing provided, however,
that no amount shall be withheld from any cash payment or shares of Common Stock
relating to an Award which was transferred by the Participant in accordance with
this Plan.
(b) If any disqualifying disposition described in Section 7(l) is made
with respect to shares of Common Stock acquired under an Incentive Stock Option
granted pursuant to this Plan, or any transfer described in Section 6(c) is
made, or any election described in Section 17 is made, then the person making
such disqualifying disposition, transfer, or election shall remit to the Holding
Company or its Affiliates an amount sufficient to satisfy all federal, state,
and local withholding taxes thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Holding Company or its Affiliates shall have the
right to withhold such sums from compensation otherwise due to the Participant,
or, except in the case of any transfer pursuant to Section 6(c), from any shares
of Common Stock due to the Participant under this Plan.
16. NOTIFICATION UNDER SECTION 83(b).
--------------------------------
The Committee may, on the Date of Grant or any later date, prohibit a
Participant from making the election described below. If the Committee has not
prohibited such Participant from making such election, and the Participant
shall, in connection with the exercise of any Option, or the grant of any Stock
Award, make the election permitted under Section 83(b) of the Code, such
Participant shall notify the Committee of such election within 10 days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
17. AMENDMENT OF THE PLAN AND AWARDS.
--------------------------------
(a) Except as provided in paragraph (c) of this Section 17, the Board of
Directors may at any time, and from time to time, modify or amend the Plan in
any respect, prospectively or retroactively; provided however, that provisions
governing grants of Incentive Stock Options shall be submitted for shareholder
approval to the extent required by such law, regulation or otherwise. Failure
to ratify or approve amendments or modifications by shareholders shall be
effective only as to the specific amendment or modification requiring such
ratification. Other provisions of this Plan will remain in full force and
effect. No such termination, modification or amendment may adversely affect the
rights of a Participant under an outstanding Award without the written
permission of such Participant.
(b) Except as provided in paragraph (c) of this Section 17, the Committee
may amend any Award Agreement, prospectively or retroactively; provided,
however, that no such amendment shall adversely affect the rights of any
Participant under an outstanding Award without the written consent of such
Participant.
(c) In no event shall the Board of Directors amend the Plan or shall
the Committee amend an Award Agreement in any manner that has the effect of:
E-11
<PAGE>
(i) Allowing any Option to be granted with an exercise below the Fair
Market Value of the Common Stock on the Date of Grant.
(ii) Allowing the exercise price of any Option previously granted
under the Plan to be reduced subsequent to the Date of Award.
(d) Notwithstanding anything in this Plan or any Award Agreement to the
contrary, if any Award or right under this Plan would, in the opinion of the
Holding Company's accountants, cause a transaction to be ineligible for pooling
of interest accounting that would, but for such Award or right, be eligible for
such accounting treatment, the Committee, at its discretion, may modify, adjust,
eliminate or terminate the Award or right so that pooling of interest accounting
is available.
18. EFFECTIVE DATE OF PLAN.
----------------------
The Plan was originally approved by shareholders and became effective on
September 29, 1998. The Plan, as amended and restated, shall become effective
upon approval by the Holding Company's shareholders. The failure to obtain
shareholder ratification for such purposes will not effect the validity of the
prior provisions of the Plan and any Awards made under the Plan.
19. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) ten (10) years after the Effective Date; (ii) the issuance of a number
of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards which is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4 of the Plan hereof. The Board
of Directors has the right to suspend or terminate the Plan at any time,
provided that no such action will, without the consent of a Participant,
adversely affect a Participant's vested rights under a previously granted Award.
20. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the state of
Delaware to the extent not pre-empted by applicable federal law.
21. TREATMENT OF UNVESTED, UNEXERCISED, OR NON-EXERCISABLE AWARDS UPON A CHANGE
---------------------------------------------------------------------------
IN CONTROL.
----------
(a) Notwithstanding any other provision of this Plan, and unless otherwise
determined by the Committee, in the event of a Change in Control, all Awards
shall continue to remain exercisable (in the case of Options) and shall continue
to vest or become exercisable (in the case of Stock Awards and Options) in
accordance with the terms and conditions of the grant of the Awards, as set
forth in the Award Agreement(s) governing the grant of such Awards; provided,
however, that the continuation or timing of vesting or exercisability shall take
place without regard to the Participant's continued employment or service or
satisfaction of any other requirements concerning vesting or exercisability set
forth in the Award Agreement(s).
(b) Subject to paragraph (a) of this Section 21, in the event of a Change
in Control where the Holding Company or the Bank is not the surviving entity,
the Board of Directors of the Holding Company and/or the Bank, as applicable,
shall require that the successor entity take one of the following actions with
respect to all Awards held by Participants at the date of the Change in Control:
(i) Assume the Awards with the same terms and conditions as granted
to the Participant under this Plan; or
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<PAGE>
(ii) Replace the Awards with comparable Awards, subject to the same
or more favorable terms and conditions as the Award granted to the
Participant under this Plan, whereby the Participant will be granted
common stock or the option to purchase common stock of the successor
entity; or, only if the Committee determines that neither of the
alternatives set forth in clauses (i) or (ii) are legally available,
(iii) Replace the Awards with a cash payment under an incentive plan,
program, or other arrangement of the successor entity that preserves
the economic value of the Awards and makes any such cash payment
subject to the same vesting or exercisability schedule applicable to
such Awards.
(c) The determination of comparability of Awards offered by a successor
entity under clause (ii) of paragraph(b) above shall be made by the Committee,
and the Committee's determination shall be conclusive and binding.
1998 Incentive Plan (Clean).wpd
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<PAGE>
EXHIBIT 5.1
[MULDOON, MURPHY & FAUCETTE LLP LETTERHEAD]
January 8, 1999
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 14, 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 10,041,277 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, $0.01 par value per share of Bayonne Bancshares,
Inc., a Delaware corporation ("Bayonne"), will be converted pursuant to an
Agreement and Plan of Merger dated as of July 19, 1998 (the "Merger Agreement")
by and between
<PAGE>
Richmond County Financial Corp.
January 8, 1999
Page 2
Bayonne 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) Bayonne will merge with and into Richmond County, with Richmond
County as the surviving corporation, succeeding to all of the assets and
liabilities of Bayonne (the "Merger"); (ii) subject to certain exceptions, each
outstanding share of common stock, $.01 par value per share, of Bayonne (the
"Bayonne Common Stock"), will be converted and exchangeable for 1.05 Merger
Shares (the "Exchange Ratio") plus cash in lieu of fractional shares; and (iii)
the Exchange Ratio may be increased by Richmond County in the event Bayonne
exercises its rights under the Merger Agreement to deliver to Richmond County a
notice to terminate the Merger Agreement due to the price of the Richmond County
Common Stock declining below certain levels established by formulas set forth in
the Merger Agreement.
In addition, each option granted by Bayonne to purchase Bayonne Common
Stock which is outstanding and unexercised immediately prior to the consummation
of the Merger shall be converted automatically into an option to purchase shares
of Merger Shares in an amount equal to
<PAGE>
Richmond County Financial Corp.
January 8, 1999
Page 3
the product of the number of shares of Bayonne Common Stock subject to the
original option and the Exchange Ratio, provided that any fractional Merger
Shares resulting from such multiplication shall be rounded to the nearest whole
share; and the exercise price per share of Merger Shares under the new option
shall be equal to the exercise price per share of Bayonne Common Stock under the
original option divided by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest whole cent.
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 Bayonne as filed with the
Secretary of State of the State of Delaware; (vi) the By-laws of Bayonne; (vii)
certain minutes of Bayonne made available to us by officers of Bayonne; (viii)
certain certificates from officers of Bayonne as to certain factual matters
material to the opinion expressed below; (ix) the representations of Richmond
County and Bayonne 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.
<PAGE>
Richmond County Financial Corp.
January 8, 1999
Page 4
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 Bayonne.
In addition, in rendering this opinion we have assumed, without
investigation, (i) that the Merger Shares will be offered and the shares of
Bayonne 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 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
Joint 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
<PAGE>
Richmond County Financial Corp.
January 8, 1999
Page 5
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.
Based upon and subject to the foregoing, it is our opinion that, upon
effectiveness of the Registration Statement and approval of the issuance of the
Merger Shares by Richmond County shareholders, 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 Joint Proxy
<PAGE>
Richmond County Financial Corp.
January 8, 1999
Page 6
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,
/s/ Muldoon, Murphy & Faucette LLP
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
EXHIBIT 8.1
[MULDOON, MURPHY & FAUCETTE LLP LETTERHEAD]
January 8, 1999
Board of Directors
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Re: Federal Income Tax Consequences of Merger of Bayonne Bancshares, Inc.
with and into Richmond County Financial Corp. (the "Merger")
To the Members of the Board of Directors:
You have requested an opinion regarding the material federal tax
consequences of a proposed transaction involving the merger of Bayonne
Bancshares, Inc., a holding company organized under the laws of the State of
Delaware and duly registered as a savings and loan holding company under the
Home Owners' Loan Act, as amended ("HOLA") ("Bayonne") with and into Richmond
County Financial Corp. ("RCFC"), a holding company organized under the laws of
the State of Delaware and duly registered as a savings and loan holding company
under HOLA. The Merger will be effected pursuant to the Amended and Restated
Agreement and Plan of Merger, amended and restated as of October 14, 1998, by
and between RCFC and Bayonne (the "Merger Agreement"). The Merger and related
transactions are described in the Merger Agreement and in the Joint Proxy
Statement/Prospectus (the "Proxy Statement") included in RCFC'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 Effective Time, Bayonne shall be merged
with and into RCFC (the "Merger") and the separate existence of Bayonne shall
cease. RCFC 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 Bayonne's common stock (the "Bayonne Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive that number of shares of the common stock of RCFC (the "RCFC
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
January 8, 1999
Page 2
Our opinion is provided solely with respect to the material 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, certain
factual representations of Bayonne concerning Bayonne itself as well as the
transaction ("Representations"); we have received and relied upon, without
independent verification, certain factual representations of RCFC concerning the
transaction and certain post-Merger plans ("Representations"); copies of these
Representations are attached as exhibits to this letter. 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 RCFC will be conducted in a manner wholly consistent with all Representations
provided by RCFC. 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. Each capitalized term used herein, unless otherwise
defined, has the meaning set forth in the Merger Agreement. We have assumed
that the Merger will be consummated strictly in accordance with the terms of the
Merger Agreement and that the Merger will qualify as a merger under applicable
law.
The Merger Agreement and the Joint Proxy Statement contain a detailed
description of the Merger. These documents as well as the Representations to be
provided by Bayonne and RCFC 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
<PAGE>
Board of Directors
January 8, 1999
Page 3
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 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 and attached as exhibits to this
opinion, 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 RCFC and Bayonne will each be a party to the
reorganization.
(2) No gain or loss will be recognized by RCFC, Richmond County Savings
Bank, Bayonne or First Savings Bank of New Jersey, SLA as a result of the
Merger.
(3) No gain or loss will be recognized by the stockholders of Bayonne who
exchange all of their Bayonne Common Stock solely for RCFC Common Stock
pursuant to the Merger, except to the extent of any cash received in lieu
of a fractional share interest in RCFC Common Stock.
(4) The tax basis of the RCFC Common Stock received by shareholders who
exchange their Bayonne Common Stock for RCFC Common Stock pursuant to the
Merger will be the same as the tax basis of the Bayonne 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 RCFC Common Stock received by each stockholder in
the Merger will include the holding period of Bayonne Common Stock
exchanged therefor, provided that such stockholder held such Bayonne Common
Stock as a capital asset on the Effective Date.
<PAGE>
Board of Directors
January 8, 1999
Page 4
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 of RCFC filed in connection with the Merger
and to the references to us under the headings "SUMMARY -- Tax-Free Transaction
for Bayonne Stockholders" and "THE BAYONNE MERGER -- Tax-Free Transaction for
Bayonne Stockholders" in the Joint Proxy Statement/Prospectus on Bayonne and
RCFC. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section of the Securities
Act of 1933.
Sincerely,
/s/ Muldoon, Murphy & Faucette LLP
----------------------------------
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
CERTIFICATE OF REPRESENTATIONS
------------------------------
TO: Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
I, Patrick F.X. Nilan, Chairman of the Board, Bayonne Bancshares, Inc., a
Delaware corporation, duly registered as a savings and loan holding company
under HOLA ("Bayonne"), with its principal executive headquarters located in
Bayonne, New Jersey, for the purposes of obtaining an opinion of counsel to be
rendered by Muldoon, Murphy & Faucette LLP regarding certain income tax
consequences of the proposed merger (the "Merger") of Bayonne with and into
Richmond County Financial Corp., a Delaware corporation ("RCFC"), hereby make
the following representations to you ("Representations"). All capitalized terms
used but not defined in this certificate shall have the meanings set forth in
the Amended and Restated Agreement and Plan of Merger amended and restated as of
October 14, 1998 by and between RCFC and Bayonne (the "Merger Agreement") and in
the Joint Proxy Statement/Prospectus ("Proxy Statement") included in RCFC's
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the Merger.
We recognize that your opinion may not accurately describe the federal
income tax consequences of the Merger if any of the following Representations is
not accurate. Such Representations are accurate as of the date of this letter
and you may assume that they will remain accurate through and including the
Effective Time unless we notify you otherwise.
The following definitions apply for purposes of the Representations set
forth below:
(a) A "Bayonne Related Party" is any corporation that, prior to or after
the Merger, owns (or will own by reason of the Merger or by reason of any
transaction related to the Merger) stock of Bayonne possessing at least 50% of
the combined voting power of all classes of Bayonne stock entitled to vote or at
least 50% of the total value of all Bayonne stock.
(b) In determining the existence of a Bayonne Related Party, a partner in a
partnership (or a member of a limited liability company or of any other entity
that is treated as a partnership for federal income tax purposes) shall be
treated as owning or acquiring any stock owned or acquired by the partnership in
accordance with that partner's interest in the partnership.
(c) An "Investment Company" is a regulated investment company, a real
estate investment trust, or a corporation having total assets (including its
ratable share of the assets of any subsidiary which is 50% or more owned by such
corporation, measured by the combined
<PAGE>
voting power of all voting shares or by the value of all shares of such
subsidiary, and excluding cash, cash items and U.S. Government securities): (i)
50% or more of the value of which consists of stock and securities and (ii) 80%
or more of the value of which are held for investment.
REPRESENTATIONS
1. Bayonne (i) has not redeemed any shares of Bayonne Common Stock in
connection with the Merger, and will not redeem any shares of Bayonne
Common Stock prior to the Effective Time, and (ii) has not made any
extraordinary distributions with respect to the Bayonne Common Stock in
connection with the Merger, and will pay no dividends or distributions,
other than regular or normal dividends or distributions, with respect to
any Bayonne Common Stock prior to the Effective Time.
2. With the exception of a limited and insubstantial repurchase of its
stock (such repurchase is not planned to exceed 5% of outstanding stock,
and will occur only if approved by the regulatory authorities), no Bayonne
Related Party has purchased or otherwise acquired any shares of Bayonne
Common Stock in connection with the Merger, and no Bayonne Related Party
will purchase or acquire any shares of Bayonne Common Stock prior to the
Effective Time.
3. The fair market value of the RCFC Common Stock and other consideration
received by each Bayonne shareholder will be approximately equal to the
fair market value of Bayonne Common Stock surrendered by such shareholder
in the Merger.
4. The liabilities of Bayonne assumed by RCFC and the liabilities to which
the transferred assets of Bayonne are subject were incurred by Bayonne in
the ordinary course of its business.
5. RCFC, Bayonne and the shareholders of Bayonne will pay their respective
expenses, if any, incurred in the connection with the Merger.
6. There is no intercorporate indebtedness existing between RCFC and
Bayonne that was issued, acquired or will be settled at a discount.
7. Bayonne is not an Investment Company.
8. Bayonne is not under the jurisdiction of a court in a case under Title
11 of the United States Code [Bankruptcy] or in a receivership, foreclosure
or similar proceeding in a federal or state court.
2
<PAGE>
9. The fair market value and tax basis of the assets of Bayonne transferred
to RCFC will equal or exceed the sum of the liabilities assumed by RCFC,
plus the amount of liabilities, if any, to which the transferred assets are
subject.
10. The Merger is being effected for bona fide business reasons as
described in the Proxy Statement.
11. No compensation to be paid to shareholder-employees of Bayonne will be
separate consideration for, or allocable to, any of their shares of Bayonne
Common Stock. The compensation paid to such shareholder-employees will be
for services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's-length for similar services. None of
the RCFC Common Stock received by any such shareholder-employee will be in
exchange for, or in consideration of, services rendered to Bayonne, RCFC or
any other entity by such shareholder-employee.
12. The payment of cash in lieu of a fractional share interest in RCFC
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to RCFC of issuing fractional shares and does not represent
separately bargained-for consideration. Such cash payment will not be made
pro rata to all Bayonne shareholders. The total cash consideration that
will be paid in the Merger to Bayonne shareholders in lieu of fractional
shares of RCFC Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to Bayonne shareholders in
exchange for their shares of Bayonne Common Stock. The fractional share
interests of each Bayonne shareholder will be aggregated, and no Bayonne
shareholder will receive cash in an amount equal to or greater than the
value of one full share of RCFC Common Stock.
13. The Merger will be effected in accordance with the Merger Agreement.
By: /s/ Patrick F. X. Nilan
-------------------------
Patrick F. X. Nilan
Chairman of the Board
Bayonne Bancshares, Inc.
Date: January 8, 1999
3
<PAGE>
CERTIFICATE OF REPRESENTATIONS
------------------------------
TO: Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
I, Michael F. Manzulli, Chairman of the Board and Chief Executive Officer,
Richmond County Financial Corp., Inc., a Delaware corporation, duly registered
as a savings and loan holding company under HOLA ("RCFC"), with its principal
executive headquarters located in Staten Island, New York, for the purpose of
obtaining an opinion of counsel to be rendered by Muldoon, Murphy & Faucette LLP
regarding certain income tax consequences of the proposed merger (the "Merger")
of Bayonne Bancshares, Inc., a Delaware corporation ("Bayonne"), with and into
RCFC, hereby make the following representations to you ("Representations"). All
capitalized terms used but not defined in this certificate shall have the
meanings set forth in the Amended and Restated Agreement and Plan of Merger
amended and restated as of October 14, 1998 by and between RCFC and Bayonne (the
"Merger Agreement") and in the Joint Proxy Statement/Prospectus ("Proxy
Statement") included in RCFC's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission in connection with the Merger.
We recognize that your opinion may not accurately describe the income tax
consequences of the Merger if any of the following Representations is not
accurate. Such Representations are accurate as of the date of this letter and
you may assume that they will remain accurate through and including the
Effective Time unless we notify you otherwise.
The following definitions apply for purposes of the Representations set
forth below:
(a) An "RCFC Related Party" is any corporation that, prior to or after the
Merger, either (i) is a member of the same affiliated group of corporations of
which RCFC is a member (or will become a member by reason of the Merger or by
reason of any transaction related to the Merger) within the meaning of section
1504 of the Internal Revenue Code ("Code") (determined without application of
section 1504(b) of the Code), or (ii) owns (or will own by reason of the Merger
or by reason of any transaction related to the Merger) stock of RCFC possessing
at least 50% of the combined voting power of all classes of RCFC stock entitled
to vote or at least 50% of the total value of all RCFC stock.
(b) In determining the existence of an RCFC Related Party, a partner in a
partnership (or a member of a limited liability company or of any other entity
that is treated as a partnership for federal income tax purposes) shall be
treated as owning or acquiring any stock owned or acquired by the partnership in
accordance with that partner's interest in the partnership.
(c) "Merger Stock" means shares of RCFC Common Stock received by a Bayonne
shareholder in the Merger.
<PAGE>
(d) "Open Market Purchases" means purchases by RCFC of Merger Stock in the
open market as part of RCFC's ongoing stock repurchase program, provided that
such purchases constitute a small percentage of the RCFC Common Stock and that
such stock repurchase program was not created or modified in connection with the
Merger.
(e) The "RCFC Qualified Group" includes (i) any corporation in which RCFC
directly owns at least 80% of the total combined voting power and at least 80%
of the total number of nonvoting shares (such a corporation is a "Qualified
Corporation"; the stock ownership requirements together represent "80%
Ownership"), and (ii) any other corporation in which a Qualified Corporation has
80% Ownership. A corporation described in clause (ii) is itself a Qualified
Corporation.
(f) An "Investment Company" is a regulated investment company, a real
estate investment trust, or a corporation having total assets (including its
ratable share of the assets of any subsidiary which is 50% or more owned by such
corporation, measured by the combined voting power of all voting shares or by
the value of all shares of such subsidiary, and excluding cash, cash items and
U.S. Government securities): (i) 50% or more of the value of which consists of
stock and securities and (ii) 80% or more of the value of which are held for
investment.
REPRESENTATIONS
1. No shares of Bayonne Common Stock have been sold or otherwise transferred
to RCFC or to an RCFC Related Party in connection with the Merger, and
prior to the Effective Time, no such stock will be sold or otherwise
transferred to RCFC or to an RCFC Related Party.
2. In connection with the Merger, with the exception of a possible limited
and insubstantial repurchase of its stock by Bayonne (where such
repurchase is not planned to exceed 5% of outstanding stock, and will
occur only if approved by regulatory authorities), no RCFC Related Party
will acquire any shares of Bayonne Common Stock.
3. In connection with the Merger, no RCFC Related Party will acquire any
shares of RCFC Common Stock exchanged for Bayonne Common Stock in the
Merger.
4. Neither RCFC nor any RCFC Related Party has provided or will provide funds
to any party to purchase or otherwise acquire any shares of Bayonne Common
Stock from any Bayonne shareholder and neither RCFC nor any RCFC Related
Party will (i) purchase, redeem (other than redemptions by RCFC of
fractional shares of Merger Stock) or otherwise acquire any Merger Stock,
(ii) redeem any Merger Stock from any party that purchases or otherwise
acquires Merger Stock from an Bayonne shareholder, or (iii) provide funds
to permit any party to purchase or otherwise acquire Merger Stock. Open
Market Purchases shall be ignored for purposes of clauses (i) and (ii) of
this
2
<PAGE>
representation.
5. The fair market value of the RCFC Common Stock and other consideration
received by each Bayonne shareholder will be approximately equal to the
fair market value of the Bayonne Common Stock surrendered by such
shareholder in the Merger.
6. Following the Merger, RCFC will continue the historic business of Bayonne
or use a significant portion of Bayonne's business assets in a business.
7. RCFC has no plan or intention to sell or otherwise dispose of any of the
assets of Bayonne acquired in the Merger except for dispositions to be
made in the ordinary course of business or transfers of assets to a member
of RCFC's Qualified Group, or to a partnership of which RCFC (or a member
of RCFC's Qualified Group) is a partner and either (i) owns at least a
one-third interest or (ii) owns at least a 20% interest and performs
active and substantial management functions as a partner.
8. RCFC, Bayonne and shareholders of Bayonne will pay their respective
expenses, if any, incurred in connection with the Merger.
9. There is no intercorporate indebtedness existing between RCFC and Bayonne
that was issued, acquired or will be settled at a discount.
10. RCFC is not an Investment Company.
11. The fair market value and the tax basis of the assets of Bayonne
transferred to RCFC will equal or exceed he sum of the liabilities assumed
by RCFC, plus the amount of liabilities, if any, to which the transferred
assets are subject.
12. The Merger is being effected for bona fide business reasons as described
in the Proxy Statement.
13. After the Merger, no dividends or distributions will be made to former
Bayonne shareholders by RCFC other than regular or normal dividend
distributions made with regard to all shares of RCFC Common Stock.
14. No compensation to be paid to shareholder-employees of Bayonne will be
separate consideration for, or allocable to, any of their shares of
Bayonne Common Stock. The compensation paid to such shareholder-employees
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services. None of the RCFC Common Stock received by any such shareholder-
employee will be in exchange for, or in consideration of, services
rendered to Bayonne, RCFC or any other entity by such shareholder-
employee.
3
<PAGE>
15. The payment of cash in lieu of a fractional share interest in RCFC Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to RCFC of issuing fractional shares and does not represent separately
bargained-for consideration. Such cash payment will not be made pro rata
to all Bayonne shareholders. The total cash consideration that will be
paid in the Merger to Bayonne shareholders in lieu of fractional shares of
RCFC Common Stock will not exceed one percent of the total consideration
that will be issued in the Merger to Bayonne shareholders in exchange for
their shares of Bayonne Common Stock. The fractional share interests of
each Bayonne shareholder will be aggregated, and no Bayonne shareholder
will receive cash in an amount equal to or greater than the value of one
full share of RCFC Common Stock.
16. Following the Merger, any acquisitions of RCFC Common Stock pursuant to
any stock repurchase program of RCFC will be directed to RCFC shareholders
generally and will not directed specifically to Bayonne shareholders who
receive RCFC Common Stock pursuant to the Merger.
17. The Merger will effected in accordance with the Merger Agreement.
By: /s/ Michael F. Manzulli
-------------------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
Richmond County Financial Corp.
Date: January 8, 1999
4
<PAGE>
[LETTERHEAD OF McCARTER & ENGLISH, LLP APPEARS HERE]
January 8, 1999
Re: Merger of Bayonne Bancshares, Inc. with and into
Richmond County Financial Corp.
----------------------------------------------------------
Bayonne Bancshares, Inc.
568 Broadway
Bayonne NJ 07002
Ladies and Gentlemen:
You have requested our opinion with respect to certain Federal tax
consequences of a proposed transaction involving the merger of Bayonne
Bancshares Corp., a Delaware corporation ("Bayonne"), with and into Richmond
County Financial Corp., a Delaware corporation ("Richmond"), with Richmond as
the surviving corporation (the "Merger").
The proposed transaction is described in the section of this letter
entitled "Statement of Facts," and our opinion as to certain Federal tax
consequences of the Merger are set forth in the section of this letter entitled
"Opinion."
STATEMENT OF FACTS
The Merger will be effected pursuant to the provisions of a certain
Amended and Restated Agreement and Plan of Merger dated as of October 14, 1998,
by and between Richmond and Bayonne (the "Agreement"). Capitalized terms used
herein not otherwise defined shall have the meanings given to such terms in the
Agreement. This opinion is delivered pursuant to Section 5.3(e) of the
Agreement.
Subject to the terms and conditions of the Agreement, at the Effective
Time, Bayonne shall be merged with and into Richmond in accordance with the
provisions of the Delaware General Corporation Law ("DGCL") with Richmond as the
surviving corporation of the Merger.
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 2
Pursuant to the Agreement, at the Effective Time, each issued and
outstanding share of Bayonne Common Stock (other than Excluded Shares) shall be
canceled and converted into the right to receive 1.05 shares of Richmond Common
Stock (the "Exchange Ratio"). Other than the Common Stock referenced in the
foregoing sentence, neither Bayonne nor Richmond has any other class of stock
that is issued and outstanding.
Pursuant to the Agreement, at the Effective Time, each outstanding
Bayonne Option shall be converted into an option to acquire a number of shares
of Richmond Common Stock calculated by multiplying the number of shares of
Bayonne Common Stock subject to such Bayonne Option immediately prior to the
Effective Time by the Exchange Ratio and at an exercise price equal to the per
share exercise price of each Bayonne Option divided by the Exchange Ratio and
rounding up to the nearest cent (the "New Options"). The New Options shall
otherwise have the same terms and conditions, including expiration dates, as the
Bayonne Options.
No fractional shares of Richmond Common Stock will be issued in the
Merger, and in lieu thereof, any holder of any Bayonne stock who would otherwise
be entitled to receive a fractional share of Richmond Common Stock will receive
an amount in cash, rounded to the nearest cent, determined by multiplying such
fractional interest by the average closing price of Richmond Common Stock on the
NASDAQ National Market System for the fifteen (15) consecutive trading days
immediately preceding the Valuation Date.
Pursuant to Section 262(b) of the DGCL, it is not anticipated that a
holder of Bayonne Common Stock or Richmond Common Stock will have the right to
dissent from the transactions contemplated by the Agreement.
* * *
In providing the opinions set forth below, we have requested and
received certain specific representations from Richmond and Bayonne regarding
the Merger and related aspects of this transaction, all of which are set forth
below. We have expressly relied on such representations in rendering our
opinion. The parties to the Merger understand and acknowledge that any
inaccuracy in such representations (which shall be deemed made as of the date of
this letter and shall continue in force and effect through the Effective Time)
may cause some portion or all of the opinion set forth herein to be
undeliverable or inaccurate or inapplicable to the Merger in whole or in part.
Specifically, Richmond and Bayonne have represented that:
1. The fair market value of the Richmond Common Stock to be received
by each holder of Bayonne Common Stock in connection with the Merger will be
approximately equal to the fair market value of the Bayonne Common Stock
surrendered in the Merger.
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 3
2. The owners of Bayonne Common Stock shall receive in the Merger,
solely by virtue of owning Bayonne Common Stock, a number of shares of Richmond
Common Stock having a value, as of the date of the Merger, equal to or greater
than (50%) of the value of all of the formerly outstanding shares of capital
---
stock of Bayonne as of the same date. The Richmond Common Stock issued in
exchange for the Bayonne Common Stock will not be redeemable by Richmond.
3. There is no plan or intention on the part of the shareholders of
Bayonne who, individually or collectively, own five percent (5%) or more of the
stock of Bayonne and, to the best knowledge of the management of Bayonne, there
is no plan or intention on the part of the remaining shareholders of Bayonne, to
sell, exchange, grant an option to buy, or otherwise transfer to Richmond or any
person related to Richmond (within the meaning of Regulation Section 1.368-
1(e)), a number of shares of Richmond Common Stock to be received in the Merger
that would cause the remaining shares of Richmond Common Stock owned by the
former shareholders of Bayonne to have a value, as of the date of the Merger, of
less than fifty percent (50%) of the value of all of the formerly outstanding
shares of stock of Bayonne as of the same date. For purposes of this
representation, the Dissenters' Shares (if any) or shares of Bayonne Common
Stock exchanged for cash in lieu of fractional shares of Richmond Common Stock
are treated as outstanding stock of Bayonne on the date of the Merger.
Moreover, shares of Bayonne capital stock and shares of Richmond capital stock
held by shareholders of Bayonne and otherwise sold, redeemed or disposed of
prior to or subsequent to the Merger are taken into account in making this
representation.
4. Richmond has no plan or intention to reacquire more than ten
percent (10%) of its Common Stock issued in the Merger.
5. Richmond has no plan or intention to sell or otherwise dispose of
any of the assets of Bayonne it acquires in the Merger, except for dispositions
appropriate in the ordinary course of business.
6. The payment of cash in lieu of fractional shares of Richmond
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Richmond of issuing fractional shares of Richmond Common Stock and does not
represent separately bargained for consideration. The total cash consideration
that will be paid in the Merger to Bayonne shareholders in lieu of fractional
shares of Richmond Common Stock will not exceed one percent (1%) of the
aggregate consideration that will be issued to all Bayonne shareholders with
respect to their Bayonne Common Stock surrendered in the transaction.
7. The liabilities of Bayonne to be assumed by Richmond (if any) in
the Merger and the liabilities to which the transferred assets of Bayonne are
subject (if any) were incurred by Bayonne in the ordinary course of its
business.
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 4
8. Following the Merger, Richmond will continue the historic
business of Bayonne and use a significant portion of Bayonne's historic business
assets in a business.
9. Richmond, Bayonne, and the shareholders of Bayonne will pay their
own respective expenses, if any, incurred in connection with the Merger.
10. There is no intercorporate indebtedness existing between Bayonne
and Richmond that was issued, acquired, or will be settled at a discount in
connection with the Merger.
11. No parties to the Merger are investment companies as defined in
Code Section 368(a)(2)(F)(iii) of the Internal Revenue Code of 1986, as amended
(the "Code").
12. Bayonne is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Code Section 368(a)(3)(A).
13. The fair market value of the assets of Bayonne to be transferred
to Richmond in the Merger will be equal to or will exceed the sum of the
liabilities to be assumed by Richmond pursuant to the Merger, as increased by
any liabilities to which the transferred assets are subject.
14. The Merger is based on valid business purposes unrelated to the
avoidance of Federal income tax and will constitute a statutory merger under the
laws of the states of incorporation and the applicable jurisdictions of the
corporations involved in the Merger.
15. None of the compensation received by any shareholder of Bayonne
who is also an employee of Bayonne or the Bank (as defined below) shall be
separate consideration for, or allocable to, any of his or her shares of Bayonne
Common Stock acquired by Richmond in the Merger; none of the shares of Richmond
Common Stock issued in the Merger shall constitute separate consideration for,
or be allocable to, any employment agreement; and the compensation paid to any
shareholder of Bayonne who is also an employee of Bayonne or the Bank shall be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 5
LIMITATIONS ON OPINION
Our opinion expressed herein is based solely upon the facts and
representations set forth above and in the Agreement and the Registration
Statement/Form S-4 prepared by Richmond. To the extent any of the facts or
representations relied on by us are not truthful or are inaccurate to any
extent, the opinion contained herein would necessarily have to be modified in
whole or in part or may be rendered undeliverable.
We have examined the Agreement and the Registration Statement/Form S-4
prepared by Richmond. In such examination, we have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us. As to any
facts material to our opinion expressed herein, we have relied on the documents
described above and the representations of the parties to the Merger set forth
above without undertaking to verify any such facts by independent investigation.
Our opinion is based on our analysis of the Code, the applicable
United States Treasury Department Regulations promulgated thereunder (the
"Regulations"), current positions of the Internal Revenue Service (the
"Service") contained in published revenue rulings and revenue procedures,
current administrative positions of the Service and existing judicial decisions,
all of which are subject to change or modification at any time. Any future
amendment or amendments to the Code, the Regulations or any new Federal judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause the opinion set forth herein to require modification or
could render such opinion undeliverable. No opinion is expressed herein with
regard to the Federal tax consequences of the Merger under any sections of the
Code except if and to the extent such section is specifically referenced below.
OPINION
Based solely upon the forgoing facts and representations, and assuming
the proposed transaction occurs in accordance with the Agreement (and taking
into consideration the limitations set forth above and at the end of this
opinion), it is our opinion that under current Federal tax law:
1. The Merger will qualify as a "reorganization" within the meaning
of Code Section 368(a)(1)(A).
2. No gain or loss will be recognized for Federal income tax
purposes by Bayonne on the transfer of its assets to Richmond and the assumption
by Richmond of Bayonne's liabilities pursuant to the Merger. Code Sections
361(a) and 357(a).
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 6
3. Richmond will recognize no gain or loss for Federal income tax
purposes upon the receipt by Richmond of Bayonne's assets in exchange for
Richmond Common Stock, the assumption by Richmond of the liabilities of Bayonne,
and payments by Richmond to shareholders of Bayonne in lieu of fractional
shares, all in accordance with and pursuant to the Merger. Code Section 1032.
4. No gain or loss will be recognized for Federal income tax
purposes by First Savings Bank of New Jersey, SLA ("Bank"), a wholly-owned
subsidiary of Bayonne, as a result of the Merger.
5. No gain or loss shall be recognized by Richmond County Savings
Bank ("Richmond Bank"), a wholly-owned subsidiary of Richmond, as a result of
the Merger.
6. No gain or loss will be recognized for Federal income tax
purposes by the holders of Bayonne Common Stock who, pursuant to the Merger,
receive no consideration for such Bayonne Common Stock other than Richmond
Common Stock (except to the extent such holders of Bayonne Common Stock receive
cash in lieu of fractional shares of Richmond Common Stock in connection with
the Merger pursuant to the Agreement).
7. Holders of Bayonne Common Stock receiving cash in lieu of
fractional shares of Richmond Common Stock will be treated for Federal income
tax purposes as if such fractional shares of Richmond Common Stock had been
issued by Richmond and then subsequently redeemed by Richmond and will be taxed
on any gain recognized in such deemed redemption in an amount which shall not
exceed the amount of cash received. Code Section 356(a). Whether the cash
received by a holder of Bayonne Common Stock in lieu of fractional shares of
Richmond Common Stock is characterized as a dividend (taxable as ordinary
income) or as payment in exchange for Richmond Common Stock (taxable as capital
gain) will depend on whether such distribution of cash, when viewed as part of
the Merger as a whole and as the proceeds of a redemption by Richmond, more
closely resembles or represents a dividend distribution or, alternatively, a
payment in exchange for Richmond Common Stock under principles analogous to
those set forth in Code Section 302(b).
8. The basis of the Richmond Common Stock received by the holders of
Bayonne Common Stock and exchanged for such stock pursuant to the Merger will
be, in each instance, the same as the adjusted basis of the Bayonne Common Stock
surrendered in exchange therefor. Code Section 358(a).
9. The holding period of the Richmond Common Stock received by the
holders of Bayonne Common Stock and exchanged for such Bayonne Capital Stock
pursuant to the Merger will include the period during which such holders of
Bayonne Common Stock held
<PAGE>
McCARTER & ENGLISH, LLP
Bayonne Bancshares, Inc.
January 8, 1999
Page 7
such Bayonne Common Stock, provided that the Bayonne Common Stock to be
surrendered in the Merger is held as a capital asset by the holders thereof.
Code Section 1223(1).
We express no opinion with regard to the Federal tax consequences that
can be anticipated by the holders of Bayonne Options, or that can be anticipated
by Richmond or Bayonne as a result of the redemption, cancellation and/or
conversion of Bayonne Options, pursuant to the Merger or any related
transactions. We also express no opinion with respect to the tax consequences
to any individual holding restricted stock, or options to purchase stock, of
Bayonne which may vest as a result of the Merger.
Since this letter is being provided in advance of the Effective Time
and prior to the consummation of the Merger, we have assumed that the Merger
will be consummated in accordance with the Agreement, and that the facts and
representations on which we have relied will remain unchanged from the date of
this letter through the Effective Time. Any change in the terms or provisions
of the Merger or in any related fact, circumstance, representation or
transaction may necessitate the modification or withdrawal of our opinion. In
the event any such change occurs, we will have no obligation to modify our
opinion as set forth herein unless we are requested to do so in writing by you
and are advised of any and all such changes. This opinion represents our views
as to the interpretation of existing law and cannot be taken as an assurance as
to the manner in which the law will subsequently develop. Accordingly, no
assurance can be given that the Service will not alter its present positions as
they relate to our opinion either prospectively or retrospectively, or will not
adopt new positions with regard to any of the matters upon which we are
rendering an opinion, nor can any assurance be given that the Service will not
audit Richmond, Bayonne, Richmond Bank or the Bank and/or question or challenge
any portion or aspect of the opinion expressed herein. The Service is not bound
in any way by the opinion expressed herein.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement/Form S-4 of Richmond and to the references to and the
summary of this opinion in such Registration Statement/Form S-4.
Except as provided above, this opinion is delivered solely for the
benefit of Richmond, Bayonne, and the shareholders of Richmond and Bayonne and
may not be relied upon by, nor may copies be delivered to, any other person
without our prior written consent.
Very truly yours,
/s/ McCarter & English, LLP
McCarter & English, LLP
<PAGE>
EXHIBIT 23.4
Consent of Ernst & Young LLP
Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 6, 1998, included in the Joint Proxy
Statement/Prospectus of Richmond County Financial Corp. that is made a part of
the Registration Statement for the registration of 10,041,277 shares of its
common stock.
/s/ Ernst & Young LLP
-------------------------
Ernst & Young LLP
New York, New York
January 8, 1999
<PAGE>
EXHIBIT 23.5
INDEPENDENT ACCOUNTANT'S CONSENT
The Board of Directors
Bayonne Bancshares, Inc.:
We consent to the incorporation by reference into the registration statement on
Form S-4 of Richmond County Financial Corp. of our report dated April 27, 1998,
with respect to the consolidated statements of financial condition of Bayonne
Bancshares, Inc. and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended March 31, 1998, which report
appears in the Form 10-K of Bayonne Bancshares, Inc., incorporated by reference
into the registration statement on Form S-4 of Richmond County Financial Corp.,
and to the reference to our Firm under the heading "Experts" in the registration
statement.
/s/ KPMG LLP
-----------------------------
KPMG LLP
Short Hills, New Jersey
January 8, 1999
<PAGE>
EXHIBIT 99.4
REVOCABLE PROXY
RICHMOND COUNTY FINANCIAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF RICHMOND COUNTY FINANCIAL CORP.
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
________________, 1999.
The undersigned shareholder of Richmond County Financial Corp. (the "Com
pany") hereby appoints the Board of Directors of the Company or any successors
thereto as proxies, each of them with full power of substitution, to attend and
act as proxy for the undersigned and to cast all votes which the undersigned
stockholder is entitled to cast at the special meeting of the stockholders of
the Company to be held at __:00 a.m., local time on ___________, 1999, at the
_____________________________________________, and any and all adjournments and
postponements thereof (the "Special Meeting"), with all powers which the
undersigned would possess if personally present (i) as designated below with
respect to the matters set forth below and described in the accompanying Joint
Proxy Statement/Prospectus, the receipt of which is hereby acknowledged, and
(ii) in their discretion with respect to any other business that may properly
come before the Special Meeting. The undersigned stockholder hereby revokes any
proxy or proxies heretofore given.
This proxy will be voted in the manner directed by the undersigned
stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED (1) FOR APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT (AS DEFINED HEREIN), (2) FOR THE
RATIFICATION OF CERTAIN AMEND MENTS TO THE RICHMOND COUNTY FINANCIAL CORP. 1998
STOCK-BASED INCENTIVE PLAN AND (3) IN THE DISCRETION OF THE PROXIES AS TO ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
(CONTINUED--TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND FOR THE RATIFICATION OF CERTAIN AMENDMENTS TO THE RICHMOND
COUNTY FINANCIAL CORP. 1998 STOCK-BASED INCENTIVE PLAN.
1. Approval and adoption of the Amended and Restated Agreement and Plan of
Merger, amended and restated as of October 14, 1998, by and between the
Richmond County Financial Corp. and Bayonne Bancshares, Inc. pursuant to
which, among other things, Bayonne Bancshares, Inc. will merge with and
into Richmond County Financial Corp.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. The ratification of certain amendments to the Richmond County Financial
Corp. 1998 Stock-Based Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjourn
ment or postponement thereof. As of the date of the Special Meeting,
management of the Company is not aware of any such other business.
<PAGE>
This proxy may be revoked prior to the time it is voted by delivering to
the secretary of the Company either a written revocation or a proxy bearing a
later date or by appearing at the Special Meeting and voting in person. The
undersigned hereby acknowl edges receipt of the Notice of the Special Meeting
of Shareholders and the Joint Proxy Statement/Prospectus, dated _____, 1999, for
the Special Meeting.
Dated: ___________________
Signature: _______________
Signature: _______________
Title: ___________________
(Please date and sign here exactly as name appears
at left. When signing as attorney, ad ministrator,
trustee or guardian, give full title as such; and
when stock has been issued in the name of two or
more persons, all should sign.)
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE DATE,
SIGN AND RETURN ALL CARDS IN THE ACCOMPANYING ENVELOPE
<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>
