<PAGE>
As filed with the Securities and Exchange Commission on January 27, 1999
Registration No. 333-66749
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
PRE-EFFECTIVE AMENDMENT NO. 4 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
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(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
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1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
(Address, including Zip Code and Telephone Number,
including Area Code, of Registrant's Principle Executive Offices)
Michael F. Manzulli
Chief Executive Officer
1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
(Name, Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service)
-----------------------
Copies to:
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 07102
Washington, D.C. 20016 (973) 622-4444
(202) 362-0840
-----------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this Registration Statement
and the satisfaction or waiver of all other conditions to the merger
described in the Joint Proxy Statement/Prospectus.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
-----------------------
Calculation of Registration Fee
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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. 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. As of ____________, this was worth about
$_______. 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, _________ __, 1999
10:00 a.m. local time 10:00 a.m. local time
Columbian Lyceum -------------------------
386 Clove Rd -------------------------
Staten Island, New York 10310 -------------------------
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 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 ___________ __, 1999
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of
Richmond County Financial Corp. ("Richmond County"), will be held at the
Columbia Lyceum, 386 Clove Road, Staten Island, New York, 10310 on
_________ __, 1999 at 10:00 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
January 19, 1999 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
_______, 1999
<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 _________ __, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Bayonne Bancshares, Inc. ("Bayonne") will be held at ____________,
________________, ________, New Jersey on ___________ __, 1999 at 10:00
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 January
19, 1999 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
- ---------,1999
<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.................................................................. 1
Richmond County Stockholders...................................................... 1
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.................................. 2
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................................................. 3
Differences in the Rights of Richmond County's and Bayonne's
Stockholders.................................................................. 4
Our Reasons for the Merger........................................................ 4
Our Recommendations to Stockholders............................................... 4
The Transaction is Fair to Stockholders According to Two Investment
Advisors...................................................................... 4
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.................................. 6
Bayonne Merger Stock Option Agreement............................................. 6
The Ironbound Merger................................................................... 7
INDEX OF DEFINED TERMS...................................................................... 8
SELECTED HISTORICAL FINANCIAL DATA OF
RICHMOND COUNTY AND BAYONNE............................................................ 10
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL INFORMATION.................................................................. 17
COMPARATIVE PER SHARE DATA.................................................................. 19
THE COMPANIES............................................................................... 20
Richmond County........................................................................ 20
Bayonne................................................................................ 20
WHERE YOU CAN FIND MORE INFORMATION......................................................... 21
FORWARD-LOOKING STATEMENTS.................................................................. 23
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MARKET PRICES AND DIVIDEND INFORMATION............................................. 24
THE STOCKHOLDERS' MEETINGS......................................................... 25
MEETING OF RICHMOND COUNTY STOCKHOLDERS............................................ 25
Date, Time and Place; Purpose of Meeting...................................... 25
Who Can Vote on Matters Addressed in this Document............................ 25
Proxies; Voting and Revocation of Proxies..................................... 26
Vote Required; Principal Stockholders......................................... 27
BENEFICIAL OWNERSHIP OF RICHMOND COUNTY COMMON STOCK............................... 28
Owners of 5% of Richmond County Common Stock.................................. 28
What Richmond County's Directors and Executive Officers Own................... 29
MEETING OF BAYONNE STOCKHOLDERS.................................................... 30
Date, Time and Place; Purpose of Meeting...................................... 30
Who Can Vote on Matters Addressed in this Document............................ 30
Proxies; Voting and Revocation of Proxies..................................... 31
Vote Required; Principal Stockholders......................................... 32
BENEFICIAL OWNERSHIP OF BAYONNE COMMON STOCK....................................... 34
Owners of 5% of Bayonne Common Stock.......................................... 34
What Bayonne's Directors and Executive Officers Own........................... 35
PROPOSAL NO. 1 FOR THE RICHMOND COUNTY AND BAYONNE STOCKHOLDERS:
THE MERGER.................................................................... 36
General....................................................................... 36
Background of the Merger...................................................... 36
Recommendation of the Richmond County Board; Richmond County's Reasons
for the Merger........................................................... 39
The Transaction is Fair to Richmond County's Stockholders According to
Richmond County's Investment Advisor..................................... 41
Material Projections Shared Between the Companies in Negotiating the Merger
Agreement................................................................ 49
Recommendation of the Bayonne Board; Bayonne's Reasons for the Merger......... 50
The Transaction is Fair to Bayonne's Stockholders According to Bayonne's
Investment Advisor....................................................... 52
Bayonne Stockholders Will Receive 1.05 Shares of Richmond County Common
Stock for Each Bayonne Share............................................. 60
Procedures for Exchanging Your Stock Certificates............................. 62
Richmond County.......................................................... 62
Bayonne.................................................................. 62
Interests of Directors and Officers in the Merger that are Different from Your
Interests................................................................ 62
Management and Operations Following the Merger................................ 64
Employee Matters.............................................................. 64
Conditions to the Merger...................................................... 65
Regulatory Approvals Needed to Complete the Merger............................ 67
Conduct of Business Pending the Merger........................................ 68
Representations and Warranties Made by Richmond County and Bayonne in the
Merger Agreement......................................................... 71
What Happens if a Third Party Offers to Buy Bayonne........................... 71
Waiving and Amending Provisions in, or Terminating the Merger Agreement....... 72
Price-Based Termination of the Merger Agreement............................... 73
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Nasdaq National Market Listing................................................ 73
Accounting Treatment of the Merger............................................ 73
Tax-Free Transaction for Bayonne Stockholders................................. 74
Selling the Richmond County Common Stock You Receive in the Merger............ 74
You Do Not Have Appraisal Rights in the Merger................................ 75
Who Pays For What............................................................. 75
When Will the Merger Be Completed............................................. 75
CERTAIN RELATED TRANSACTIONS....................................................... 76
Bayonne Merger Stock Option Agreement......................................... 76
Effect of the Bayonne Merger Stock Option Agreement...................... 77
Bank Merger Agreement......................................................... 77
THE IRONBOUND MERGER............................................................... 78
REGULATION AND SUPERVISION......................................................... 78
General....................................................................... 78
New York State Law............................................................ 78
FDIC Regulations.............................................................. 79
Investment Activities......................................................... 81
Transactions with Companies or Entities that Control Savings Banks............ 81
The FDIC's Enforcement Authority.............................................. 82
Insurance of Deposit Accounts................................................. 82
Payment of Financing Corporation Bonds........................................ 83
Federal Reserve System........................................................ 83
Community Reinvestment Act.................................................... 83
Holding Company Regulation.................................................... 84
Interstate Banking and Branching.............................................. 85
DESCRIPTION OF RICHMOND COUNTY CAPITAL STOCK....................................... 86
General....................................................................... 86
Common Stock.................................................................. 87
Preferred Stock............................................................... 87
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS....................................... 87
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS........... 89
ADDITIONAL MATTERS TO BE CONSIDERED AT THE RICHMOND COUNTY MEETING................. 98
Proposal No. 2 for the Richmond County Stockholders:
Ratification of the Amendments to the Richmond County Financial
Corp. 1998 Stock-Based Incentive Plan.................................... 98
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ADDITIONAL MATTERS TO BE CONSIDERED AT THE BAYONNE MEETING............................ 99
Proposal No. 2 for Bayonne Stockholders:
Election of Bayonne Directors............................................... 99
Information with Respect to the Nominees, Continuing Directors and Executive
Officers of Bayonne......................................................... 99
Compensation Committee and Insider Participation in Compensation Decisions....... 101
Directors' Compensation.......................................................... 101
Executive Compensation........................................................... 102
Summary Compensation Table....................................................... 106
Employment Agreements............................................................ 107
Change in Control Agreements..................................................... 108
Retirement Plan.................................................................. 108
Option Exercises and Year-End Value.............................................. 110
Transactions With Certain Related Persons........................................ 110
Stock Performance Graph.......................................................... 111
Proposal No. 3 for Bayonne Stockholders:
Ratification of Appointment of Independent Auditors......................... 112
ADDITIONAL INFORMATION................................................................ 112
If You Want to Have a Stockholder Proposal Included in Bayonne's Proxy
Statement Relating to the 1999 Annual Stockholders' Meeting................. 112
Notice of Business to be Conducted at a Bayonne Meeting.......................... 112
LEGAL MATTERS......................................................................... 113
EXPERTS............................................................................... 113
STOCKHOLDER PROPOSALS................................................................. 113
INFORMATION NOT REQUIRED IN PROSPECTUS................................................ II-1
SIGNATURES............................................................................ II-8
EXHIBIT INDEX......................................................................... II-10
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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 prospectus.
It does not contain all of the information that is important to you. You
should carefully read the entire 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 ________ __, 1999 at 10:00 a.m., local time, at the Columbian Lyceum, 386
Clove Road, Staten Island, New York 10310. 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 __________ __,
1999 at 10:00 a.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
4. 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
1
<PAGE>
stockholders if you owned Richmond County common stock at the close of business
on January 19, 1999. 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's stock 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 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 merger agreement, Richmond County common stock closed at $12.25 per
share and Bayonne common stock closed at $12.00 per share. On January 19, 1999,
Richmond County common stock
2
<PAGE>
closed at $15.81 per share and Bayonne common stock closed at $16.43 per share.
Based on the exchange ratio in the merger, the amount that Bayonne stockholders
will receive in the merger for each share of Bayonne common stock would be
$16.60 based on Richmond County's closing stock price on January 19, 1999. 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 __)
Delaware law does not provide you with appraisal rights in the merger. This
means that if you are not satisfied with what you are receiving as consideration
in the merger, you are not legally entitled to have the value of your interest
---
independently determined and receive payment based on that valuation.
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.
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 payment or entitlement of or to benefits
under employee benefit plans sooner than if the merger had not happened. For
example, 49,684 shares of restricted Bayonne common stock for which these people
would otherwise have waited longer to have 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
3
<PAGE>
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 protect
directors and officers of Bayonne against the cost of events occurring before
the merger, including events related to the merger. This protection and
insurance will be in addition to the protection 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 in the merger that
should have a beneficial effect on our earnings per share. To review our reasons
for the merger in greater detail, as well as how we came to agree on the merger,
please see pages __ through __.
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGES __ AND __)
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
4
<PAGE>
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.
2. Approval of the merger 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
5
<PAGE>
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, or if any government authority issues an
order that blocks the merger.
2. We do not complete the merger 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
termination date would be extended to 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 violated 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 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 prevent 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 SEC.
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. In those cases, the
stockholders negatively impacted by the change would have to 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.
6
<PAGE>
Bayonne granted the option to increase the likelihood that we would complete the
merger. The option agreement could discourage other companies from trying or
proposing to combine with Bayonne before we complete the merger.
THE IRONBOUND MERGER (PAGE__)
In a separate and unrelated transaction, Richmond County is also acquiring
Ironbound Bankcorp, NJ. Ironbound is a New Jersey bank holding company. It
operates Ironbound Bank. Ironbound Bank is a commercial bank that operates three
branches in the New Jersey counties of Union and Essex. At September 30, 1998,
Ironbound had total assets of $115.3 million, deposits of $102.8 million, and
stockholders' equity of $11.5 million. The Ironbound merger does not require the
approval of the Richmond County or Bayonne stockholders.
7
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"Bank Index" ..............................................................
"critically undercapitalized" .............................................
"FASB" ....................................................................
"GAAP" ....................................................................
"Highly Valued Group" .....................................................
"Large Thrift Highly Valued Group" ........................................
"Peer Group" ..............................................................
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
"QTL" .....................................................................
"QTL Test" ................................................................
"qualified thrift investments" ............................................
"Regional Group" ..........................................................
"Regional Transactions" ...................................................
"risk-based capital ratio" ................................................
"Selected Market Transactions" ............................................
"Selected U.S. Transactions" ..............................................
"significantly undercapitalized" ..........................................
"Tier I" ..................................................................
"Tier II" .................................................................
"undercapitalized" ........................................................
"well capitalized" ........................................................
</TABLE>
9
<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 SEC 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.
10
<PAGE>
RICHMOND COUNTY FINANCIAL CORP.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
Richmond County's consolidated selected historical unaudited financial and
other data has three sections: selected consolidated financial condition data,
selected consolidated operating data and selected consolidated financial ratios
and other data.
On July 1, 1994, the Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 115 ( "SFAS No. 115") "Accounting for Certain Investments
in Debt and Equity Securities. Under SFAS No. 115, all affected debt and equity
securities must be classified as held-to-maturity, trading, or available-for-
sale. Classification is important because it affects the carrying amount of the
security, as well as the timing of gain or loss recognition in the income
statement.
In November 1995 the Bank reclassified securities having a market value of
$26 million from its held-to-maturity portfolio to its available-for-sale
portfolio. In February 1998, in connection with its reassessment of its
asset/liability management strategy, implemented at that time, transferred its
entire held-to-maturity portfolio to its available-for-sale portfolio.
At the time of its conversion, February 18, 1998, from a mutual savings
bank to a stock form of ownership, formed the Richmond County Savings
Foundation. As a result, Richmond County contributed 1,957,300 shares of its
common stock valued at $19.6 million ($11.2 million net of tax). The effect of
this one-time non-recurring charge was an increase in non-interest expense of
$19.6 million for the year ended June 30, 1998.
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share includes the effect of all potential
common shares (such as stock options) that were dilutive and outstanding during
the period. For the three months ended September 30, 1998 basic and diluted
earnings per share were $0.22. At June 30, 1998, the Richmond County reported
basic and diluted loss per share of $0.16. The loss per share reflected the
operations of Richmond County from date of conversion, February 18, 1998 through
June 30, 1998, and included the non-recurring charge relating to the foundation.
On a pro forma basis, had Richmond County Savings converted as of July 1, 1997,
basic and diluted earnings per share, for the year ended June 30, 1998, would
have been $0.19. Basic and diluted earnings per share is not applicable to years
prior to July 1, 1997, as Richmond County Financial Corp. had no outstanding
shares prior to February 18, 1998.
<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:
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:
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............................ 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............................. 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.......................... -- -- -- -- -- (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..................................... $ .22 N/A $ (0.16) N/A N/A N/A N/A
========== ==========
</TABLE>
(footnotes on next page)
11
<PAGE>
BAYONNE BANCSHARES, INC.
SELECTED HISTORICAL UNAUDITED FINANCIAL AND OTHER DATA
(In thousands, except per share amounts)
Listed below are selected financial and other data of Bayonne. This
information is derived in part from and should be read in conjunction with the
Consolidated Financial Statement of Bayonne and the Notes to those statements
included in Bayonne's Form 10-K, as amended, as of March 31, 1998. The selected
financial and other data at or for the six month periods ended September 30,
1998 and 1997 are unaudited. However, in the opinion of management, all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation at such dates and for such periods have been made. The results of
operations for the six-month period ended September 30, 1998, are not
necessarily indicative of results that may be expected for a full fiscal year.
At the time of First Savings' reorganization into a mutual holding company
structure in 1995, First Savings changed its fiscal year-end from May 31 to
March 31. 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 and was $1.1 million, compared to $838,000 for
the three months ended June 30, 1997.
Loans receivable, net, excludes loans to joint ventures of First Savings'
subsidiaries. U.S. Government and agency obligations, net of valuation allowance
at September 30, 1998 and 1997, March 31, 1998, 1997, 1996 and 1995 and May 31,
1994 includes $80.3 million $61.1 million, $61.1 million, $69.5 million, $67.6
million, $92.6 million, $64.3 million and $64.1 million of those securities, net
of valuation allowances 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 those securities classified as held to maturity.
Mortgage securities include mortgage-backed securities and mutual funds that
invest primarily in mortgage-backed securities, net of valuation allowance. At
September 30, 1998 and 1997 and March 31, 1998, 1997, 1996 and 1995 and May 31,
1994, all such securities were classified as available for sale.
<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................... 308,789 231,820 235,465 235,624 224,028 218,554 188,980
U.S. Government and agency obligations,
net of valuation allowance..................... 88,208 76,931 77,446 76,489 101,729 148,062 146,806
Mortgage securities, net........................ 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>
12
<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)
13
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS TEN MONTHS YEAR
ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, /(9)/ 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.
14
<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.
15
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
OF RICHMOND COUNTY, IRONBOUND AND BAYONNE
<TABLE>
<CAPTION>
AT
SEPTEMBER
30,
1998
------------
<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.
16
<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.
17
<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. 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."
18
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Richmond County and Bayonne file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Richmond County and Bayonne public filings are also
available to the public from commercial document retrieval services and at the
Internet World Wide Website maintained by the SEC at "http://www.sec.gov. "
Richmond County has filed the Registration Statement to register with the
SEC the shares of Richmond County common stock to be issued to Bayonne
stockholders in the merger. This 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 meeting and a proxy statement of Bayonne
for the Bayonne 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.
RICHMOND COUNTY SEC FILINGS (FILE NO. 0-23271)
Registration Statement on Form 8-A Dated October 27, 1997
Quarterly Report on Form 10-Q Three months ended March 31, 1998
Annual Report on Form 10-K Year ended June 30, 1998
Quarterly Report on Form 10-Q Three months ended September 30, 1998
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
Richmond County and Bayonne incorporate by reference additional documents
that they might file with the SEC between the date of this 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
19
<PAGE>
on Form 10-K for the Year Ended March 31, 1998 as well as subsequent quarterly
reports on Forms 10-Q, and any amendments to these forms, 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 prospectus. Stockholders of Richmond County or
Bayonne may obtain documents incorporated by reference in this 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
February 12, 1999 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 prospectus is dated ______________, 1999. You should not assume
that the information contained in the prospectus is 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
20
<PAGE>
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.
21
<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 January 19, 1999)..... $16.44 $15.00 N/A/(1)/ $16.75 $15.38 N/A/(1)/
</TABLE>
___________
(1) As of January 19, 1999 neither Richmond County nor Bayonne had declared
their dividends for the first calendar quarter of 1999.
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, which
is the last business day preceding the public announcement of the amendments to
the merger agreement, and (2) January 19, 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
January 19, 1999...... $15.81 $16.13 $16.60
</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 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
22
<PAGE>
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 the Columbian Lyceum, 386 Clove
Road, Staten Island, New York 10310, on ________ __, 1999 at 10:00 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."
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 January 19, 1999 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 25,192,550 shares of Richmond County
23
<PAGE>
common stock outstanding and entitled to be voted, 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 each share of stock owned. However, Richmond
County's Certificate of Incorporation provides that record holders of common
stock who are considered to 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
considered to be the 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.
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;
24
<PAGE>
. 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. 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 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 persons closely associated with them, may be deemed to have 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 stock incentive plan. These
persons have informed
25
<PAGE>
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
were considered to have owned 900 shares of Richmond County common stock. See
"CERTAIN RELATED TRANSACTIONS -- Bayonne Merger Stock Option Agreement. "
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 may be considered to be the 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 "-- What Richmond
County's Directors and Executive Officers Own," a person may be considered to
own any shares of Richmond County common stock (1) over which he or she has,
directly or indirectly, sole or shared voting or investing power, or (2) of
which he or she has the right to acquire ownership, including the right to
acquire beneficial ownership by the exercise of stock options, within 60 days
after September 30, 1998.
<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 1,957,300/(2)/ 7.4%
Foundation
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.
(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.
26
<PAGE>
WHAT RICHMOND COUNTY'S DIRECTORS AND EXECUTIVE OFFICERS OWN
The following table provides information about the shares of Richmond
County common stock are owned or may be deemed to be 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 investing 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 stock incentive plan. See "ADDITIONAL MATTERS TO BE
CONSIDERED AT THE RICHMOND COUNTY MEETING" for a discussion of the granting
of such options and awards.
(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.
27
<PAGE>
MEETING OF BAYONNE STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
The Bayonne meeting will be held on ________ __, 1999, at 10:00 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 THOSE 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 BEST INTERESTS AND
UNANIMOUSLY RECOMMENDS THAT BAYONNE'S STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF 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 has fixed the close of business on January 19, 1999 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 the Bayonne record date are entitled to
receive notice and to vote. At the close of business on the Bayonne record date,
there were 9,144,507 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 .
28
<PAGE>
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 are deemed to 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 persons closely associated
with them.
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 REGISTERED IN YOUR OWN NAME,
--------------------------------------------------------------------------
YOU WILL NEED ADDITIONAL 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.
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 may be considered to be owned by
others, to forward proxy materials to and obtain proxies from the owners, and
will reimburse the record holders for their reasonable expenses incurred in
doing so .
29
<PAGE>
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 attendance at the meeting in order
to answer any questions you might have.
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 Bayonnes and
persons closely associated with them, are considered to have 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,
and 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
30
<PAGE>
executive officers of Richmond County are considered to have 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 to this document as Annex B. Under the 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 any ownership interest of these 1,809,804 shares. See
"CERTAIN RELATED TRANSACTIONS --Bayonne Merger Stock Option Agreement. "
31
<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 owns or may be considered to be the 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 BENEFICIAL COMMON STOCK
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OUTSTANDING/ (1)/
- ---------------- ------------------------------------- --------------- -----------------
<S> <C> <C> <C>
Common Stock First Savings Bank of New Jersey, SLA 708,179/(1)/ 7.76%
Employee Stock Ownership Plan
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. 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.
32
<PAGE>
WHAT BAYONNE'S DIRECTORS AND EXECUTIVE OFFICERS OWN
The following table provides information on the shares of Bayonne common
stock considered to be 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 investing power over their
shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME TITLE 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 Bayonne's
recognition and retention plans, 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
Bayonne's recognition and retention plan and the Bayonne incentive plan
vest in equal installments of 20% per year. Upon completion of the second-
step conversion, Bayonne adopted Bayonne's recognition and retention plan
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 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
Bayonne's recognition and retention plan 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 Bayonne's,
recognition and retention plan that have not vested. Shares awarded under
Bayonne's recognition and retention plan 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 Bayonne's recognition and retention
plan as to which voting may be directed. Includes 83,337 options awarded
under the 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.
33
<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 the merger
agreement carefully.
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 -- 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 to 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 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 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,
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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. 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. 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. 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.
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
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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 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
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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 would not
be protected 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 of the 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:
(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;
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(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;
(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;
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(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 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 UNANIMOUSLY RECOMMENDS THAT RICHMOND COUNTY'S STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE 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 document, the
consideration to be paid to the holders of Bayonne common stock in the merger
under 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
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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 the Richmond
County board has the legal right to rely on the Tucker Anthony
fairness opinion and, absent any controlling precedent, Richmond County and
Tucker Anthony have agreed to 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 to this document.
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 of this document. Richmond
County has also agreed to reimburse Tucker Anthony for its out-of-pocket
expenses and to protect Tucker Anthony against certain liabilities arising out
of its services .
In arriving at its opinion dated as of the date, of this document 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;
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(6) reviewed certain internal financial data, projections and other
information of Richmond County and Bayonne including financial
projections approved by management regarding Richmond County's
and Bayonne's past and current business, operations and results
thereof, financial condition and future prospects;
(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 under
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.
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 of this document.
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
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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. This analysis sought to provide
a perspective on the market price of Richmond County common stock in recognition
of the fact that the merger will be accomplished through an exchange of shares.
Tucker Anthony's analysis indicated that the stock of each company was trading
in a range comparable to that company's peer groups before the announcement of
the transaction.
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Specifically, the index of other selected publicly traded financial
institutions compared to Richmond County common stock included:
<TABLE>
<CAPTION>
<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>
The index of other selected publicly traded financial institutions compared
to Bayonne common stock included:
(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;
Tucker Anthony also compared financial data and financial ratios for these
two groups of financial institutions to Richmond County and Bayonne, as detailed
in the section "-- Analysis of Selected Publicly Traded Companies" below.
CONTRIBUTION ANALYSIS. Tucker Anthony analyzed the contribution of each of
Richmond County and Bayonne to, among other things, the stockholders' equity and
after-tax net income of the pro forma combined company. This analysis showed
that, among other factors, Bayonne would have contributed 30.5%, 22.7%, and
22.8% of the assets, stockholders' equity, and net income of the pro forma
combined company as of and for the 12 months ended June 30, 1998, respectively.
This is compared with a proposed ownership of 25.6% of the combined company to
be held by the holders of Bayonne common stock following the merger. Tucker
Anthony's analysis determined that the projected contribution to be provided by
Bayonne to the combined company in relationship to assets, equity and income is
consistent with the price to be paid by Richmond County.
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
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"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. Tucker Anthony's
analysis of selected acquisition transactions sought to compare the proposed
pricing of the merger to other selected transactions to determine whether or not
the proposed pricing multiples to be paid were comparable to such recent
transactions. Tucker Anthony's analysis determined that the proposed pricing
multiples were comparable to these transactions. Set forth below is a summary of
the analysis with respect to the Selected Market Transactions and the Selected
U.S. Transactions.
<TABLE>
<CAPTION>
SELECTED MARKET SELECTED U.S.
TRANSACTIONS TRANSACTIONS
-------------------------- --------------------------
BAYONNE OFFER OFFER
OFFER /(1)/ MEDIAN PERCENTILE /(2)/ MEDIAN PERCENTILE /(2)/
------------ ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Price/Trailing Twelve Months Earnings.. 26.8x 22.9x 72% 21.6x 67%
Price/Book Value....................... 1.79x 2.14x 30% 1.97x 37%
Price/Adjusted Book Value /(3)/........ 2.47x 1.90x 70% 2.17x 69%
Premium to Market Price /(4)/.......... 111% 111% 50% 111% 57%
</TABLE>
_______________________
(1) Based upon value of $19.03 per share of Bayonne common stock (based on the
July 17, 1998 closing price of Richmond County common stock of $18.13). If
the value of the Richmond County common stock were based on its average
closing bid price per share of $18.45 during the fifteen trading day period
prior to the announcement of the 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. This analysis
sought to determine whether or not the financial data and ratios exhibited by
Richmond County and Bayonne were comparable to those exhibited by their
respective peer groups in order to assist Tucker Anthony in its evaluation of
Richmond County and Bayonne. The thrift institutions included in the comparison
to Richmond County were:
(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.
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The thrift institutions included in the comparison to Bayonne were:
(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;
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;
(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:
45
<PAGE>
(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, 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
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<PAGE>
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 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."
MATERIAL PROJECTIONS SHARED BETWEEN THE COMPANIES IN NEGOTIATING THE MERGER
AGREEMENT
In evaluating a possible transaction involving Bayonne, Bayonne
prepared nonpublic estimates reflecting management's views as to the possible
future performance of Bayonne. These estimates were based on assumptions
relating to the interest rate environment, loan portfolio growth, asset growth
and deposit growth which management believed to be reasonable at the time.
Management's belief as to the reasonableness of its estimates and of the
assumptions underlying the estimates is based upon the use of industry data,
management's history of operations of Bayonne and the significant time and
resources management devoted to developing such estimates. The following are the
material estimates prepared by Bayonne's management and furnished to Richmond
County while the parties were negotiating the merger agreement. All of the
following estimates exclude gains on sales of investments and non-recurring
items.
BAYONNE'S PROJECTIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999 (DOLLARS IN
THOUSANDS)
Net Interest Income $18,857
Non-Interest Income 1,386
Non-Interest Expense 11,041
Net Income 5,562
Earnings Per Share 0.06
Book Value Per Share 11.26
Tangible Book Value Per Share 11.26
Dividends Per Share 0.25
Similarly, Richmond County prepared certain nonpublic estimates
reflecting management's views as to the possible future performance of Richmond
County. These estimates were based on assumptions which management believed to
be reasonable at the time. Management's belief as to the reasonableness of its
estimates and of the assumptions underlying such estimates is based upon the use
of industry data, management's history of operations of Richmond County and the
significant time and resources management devoted to developing the estimates.
The following is a summary of the material estimates prepared by Richmond
County's management and furnished to Bayonne while the parties were negotiating
the merger agreement.
Richmond County's Projections for the fiscal year ended June 30, 1999 (Dollars
in Thousands)
Net Interest Income $70,588
Non-Interest Income 3,632
Non-Interest Expense 34,391
Net Income 22,664
Earnings Per Share 0 .92
Book Value Per Share 12.48
Tangible Book Value Per Share 12.44
Dividends Per Share 0.21
The estimates were not prepared with a view to public disclosure or
compliance with published guidelines established by the SEC or the American
Institute of Certified Public Accountants regarding projections. They are
included in this document solely because the parties furnished it to each other
during the merger negotiations. Neither party's independent auditors assume any
responsibility for the accuracy of the information. In addition, because the
estimates are inherently subject to significant economic and competitive
uncertainties and contingencies beyond each company's control, there can be no
assurance that the estimates will be realized. Actual results may be higher or
lower than those estimated. Neither party's auditor nor any other independent
accountants has compiled, examined or performed any procedures with respect to
the estimates, nor have they expressed any opinion or any other form of
assurance on the information or its achievability, and assume no responsibility
for, and disclaim any association with, the foregoing prospective financial
information.
The estimates do not give effect to the merger and should be read
together with the Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements.
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.
47
<PAGE>
(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 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
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 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.
48
<PAGE>
(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.
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.
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<PAGE>
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, 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
50
<PAGE>
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 two different groups of savings institutions. The first group
consisted of Bayonne and the following 16 publicly-traded regional savings
institutions (the "Regional Group"):
(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
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:
(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
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<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>
RICHMOND REGIONAL HIGHLY VALUED
COUNTY 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 and 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 Loans.. 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%
Noninterest Income/Average Assets...... 0.22% 0.38% 0.85%
Noninterest 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>
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"):
(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.;
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<PAGE>
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:
(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.;
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>
RICHMOND REGIONAL HIGHLY VALUED
COUNTY 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 and 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 Loans.. 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%
Noninterest Income/Average Assets...... 0.27% 0.40% 0.65%
Noninterest 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 15.70
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.
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<PAGE>
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 in Maryland, New Jersey, New York and Pennsylvania
("Regional Transactions"). Sandler O'Neill reviewed the ratios of deal price to
last 12 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. Sandler O'Neill
concluded that the Implied Value of the merger to Bayonne stockholders of $19.23
was within the range of values paid in comparable transactions.
<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.
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
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$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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<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>
Sandler O'Neill concluded that the percentage of pro forma shares owned by
Bayonne stockholders was comparable to the percentage contribution of Bayonne to
the combined company.
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 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;
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(5) certain financial analyses and forecasts of Bayonne prepared by and
reviewed with management of Bayonne and the views of senior management
of Bayonne regarding Bayonne's past and current business, operations,
results thereof, financial condition and future prospects;
(6) certain financial analyses and forecasts of Richmond County prepared
by and reviewed with management of Richmond County and the views of
senior management of Richmond County regarding Richmond County's past
and current business, operations, results thereof, financial condition
and future prospects;
(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
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<PAGE>
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 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 January 19,
1999, the last practicable date prior to the printing of this document, Bayonne
will pay Sandler O'Neill a transaction fee of approximately $1,651,000, of which
approximately $470,000 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 protect 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, some shares as described 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 of the Merger Agreement." 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
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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. The exchange ratio cannot be decreased without
approval of Bayonne and the Richmond County 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 do 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 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 option Richmond County may have the right to exercise under
the 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. 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.
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<PAGE>
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, 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
shares, will be mailed back to you. The Bayonne certificates you surrender will
be canceled.
As a Bayonne stockholder, you will receive 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 that are presented for transfer after the
completion of the merger will be canceled and exchanged for Richmond County
stock certificates.
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 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 employment
agreement. Other senior officers of Bayonne, including Mr. 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
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<PAGE>
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 Bayonne's recognition and retention
plan, 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, this
plan 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.
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 year 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.
PROTECTION OF OFFICERS, DIRECTORS AND EMPLOYEES AGAINST CLAIMS. Richmond
County has also agreed as to protect 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 protected 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
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Delaware General Corporation Law. 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.
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 the
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.
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 reissue all or a portion
of these repurchased shares in order to utilize the pooling-of-interests methods
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.
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.
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(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 contract is in writing with Richmond County
or Richmond County Savings.
(4) Each of 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 employee will be eligible to
participate in Richmond County employee plans, on the same basis as
any newly-hired employee of Richmond County or Richmond County
Savings. However, with respect to each Richmond County employee plan,
other than the Richmond County 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.
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;
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(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 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
appropriate authorities as to the corporate existence and good
standing of one another and their respective subsidiaries;
(6) 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's stockholders for their fractional
share interest; and
(7) 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;
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(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; and
(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 merger's
conclusion.
The parties have received these opinions which will be updated after
completion of the merger.
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 is 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
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, under 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
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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, 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 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 Community Reinvestment Act, 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 "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 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, 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."
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
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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. Further, 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 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;
. 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 party is materially adversely effected (1) an event whose effect 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 from July 19, 1998 to the completion of the merger, Bayonne has agreed
that neither it nor any of its subsidiaries will take certain actions unless
permitted to by Richmond County or required to by law. These include:
(1) changing their governing documents;
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(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
12 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 make payments to retain
key 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 on the operations of Bayonne
or any of its subsidiaries;
(8) acquiring or agreeing to acquire any business or business assets which
are material 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;
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(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 Loan Bank. 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 Federal Home Loan Bank
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 other than 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 Federal Home Loan Bank 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 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. Generally, 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 violate this covenant.
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 deemed to be a financially superior proposal to Richmond County. A
proposal of this nature 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.
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.
WAIVING AND AMENDING PROVISIONS IN, OR TERMINATING THE MERGER AGREEMENT
Prior to the completion of the merger, any provision of the merger
agreement may be 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
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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 required to complete the
merger have not been obtained, but all other conditions 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 give 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.
(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, 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
Generally, the merger agreement provides that if the average of the daily
closing sales price of Richmond County stock for the 15 consecutive trading days
immediately preceding the day on which the last regulatory approval is obtained
is less than $15.41, and Richmond County's stock has underperformed the stock of
a group of its peers by 15% or more, then Bayonne may terminate the merger
agreement. This termination can occur during the five days following the date on
which the last regulatory approval is obtained. The peer group against which
Richmond County's stock prices will be compared is comprised of 14 financial
institution holding companies identified in the merger agreement that are
publicly traded and for which no publicly announced acquisition transaction has
occurred. The peer group's stock prices are evaluated for the 15 trading days
ending on the date on which the last regulatory approval is obtained. However,
no termination will occur if Richmond County agrees to increase the exchange
ratio. The increase required by the merger agreement is generally designed to
make up for the extent to which Richmond County's stock has underperformed those
of its peers, should that be the case. The calculations necessary to arrive at
such an increase are complex and we encourage you to read them in context within
Section 6.1 of the merger agreement. Please note, however, that based on
Richmond County's stock price alone as of the date of this document, no such
increase would be necessary. Of course, this could change due to market
fluctuations beyond the parties' control.
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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
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 generally held for investment. In addition, this
discussion does not address all of the tax consequences that may be relevant to
a holder of Bayonne common stock in light of his or her particular circumstances
or to holders subject to special rules, such as foreign persons, financial
institutions, tax-exempt organizations, 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.
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HOLDERS OF BAYONNE COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER.
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 stockholders 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 stockholders 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 control Bayonne, such as an executive officer,
director or someone who owns a significant amount of the company's stock. These
controlling persons of Bayonne may not sell their shares of Richmond County
common stock acquired in connection with the merger except under an effective
registration statement under the Securities Act of 1933 covering such shares or
in compliance with an 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
controlling persons of Bayonne. Bayonne has obtained from each person who is a
controlling person 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 Delaware General Corporation Law 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.
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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 and
filing fees associated with the requisite registrations and approvals required
to complete 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. 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 of the challenge. 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 completed 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 merger stock
option agreement. Execution of the 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 merger stock option agreement. The
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 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 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 merger stock option
agreement and (2) no preliminary or permanent injunction or other order against
the delivery of the shares covered by the option granted under the
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merger stock option agreement issued by any court is in effect, Richmond County
may exercise the option granted under the merger stock option agreement, in
whole or in part, at any time following the occurrence of a particular event,
such as 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 option granted
under the merger stock option agreement 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 an
event described above or one which may lead to those events;
(c) 12 months after the termination of the merger agreement other
than because of the events described above or because of other
situations that may lead to the events described above;
----
(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 an event described above.
A preliminary event that could lead to Bayonne or First Savings merging
with a third party, or the like, generally 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. These preliminary events
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, they 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, buys
at least 20% of their assets, or buy 15% of their stocks.
Bayonne must notify Richmond County promptly in writing if any of foregoing
situations arise.
EFFECT OF THE BAYONNE MERGER STOCK OPTION AGREEMENT. The merger stock
option agreement is intended to increase the likelihood that the merger will be
completed. Consequently, certain aspects of the 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 option granted under the merger stock option
agreement to become exercisable. The existence of the merger stock option
agreement could significantly increase the cost to a potential acquiror of
acquiring Bayonne compared to its cost had the 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 option granted under the merger stock option agreement 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
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existence of the merger stock option agreement may deter significantly,
or completely prevent, an acquisition of Bayonne by certain other banking
organizations. The Bayonne board took this factor into account before approving
the merger stock option agreement. See "THE BAYONNE MERGER --
Recommendation of the Bayonne Board; Bayonne's Reasons for the Merger."
BANK MERGER AGREEMENT
In connection with the merger, Richmond County Savings and First Savings
have entered into a bank merger agreement under which First Savings and
Richmond County Savings will merge, with Richmond County Savings Bank being the
surviving bank. The bank merger agreement may be terminated by mutual consent
of the parties 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, or may be converted to a New
Jersey-chartered 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 as, its
chartering agency, and by the FDIC, as the deposit insurer. Richmond County
Savings must file reports with the New York Banking Board and the Superintendent
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 New York Banking Board and
the Superintendent 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.
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NEW YORK STATE LAW
Richmond County Savings derives its lending, investment and other authority
primarily from the applicable provisions of New York Banking Law and the
regulations of the New York Banking Board and the Superintendent, as limited by
FDIC regulations. See "-- Investment Activities." Under these laws and
regulations, savings banks, including Richmond County Savings, may invest in
real estate mortgages, consumer and commercial loans, certain types of debt
securities, including certain corporate debt securities and obligations of
federal, state and local governments and agencies, certain types of corporate
equity securities and certain other assets. Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities. Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below. Such
equity securities must meet certain tests of financial performance. A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers. A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
authorized under the New York Banking Law. 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 New York Banking Law, 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 New York Banking Law 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 New York Banking Board and the
Superintendent.
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
New York Banking Board. 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 New York Banking
Law is limited by FDIC regulations and other federal law and regulations. In
particular, the applicable provisions of the New York Banking Law 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 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 New York Banking Law, 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
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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-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:
Tier I Risk-Based Capital......... 21.60%
Total Risk-Based Capital.......... 22.49
Leverage Capital.................. 12.38
The following is a summary of First Savings' regulatory capital ratios at
September 30, 1998:
Tier I Risk-Based Capital......... 27.30%
Total Risked-Based Capital........ 28.45
Leverage Capital.................. 12.24
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REAL ESTATE LENDING STANDARDS. The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (1) are secured by real estate or (2) are made for the purpose of
financing the construction or improvements on real estate. The FDIC regulations
require each institution to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the institution and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real estate loans. Institutions are also permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
DIVIDEND LIMITATIONS. The FDIC has authority to use its enforcement powers
to prohibit a bank from paying dividends if, in its opinion, the payment of
dividends would constitute an unsafe or unsound practice. Federal law prohibits
the payment of dividends by a bank that will result in the bank failing to meet
applicable minimum capital requirements on a pro forma basis. Additionally,
Richmond County Savings, as a subsidiary of a savings and loan holding company,
is required to provide the OTS with 30 days prior written notice before
declaring any dividend. The plan of conversion adopted by Richmond County
Savings' in connection with its conversion to stock form also restricts the
institution's payment of dividends in the event the dividend would impair the
liquidation account established in connection with the conversion. In addition,
the liquidation account established by First Savings in connection with
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 the Federal Deposit Insurance Corporation
Improvement Act, 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. The Federal Deposit Insurance Corporation Improvement
Act 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
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permitted by the New York Banking Law, whichever is less. Such grandfathering
authority is subject to termination upon the FDIC's determination that such
investments pose a safety and soundness risk to Richmond County Savings or in
the event Richmond County Savings converts its charter, other than a mutual to
stock conversion, or undergoes a change in control. As of September 30, 1998,
Richmond County Savings had $47.2 million of securities which were permissible
under such grandfathering authority.
TRANSACTIONS WITH COMPANIES OR ENTITIES THAT CONTROL SAVINGS BANKS
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 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
director who has an interest in the outcome of whether the loan is granted 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
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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. 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 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 Financing Corporation 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 management of
Richmond County Savings does not know of any practice, condition or violation
that might lead to termination of deposit insurance.
PAYMENT OF FINANCING CORPORATION BONDS
Bank Insurance Fund deposits are also assessed for payments on bonds issued
by Financing Corporation, which were issued in the late 1980's to recapitalize
the predecessor Savings Association Insurance Fund. For the third quarter of
1998, the Financing Corporation 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 Financing Corporation 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 Federal Reserve System regulations require depository institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve System
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 Federal Reserve
System) the reserve requirement is 3%; and for accounts greater than $47.8
million, the reserve requirement is $1.4
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million plus 10% (subject to adjustment by the Federal Reserve System 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 Federal Reserve System) 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 Federal Reserve System, 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 New York Banking Law that impose continuing and affirmative
obligations upon banking institutions organized in New York State to serve the
credit needs of its local community, which are substantially similar to those
imposed by the Community Reinvestment Act. Under the New York Community
Reinvestment Act, a bank must file copies of all federal Community Reinvestment
Act reports with the New York Banking Board and the Superintendent. The New York
Community Reinvestment Act also requires the Superintendent to consider a bank's
New York Community Reinvestment Act 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 New York Community Reinvestment Act, utilizing a four-tiered rating system,
and require the New York Banking Board and the Superintendent to make available
to the public such rating and a written summary of the results.
FEDERAL REGULATION. Under the Community Reinvestment Act, 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
Community Reinvestment Act 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 Community
Reinvestment Act. The Community Reinvestment Act requires the FDIC to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The FDIC utilizes a four-tier descriptive rating system in its
Community Reinvestment Act 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 Home Owners Loan Act 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, 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 Home Owners Loan Act.
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
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that date. Several bills were introduced in 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 Home Owners Loan Act prohibits a savings and loan holding company,
directly or indirectly, or through one or more subsidiaries, from acquiring more
than 5% of the voting stock of another savings association or holding company
thereof, or from acquiring such an institution or company by merger,
consolidation or purchase of its assets, without prior written approval of the
OTS. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources and
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.
The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, except (1) interstate supervisory acquisitions by savings
and loan holding companies, and (2) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions. The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.
In order to elect and continue to be regulated as a savings and loan
holding company by the OTS, 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 Federal Reserve
System 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 New York Banking
Law. The term "bank holding company," for the purposes of the New York Banking
Law, 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 New York
Banking Law. Under New York Banking Law, the prior approval of the New York
Banking Board and the Superintendent is required before:
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(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 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
the Home Owners Loan Act 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 Bank Holding Company 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
Federal Reserve System may not approve an acquisition under the Bank Holding
Company 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 New York Banking Law, 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,
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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.
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 stock 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
considered to 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.
85
<PAGE>
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 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 Delaware General Corporation Law. If the merger is completed,
the holders of Bayonne common stock, whose rights are currently protected by the
Delaware General Corporation Law 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
Delaware General Corporation 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 to whom this document is delivered, on written or oral request, by
following the instructions listed under "WHERE YOU CAN FIND MORE
INFORMATION."
86
<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 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.
87
<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 ALL
COUNTY/ COMBINED
RICHMOND PRO FORMA BAYONNE PRO FORMA TRANSACTIONS
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND ADJUSTMENTS PRO FORMA
---------- -------- -------------- ----------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks... $ 22,764 $ 3,042 $ (4,862)/(2)/ $ 25,025 $ 4,070 $(2,031)/(5)/ $ 27,064
4,081/(3)/
Federal funds sold........ 4,200 5 4,205 12,318 16,523
Securities
held-to-maturity......... -- 11,708 220/(3)/ 11,928 43,129 92/(6)/ 55,149
Securities available for
sale, net 831,670 324,457 1,156,127 10,718 1,166,845
Loans receivable:
Real estate mortgage
loans.................. 765,799 278,719 (804)/(3)/ 1,043,714 38,467 (250)/(6)/ 1,081,931
Other loans............. 16,679 33,105 49,784 3,335 53,119
Less allowance for loan
losses................. (7,920) (3,035) (10,955) (857) (11,812)
---------- -------- --------- ---------- --------- -------- ----------
Total loans receivable,
net...................... 774,558 308,789 (804) 1,082,543 40,945 (250) 1,123,238
Federal Home Loan Bank of
New York stock.......... 20,375 10,511 30,886 -- 30,886
Banking premises and
equipment, net........... 13,530 5,524 881/(3)/ 19,935 2,601 100/(6)/ 22,636
Accrued interest
receivable............... 11,514 3,901 15,415 785 16,200
Excess of cost over fair
value of net assets
acquired and other
intangibles........... -- -- 28,560/(4)/ 28,560 -- 16,130/(7)/ 44,690
Other real estate owned... 340 501 841 149 990
Other assets.............. 13,664 4,219 17,883 587 18,470
---------- -------- --------- ---------- --------- -------- ----------
Total assets............ $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302 $ 14,041 $2,522,691
========== ======== ========= ========== ========= ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Liabilities:
Deposits................ $ 953,506 $420,749 $ (906)/(3)/ $1,373,349 $102,828 $ (69)/(6)/ $1,476,108
Borrowings.............. 400,000 146,750 1,832/(3)/ 548,582 -- 548,582
Accrued expenses and
other liabilities...... 9,283 10,006 (380)/(3)/ 18,675 945 4/(6)/ 19,624
(234)/(3)/
--
---------- -------- --------- ---------- -------- -------- ----------
Total liabilities...... 1,362,789 577,505 312 1,940,606 103,773 (65) 2,044,314
Stockholders' equity:
Preferred stock......... -- -- -- -- --
Common stock............ 264 91 (91)/(8)/ 360 5,213 (5,213)/(8)/ 374
96/(2)/ -- 14/(5)/
Additional
paid-in-capital........ 254,288 60,995 (60,995)/(8)/ 379,928 4,301 (4,301)/(8)/ 405,549
125,640/(2)/ 25,621/(5)/
Retained
earnings-substantially
restricted............ 107,529 44,999 (44,999)/(8)/ 107,529 2,631 (2,631)/(8)/ 107,529
Unallocated common
stock held
by the ESOP........... (33,274) (4,081) 4,081/(8)/ (33,274) -- (33,274)
Unamortized Management
Retention
Plan shares............ -- (2,987) 2,987/(8)/ (2,820) -- (2,820)
(2,820)/(3)/ -- --
Treasury stock.......... -- -- -- (672) 672/(8)/ --
Comprehensive income:
Unrealized gain
(loss) on
securities
available-for-sale,
net of taxes.......... 1,019 (3,865) 3,865/(8)/ 1,019 56 (56)/(8)/ 1,019
---------- -------- --------- ---------- -------- -------- ----------
Total stockholders'
equity................ 329,826 95,152 27,764 452,742 11,529 14,106 478,377
Total liabilities and
stockholders'
equity................ $1,692,615 $672,657 $ 28,076 $2,393,348 $115,302 $ 14,041 $2,522,691
========== ======== ========= ========== ======== ======== ==========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS."
88
<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/ ALL COMBINED
RICHMOND PRO FORMA BAYONNE PRO FORMA TRANSACTIONS
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND ADJUSTMENTS PRO FORMA
-------- ------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income...................... $ 27,662 $ 11,137 (2)/(9)/ 38,797 $ 1,950 $ (28)/(10)/ $ 40,719
Interest expense..................... 12,599 6,735 (58)/(9)/ 19,391 697 (2)/(10)/ 20,086
-------- -------- ------- ------- ------- ------ --------
Net interest income.................. 15,063 4,402 (60) 19,406 1,253 (26) 20,633
Provision for loan losses............ 750 75 -- 825 -- -- 825
-------- -------- ------- ------- ------- ------ --------
Net interest income after
provision for loan losses........... 14,313 4,327 (60) 18,581 1,253 (26) 19,808
Non-interest income.................. 1,844 538 -- 2,382 172 -- 2,554
Non-interest expense................. 7,632 2,768 476/(4)(11)/ 10,876 902 269/(7)(11)/ 12,047
-------- -------- ------- ------- ------- ------ --------
Income before income taxes........... 8,525 2,097 (536) 10,087 523 (295) 10,315
Provision for income taxes........... 3,171 776 (18) 3,929 /(12)/ 186 (178) 3,937/(12)/
-------- -------- ------- ------- ------- ------ --------
Net income........................... $ 5,354 $ 1,321 $(518) 6,158 $ 337 $(117) $ 6,378
======== ======== ======= ======= ======= ====== ========
Weighted average shares outstanding:
Basic............................... 24,362,800 9,041,000 33,938,302 997,158 35,384,181
Diluted............................. 24,362,800 9,174,637 34,078,621 1,031,527 35,558,869
Earnings per share:
Basic............................... $0.22 $0.15 $ 0.18 $ 0.34 $ 0.18
Diluted............................. $0.22 $0.15 $ 0.18 $ 0.34 $ 0.18
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATEDD
FINANCIAL STATEMENTS."
89
<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 ALL
COUNTY/ COMBINED
RICHMOND PRO FORMA BAYONNE PRO FORMA TRANSACTIONS
COUNTY BAYONNE ADJUSTMENTS PRO FORMA IRONBOUND ADJUSTMENTS PRO FORMA
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 86,754 $ 40,860 $ (9)/(9)/ $ 127,605 $ 7,695 $ (110)/(10)/$ 135,190
Interest expense...................... 37,512 24,872 229/(9)/ 62,613 2,610 (9)/(10)/ 65,214
--------- --------- -------- --------- ------- ------- --------
Net interest income................... 49,242 15,988 (238) 64,992 5,085 (101) 69,976
Provision for loan losses............. 2,200 180 -- 2,380 -- -- 2,380
--------- --------- -------- --------- ------- ------- --------
Net interest income after 47,042 15,808 238) 62,612 5,085 (101) 67,596
provision for loan losses............
Non-interest income................... 3,601 1,343 -- 4,944 723 -- 5,667
Contribution to the Foundation........ 19,558 -- -- 19,558 -- -- 19,558
Non-interest expense.................. 24,488 10,170 1,904 36,562 3,843 1,075 41,480
--------- --------- -------- --------- ------- ------- --------
Income before income taxes............ 6,597 6,981 (2,142) 11,436 1,965 (1,176) 12,225
Provision (benefit) for income taxes.. 2,071 2,602 (484) 4,189/(12)/ 705 (457) 4,177/(12)/
--------- --------- -------- --------- ------- ------- --------
Net income............................ $ 4,526 $ 4,379 $41,658) $ 7,247 $ 1,260 (719) $ 8,048
========= ========= ======= ========= ======= ------- ========
Weighted average shares outstanding:
Basic................................ 24,328,143 8,865,966 33,903,645 1,035,461 35,349,524
Diluted.............................. 24,328,143 8,963,512 34,006,069 1,058,163 35,474,650
Earnings (loss) per share:
Basic................................ $(0.16) $0.49 $0.21 $1.22 $0.23
Diluted.............................. $(0.16) $0.49 $0.21 $1.19 $0.23
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS."
90
<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 Condensed Combined 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>
91
<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 Bayonne's recognition and retention plan 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>
92
<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.
93
<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 SEPTEMBER 30,
JUNE 30, 1998 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 THREE MONTHS
FISCAL YEAR ENDED
ENDED SEPTEMBER 30,
JUNE 30, 1998 1998
------------- ------------
<S> <C> <C>
Reduction in interest income for cash utilized $(112) $(28)
for transaction costs (based on an
average annual rate of 5.49%)................
Amortization of premium on fixed assets (23) (6)
(4 years)....................................
Accretion of discount on loans (10 years)...... 25 6
----- ----
Total net adjustments to interest income..... $(110) $(28)
===== ====
Amortization of premium on fixed assets $ 5 $ 1
(20 years)...................................
Accretion of discount on deposits (5 years)..... (14) (3)
----- ----
Total net adjustments to interest expense.... $ (9) $ (2)
===== ====
</TABLE>
(11) The amortization of the excess of cost over the fair value of net assets
acquired for the 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.
94
<PAGE>
(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>
95
<PAGE>
ADDITIONAL MATTERS TO BE CONSIDERED
AT THE RICHMOND COUNTY MEETING
PROPOSAL NO. 2 FOR THE RICHMOND COUNTY STOCKHOLDERS:
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 stock incentive plan. Stockholders originally approved the stock
incentive plan on September 29, 1998. The Richmond County board approved the
amended and restated stock incentive plan in January, 1999, subject to
stockholders approval. The proposed amended stock 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 stock 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 stock 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
stock 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 stock incentive plan and 2,668 shares of
common stock.
Richmond County implemented the stock incentive plan largely to
attract, keep, and motivate qualified individuals in key positions. The stock
incentive plan provides officers, employees and non-employee 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 stock 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 stock 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 stock incentive plan.
FDIC policies provide that restricted stock and stock option awards granted
under any stock-based benefit plan, such as the stock 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.
THE RICHMOND COUNTY BOARD RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENTS TO
THE RICHMOND COUNTY FINANCIAL CORP. 1998 STOCK-BASED INCENTIVE PLAN.
96
<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 under 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 BAYONNE BOARD 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 considered to be owned by each director and
all directors and executive officers as a group as of the Bayonne record
date.
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<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE/(1)/ DIRECTOR
- ----------------------- --- ---------- -------------
<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>
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<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE/(1)/ DIRECTOR
- ----------------------- --- ---------- -------------
<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.
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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
director 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. Under 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 Bayonne's 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 Bayonne's
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'
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awards will immediately vest or become exercisable and all stock options will
remain exercisable for a period of three years.
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 of 1933.
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.
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.
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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 stock option plan, which was subsequently
adopted by Bayonne. Subsequent to the adoption of the stock option plan, all of
the executive officers of First Savings received grants of options to purchase
shares of First Savings common stock, which options commenced vesting in equal
annual installments of 20% on August 9, 1996. Upon consummation of the second-
step conversion, Bayonne adopted the stock option plan and each option to
purchase First Savings common
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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
stock option plan during fiscal 1998.
BAYONNE 1995 RECOGNITION AND RETENTION PLAN. First Savings adopted
Bayonne's recognition and retention plan 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 Bayonne's recognition
and retention plan, 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 Bayonne's recognition and retention plan 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
Bayonne's incentive plan, which the stockholders approved on March 27, 1998.
Pursuant to Bayonne's 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 through the exercise of options and option-related awards that may be
granted under Bayonne's 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
Bayonne's 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 Bayonne's 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 Bayonne's incentive plan during fiscal 1998.
Prior to granting awards under Bayonne's 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 Bayonne's 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 Bayonne's 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 during the first two years, with the remaining shares to be granted
during years three, four and five if certain performance goals are met.
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 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
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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
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SUMMARY COMPENSATION TABLE. The following table shows, for the year ended
March 31, 1998, the cash compensation paid, as well as certain other
compensation paid or accrued for that year to the 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 Bayonne's
recognition and retention plan. 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 Bayonne's recognition and retention plan 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
Bayonne's recognition and retention plan as a plan of Bayonne and issued
Bayonne common stock in lieu of First Savings common stock to Bayonne's
recognition and retention plan 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 Bayonne's recognition and retention plan, 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, under the stock option plan. Under the 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 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 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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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 agreement 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
the control of Bayonne or First Savings. A change in controls occurs if Bayonne
is merged into Richmond County and First Savings into Richmond County Savings,
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.
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 over 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 under a
legal judgment, arbitration or settlement. The employment agreements also
provide that Bayonne and First Savings will protect Mr. Nilan to the fullest
extent allowable under federal and Delaware law, respectively. In the event of a
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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 under 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 10 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 above formula, the retirement plan will pay a minimum
monthly benefit equal to 2% of monthly salary, times years of service up to 10
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.
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For the plan year ended December 14, 1998, First Savings made a contribution to
the retirement plan of $259,000.
The following table indicates the annual retirement benefit that would be
payable under the retirement plan upon retirement at age 65 in calendar year
1997, expressed in the form of a life annuity with a five year guaranteed
payment for the final average salary and benefit service classification
specified below. Benefits payable under the retirement plan are not subject to a
deduction for social security or other amounts.
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
------------------------------------------------------------------------------
HIGH 5 YEAR FINAL
AVERAGE
EARNINGS/(1)/ 5 10 15 20 25 30 35 40
- ------------------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 2,000 $ 4,000 $ 4,125 $ 5,500 $ 6,875 $ 8,250 $ 9,625 $ 11,625
$ 40,000 4,000 8,000 9,188 12,250 15,313 18,375 21,438 25,438
$ 60,000 6,000 12,000 15,188 20,250 25,313 30,375 35,438 41,438
$ 80,000 8,000 16,000 21,188 28,250 35,313 42,375 49,438 57,438
$100,000 10,000 20,000 27,188 36,250 45,313 54,375 63,438 73,438
$150,000 15,000 30,000 42,188 56,250 70,313 84,375 98,438 113,438
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
$152,000 /(2)/ 15,200 30,400 42,788 57,050 71,313 85,575 99,838 115,038
</TABLE>
______________________________
(1) High five-year average monthly earnings means the average of a
participant's monthly earnings in the five consecutive years yielding the
highest such average while a participant in the retirement plan. For
participants with less than five years of service, it is the average of
monthly earnings for all complete calendar years of participation.
(2) Limited due to maximum earnings limits under Section 401(a)(17) of the
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 of benefits. The lump sum payments represented the present value
of the executives' accrued annual benefits under the supplemental executive
retirement agreements based on a current actuarial valuation. First Savings
determined that paying the participants in a lump sum would benefit First
Savings over time by saving the annual accruals that would otherwise be required
to fund the supplemental executive retirement agreements. First Savings has
discontinued this plan.
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OPTION EXERCISES AND YEAR-END VALUE. This table contains information
about exercised and unexercisable options during the fiscal year ended March 31,
1998 for Bayonne's Chief Executive Officers and the next four highest paid
executive officers of Bayonne.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
UPON VALUE YEAR-END/(1)/ YEAR-END/(2)/
----------------------------- -----------------------------
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.. 62391 $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's existing
policy, any loan to an executive officer or director, must be approved, in
advance, by a majority of the disinterested members of the Bayonne board.
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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 a reasonable time before the proxy solicitation
for such annual meeting is made at the address set forth on the first page of
this document. Any such proposal will be subject to 17 C.F.R. Section 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 considered to be 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
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<PAGE>
meeting any 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 May
24, 1999 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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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (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.
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<PAGE>
In accordance with the DGCL (being Chapter 1 of Title 8 of the Delaware
Code), Articles 10 and 11 of the Registrant's Certificate of Incorporation
provide as follows:
TENTH:
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or
an Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgment, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith; provided, however, that, except
as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter and "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Section A and B of this Article TENTH shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
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<PAGE>
an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable
standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article TENTH or otherwise shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the
Corporation or subsidiary or Affiliate or another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
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<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).*
II-4
<PAGE>
23.2 Consent of Muldoon, Murphy & Faucette LLP (included in Exhibit 8.1).*
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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
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<PAGE>
(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 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
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<PAGE>
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.
(c) 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 27, 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 27, 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.
NAME TITLE
---- -----
/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
Anthony E. Burke and Director
/s/ Thomas R. Cangemi Senior Vice President,
- --------------------------- Chief Financial
Thomas R. Cangemi Officer, Treasurer and Secretary
(principal financial and accounting
officer)
II-8
<PAGE>
/s/ Godfrey H. Carstens, Jr. Director
- -----------------------------------
Godfrey H. Carstens, Jr.
/s/ Robert S. Farrell Director
- -----------------------------------
Robert S. Farrell
/s/ William C. Frederick Director
- -----------------------------------
William C. Frederick, M.D.
/s/ James L. Kelley Director
- -----------------------------------
James L. Kelley
/s/ T. Ronald Quinlan, Jr. Director
- ----------------------------------
T. Ronald Quinlan, Jr.
/s/ Maurice K. Shaw Director
- -----------------------------------
Maurice K. Shaw
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 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).*
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.
