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EXHIBIT 10.38
CHANGE OF CONTROL SEVERANCE AGREEMENT
This CHANGE OF CONTROL SEVERANCE AGREEMENT (the "Agreement") is made and
entered into as of January 1, 2000 by and among ASTORIA FEDERAL SAVINGS AND LOAN
ASSOCIATION, a savings and loan association organized and existing under the
laws of the United States of America and having an office at One Xxxxxxx Xxxxxxx
Xxxxx, Xxxx Xxxxxxx, Xxx Xxxx 00000 (the "Bank"), ASTORIA FINANCIAL CORPORATION,
a business corporation organized and existing under the laws of the State of
Delaware and having an office at One Xxxxxxx Xxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxx
Xxxx 00000 (the "Company") and Xxx X. Xxxxxxx, an individual residing at 00
Xxxxxxxx Xxxxxx, Xxxxxx Xxx, Xxx Xxxx 00000 (the "Officer").
INTRODUCTORY STATEMENT
WHEREAS, the Boards of Directors of the Bank and the Company have
approved the Bank and the Company entering into Change of Control Severance
Agreements with certain key officers of the Bank,
WHEREAS, the Officer is a key officer of the Bank;
WHEREAS, should the possibility of a Pending Change of Control or Change
of Control of the Bank or the Company arise, the Boards of Directors of the Bank
and the Company believe it is imperative that the Bank, the Company and the
Boards of Directors of the Bank and the Company should be able to rely upon the
Officer to continue in his or her position, and that the Bank and the Company
should be able to receive and rely upon the Officer's advice, if requested, as
to the best interests of the Bank and the Company and their respective
shareholders without concern that the Officer might be distracted by the
personal uncertainties and risks created by the possibility of a Pending Change
of Control or Change of Control;
WHEREAS, should the possibility of a Pending Change of Control or Change
of Control arise, in addition to his or her regular duties, the Officer may be
called upon to assist in the assessment of such possible Pending Change of
Control or Change of Control, advise management and the Board as to whether such
Pending Change of Control or Change of Control would be in the best interests of
the Bank, the Company and their respective shareholders, and to take such other
actions as the Boards of Directors of the Bank and the Company might determine
to be appropriate; and
NOW, THEREFORE, to assure the Bank and the Company that they will have the
continued dedication of the Officer and the availability of his or her advice
and counsel notwithstanding the possibility, threat, or occurrence of a Pending
Change of Control or Change of Control of the Bank or the Company, and to induce
the Officer to remain in the employ of the Bank, in consideration of the mutual
premises and agreements set forth herein and for other good and valuable
consideration, the Bank, the Company and the Officer agree as follows:
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AGREEMENT
Section 1. Effective Date; Term; Pending Change of Control and Change of
Control Defined.
(a) This Agreement shall take effect on January 1, 2000 (the "Effective
Date") and shall remain in effect during the period (the "Term")
beginning on the Effective Date and ending on the earlier of :
(i) the date, prior to the occurrence of a Pending Change of
Control or a Change of Control, as defined below,
respectively, on which the Officer's employment by the Bank
terminates whether by discharge, resignation, death,
disability or retirement, or
(ii) the later of:
(A) the first anniversary of the date on which the Bank
notifies the Executive of its intent to discontinue the
Agreement (the "Initial Expiration Date") or,
(B) the second anniversary of the latest Change of Control,
as defined below, that occurs after the Effective Date
and before the Initial Expiration Date, or
(b) For purposes of this Agreement, a "Change of Control" shall be
deemed to have occurred upon the happening of any of the following
events:
(i) the consummation of a reorganization, merger or consolidation
of the Company with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended
("Exchange Act")) in substantially the same relative
proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least
51% of the outstanding equity ownership interests in the
Company; and
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(B) at least 51% of the securities entitled to vote
generally in the election of directors of the entity
resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least
51% of the securities entitled to vote generally in the
election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of the outstanding securities of the Company entitled to vote
generally in the election of directors by any person or by any
persons acting in concert;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors
of the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of Directors
of the Company on the Effective Date of this Agreement;
or
(B) individuals who first became members of the Board of
Directors of the Company after the Effective Date of
this Agreement either:
(1) upon election to serve as a member of the Board of
Directors of the Company by affirmative vote of
three-quarters of the members of such Board, or of
a nominating committee thereof, in office at the
time of such first election; or
(2) upon election by the shareholders of the Board of
Directors of the Company to serve as a member of
such Board, but only if nominated for election by
affirmative vote of three-quarters of the members
of the Board of Directors of the Company, or of a
nominating committee thereof, in office at the
time of such first nomination;
provided, however, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or
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consents (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) other
than by or on behalf of the Board of Directors of the
Company; or
(v) any event which would be described in section 1(b)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of
the Company, the Bank, or a subsidiary of either of them, by the
Company, the Bank, or any subsidiary of either of them, or by any
employee benefit plan maintained by any of them. For purposes of
this section 1(b), the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(c) For purposes of this Agreement, a "Pending Change of Control" shall
mean:
(i) the approval by the shareholders of the Bank or the Company of
a definitive agreement for a transaction which, if
consummated, would result in a Change of Control; or
(ii) the approval by the shareholders of the Bank or the Company of
a transaction which, if consummated, would result in a Change
of Control.
Section 2. Discharge Prior to a Pending Change of Control.
The Bank may discharge the Officer at any time prior to the occurrence of
a Pending Change of Control or, if no Pending Change of Control has occurred, a
Change of Control, for any reason or for no reason. In such event:
(a) The Bank shall pay to the Officer or the Officer's estate his or her
earned but unpaid compensation, including, without limitation,
salary and all other items which constitute wages under applicable
law, as of the date of the Officer's termination of employment. This
payment shall be made at the time and in the manner prescribed by
law applicable to the payment of wages but in no event later than 30
days after the date of the Officer's termination of employment.
(b) The Bank shall provide the benefits due, if any, to the Officer or
the Officer's estate, surviving dependents or designated
beneficiaries, as applicable, under the employee benefit plans and
programs and compensation plans and programs maintained for the
benefit of the officers and employees of the Bank. The time and
manner of payment or other delivery of these benefits and the
recipients of such benefits shall be determined according to the
terms and conditions of the applicable plans and programs.
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The payments and benefits described in sections 2(a) and (b) shall be referred
to in this Agreement as the "Standard Termination Entitlements."
Section 3. Termination of Employment Due to Death.
The Officer's employment with the Bank shall terminate automatically, and
without any further action on the part of any party to this Agreement, on the
date of the Officer's death. In such event, the Bank shall pay and deliver to
the Officer's estate and surviving dependents and designated beneficiaries, as
applicable, the Standard Termination Entitlements.
Section 4. Termination Due to Disability after a Pending Change of
Control or a Change of Control.
The Bank may terminate the Officer's employment during the Term and after
the occurrence of a Pending Change of Control or a Change of Control upon a
determination by the Board of Directors of the Bank, by the affirmative vote of
75% of its entire membership, acting in reliance on the written advice of a
medical professional acceptable to it, that the Officer is suffering from a
physical or mental impairment which, at the date of the determination, has
prevented the Officer from performing the Officer's assigned duties on a
substantially full-time basis for a period of at least one hundred and eighty
(180) days during the period of one (1) year ending with the date of the
determination or is likely to result in death or prevent the Officer from
performing the Officer's assigned duties on a substantially full-time basis for
a period of at least one hundred and eighty (180) days during the period of one
(1) year beginning with the date of the determination. In such event:
(a) The Bank shall pay and deliver the Standard Termination Entitlements
to the Officer or, in the event of the Officer's death following
such termination but before payment, to the Officer's estate,
surviving dependents or designated beneficiaries, as applicable.
(b) In addition to the Standard Termination Entitlements, the Bank shall
continue to pay the Officer his or her base salary, at the annual
rate in effect for the Officer immediately prior to the termination
of the Officer's employment, during a period ending on the earliest
of: (i) the expiration of one hundred and eighty (180) days after
the date of termination of the Officer's employment; (ii) the date
on which long-term disability insurance benefits are first payable
to the Officer under any long-term disability insurance plan
covering employees of the Bank; or (iii) the date of the Officer's
death.
A termination of employment due to disability under this section 4 shall be
effected by a notice of termination given to the Officer by the Bank and shall
take effect on the later of the effective date of termination specified in such
notice or, if no such date is specified, the date on which the notice of
termination is deemed given to the Officer.
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Section 5. Discharge with Cause after a Pending Change of Control or
Change of Control.
(a) The Bank may terminate the Officer's employment with "Cause" during
the Term and after the occurrence of a Pending Change of Control or
a Change of Control, but a termination shall be deemed to have
occurred with "Cause" only if:
(i) (A) the Board of Directors of the Bank, by the affirmative
vote of 75% of its entire membership, determines that
the Officer is guilty of personal dishonesty,
incompetence, wilful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to
perform stated duties, wilful violation of any law, rule
or regulation (other than traffic violations or similar
offenses) or final cease and desist order, or any
material breach of this Agreement, in each case measured
against standards generally prevailing at the relevant
time in the savings and community banking industry;
(B) prior to the vote contemplated by section 5(a)(i)(A),
the Board of Directors of the Bank shall provide the
Officer with notice of the Bank's intent to discharge
the Officer for Cause, detailing with particularity the
facts and circumstances which are alleged to constitute
Cause (the "Notice of Intent to Discharge"); and
(C) after the giving of the Notice of Intent to Discharge
and before the taking of the vote contemplated by
section 5(a)(i)(A), the Officer, together with the
Officer's legal counsel, if he so desires, are afforded
a reasonable opportunity to make both written and oral
presentations before the Board of Directors of the Bank
for the purpose of refuting the alleged grounds for
Cause for the Officer's discharge; and
(D) after the vote contemplated by section 5(a)(i)(A), the
Bank has furnished to the Officer a notice of
termination which shall specify the effective date of
the Officer's termination of employment (which shall in
no event be earlier than the date on which such notice
is deemed given) and include a copy of a resolution or
resolutions adopted by the Board of Directors of the
Bank, certified by its corporate secretary, authorizing
the termination of the Officer's employment with Cause
and stating with particularity the facts and
circumstances found to constitute Cause for the
Officer's discharge (the "Final Discharge Notice"); or
(ii) the Officer, during the 90 day period commencing on the
delivery to the Officer by the Bank of the Notice of Intent to
Discharge specified in section
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5(a)(i)(B), resigns his or her employment with the Bank prior
to the delivery to the Officer by the Bank of the Final
Discharge Notice specified in section 5(a)(i)(D).
For purposes of this section 5, no act or failure to act, on the
part of the Officer, shall be considered "willful" unless it is
done, or omitted to be done, by the Officer in bad faith or without
reasonable belief that the Officer's action or omission was in the
best interests of the Bank or the Company, respectively. Any act or
failure to act based upon authority given pursuant to a resolution
duly adopted by the Board of Directors of the Bank or the Company or
based upon the written advice of counsel for the Bank or the Company
shall be conclusively presumed to be done or omitted to be done by
the Officer in good faith and in the best interests of the Bank or
the Company, respectively.
(b) If the Officer is discharged with Cause during the Term and after a
Pending Change of Control or a Change of Control, the Bank shall pay
and provide to him or, in the event of the Officer's death following
such discharge but prior to payment and providing, to the Officer's
estate, surviving dependents or designated beneficiaries, as
applicable, the Standard Termination Entitlements only.
(c) Following the giving of a Notice of Intent to Discharge, the Bank
may temporarily suspend the Officer's duties and authority and, in
such event, may also suspend the payment of salary and other cash
compensation, but not the Officer's participation in retirement,
insurance and other employee benefit plans. If the Officer is not
discharged or is discharged without Cause within forty-five (45)
days after the giving of a Notice of Intent to Discharge, payments
of salary and cash compensation shall resume, and all payments
withheld during the period of suspension shall be promptly restored.
If the Officer is discharged with Cause not later than forty-five
(45) days after the giving of the Notice of Intent to Discharge, all
payments withheld during the period of suspension shall be deemed
forfeited and shall not be included in the Standard Termination
Entitlements. If a Final Discharge Notice is given later than
forty-five (45) days, but sooner than ninety (90) days, after the
giving of the Notice of Intent to Discharge, all payments made to
the Officer during the period beginning with the giving of the
Notice of Intent to Discharge and ending with the Officer's
discharge with Cause shall be retained by the Officer and shall not
be applied to offset the Standard Termination Entitlements. If the
Bank does not give a Final Discharge Notice to the Officer within
ninety (90) days after giving a Notice of Intent to Discharge, the
Notice of Intent to Discharge shall be deemed withdrawn and any
future action to discharge the Officer with Cause shall require the
giving of a new Notice of Intent to Discharge. If the Officer
resigns pursuant to Section 5(a)(ii), the Officer shall forfeit his
or her right to suspended amounts that have not been restored as of
the date of the Officer's resignation or notice of resignation,
whichever is earlier.
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Section 6. Discharge Without Cause after a Pending Change of Control or
Change of Control.
The Bank may discharge the Officer without Cause at any time after the
occurrence of a Pending Change of Control or a Change of Control, and in such
event:
(a) The Bank shall pay and deliver the Standard Termination Entitlements
to the Officer or, in the event of the Officer's death following the
Officer's discharge but before payment, to the Officer's estate,
surviving dependents or designated beneficiaries, as applicable.
(b) In addition to the Standard Termination Entitlements:
(i) the Bank shall provide for a period of two years following the
date of the Officer's discharge (the "Assurance Period") for
the benefit of the Officer and the Officer's spouse and
dependents continued group life, health (including
hospitalization, medical and major medical), dental, accident
and long-term disability insurance benefits on substantially
the same terms and conditions (including any co-payments and
deductibles, but excluding any premium sharing arrangements,
it being the intention of the parties to this Agreement that
the premiums for such insurance benefits shall be the sole
cost and expense of the Bank) in effect for them immediately
prior to the Officer's discharge. The coverage provided under
this section 6(b)(i) may, at the election of the Bank, be
secondary to the coverage provided as part of the Standard
Termination Entitlements and to any employer-paid coverage
provided by a subsequent employer or through Medicare, with
the result that benefits under the other coverages will offset
the coverage required by this section 6(b)(i), provided,
however, that for purposes of this section 6(b)(i) benefits
provided at the cost of the Officer or the Officer's spouse or
dependants pursuant to the Comprehensive Omnibus Budget
Reconciliation Act, as amended, shall not be considered
Standard Termination Entitlements.
(ii) The Bank shall make a lump sum payment to the Officer or, in
the event of the Officer's death following the Officer's
discharge but before payment, to the Officer's estate in an
amount equal to the salary that the Officer would have earned
if he had continued working for the Bank during the Assurance
Period at the highest annual rate of salary achieved during
the period of three (3) years ending immediately prior to the
date of termination (the "Salary Severance Payment"). The
Salary Severance Payment shall be computed using the following
formula:
SSP = BS x NY
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where:
"SSP" is the amount of the Salary Severance Payment, before
the deduction of applicable federal, state and local
withholding taxes;
"BS" is the highest annual rate of salary achieved by the
Officer during the period of three (3) years ending
immediately prior to the date of termination; and
"NY" is the Assurance Period expressed as a number of years
(rounded, if such period is not a whole number, to the next
highest whole number).
The Salary Severance Payment shall be made within thirty (30)
days after the Officer's termination of employment and shall
be in lieu of any claim to a continuation of base salary which
the Officer might otherwise have and in lieu of cash severance
benefits under any severance benefits program which may be in
effect for officers or employees of the Bank.
(iii) The Bank shall make a lump sum payment to the Officer or, in
the event of the Officer's death following the Officer's
discharge but before payment, to the Officer's estate in an
amount equal to the potential annual bonuses that the Officer
would have earned if the Officer had continued working for the
Bank during the Assurance Period at the highest annual rate of
salary achieved during the period of three (3) years ending
immediately prior to the date of termination (the "Bonus
Severance Payment"). The Bonus Severance Payment shall be
computed using the following formula:
BSP = ((BS x TIO x IP) + ( BS x TIO x FP x AP)) x NY
where:
"BSP" is the amount of the Bonus Severance Payment, before the
deduction of applicable federal, state and local withholding
taxes;
"BS" is the highest annual rate of salary achieved by the
Officer during the period of three (3) years ending
immediately prior to the date of termination;
"TIO" is the target incentive opportunity for the Officer
expressed as a percentage as established by the Compensation
Committee of the Board of Directors of the Bank pursuant to
the Bank's Annual Incentive Plan for Select Executives for the
year in which the employment of the Officer by the Bank
terminates or, if no target incentive opportunity is
established by the Compensation Committee of the Board of
Directors of the Bank for such year
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with respect to the Officer, then the highest target incentive
opportunity established by the Compensation Committee of the
Board of Directors of the Bank for the Officer pursuant to the
Annual Incentive Plan for Select Executives during the period
of three (3) years ending immediately prior to the date of
termination;
"IP" is either (i) the percentage of the TIO which is to be
determined by the individual performance of the Officer as
established by the Compensation Committee of the Board of
Directors of the Bank pursuant to the Bank's Annual Incentive
Plan for Select Executives for the year in which the
employment of the Officer by the Bank terminates or, (ii) if
no target incentive opportunity has been established with
respect to the Officer by the Compensation Committee of the
Board of Directors of the Bank for the year in which the
employment of the Officer by the Bank terminates, then the
lowest percentage of the target incentive opportunity to be
determined by the individual performance of the Officer
established by the Compensation Committee of the Board of
Directors of the Bank for the Officer pursuant to the Annual
Incentive Plan for Select Executives during the period of
three (3) years ending immediately prior to the date of
termination;
"FP" is either (i) the percentage of the TIO with respect to
the Officer which is to be determined by the financial
performance of the Company as established by the Compensation
Committee of the Board of Directors of the Bank pursuant to
the Bank's Annual Incentive Plan for Select Executives for the
year in which the employment of the Officer by the Bank
terminates or, (ii) if no target incentive opportunity has
been established with respect to the Officer by the
Compensation Committee of the Board of Directors of the Bank
for the year in which the employment of the Officer by the
Bank terminates, then a percentage equal to 100% minus the IP;
"AP" is the highest award percentage available to the Officer
with respect to the financial performance of the Company as
established by the Compensation Committee of the Board of
Directors of the Bank pursuant to the Bank's Annual Incentive
Plan for Select Executives for the year in which the
employment of the Officer by the Bank terminates or, (ii) if
no target incentive opportunity has been established with
respect to the Officer by the Compensation Committee of the
Board of Directors of the Bank for the year in which the
employment of the Officer by the Bank terminates, then the
highest award percentage available to the Officer with respect
to the financial performance of the Company established by the
Compensation Committee of the Board of Directors of the Bank
for the Officer pursuant to the Annual Incentive Plan for
Select Executives during the period of three (3) years ending
immediately prior to the date of termination;
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"NY" is the Assurance Period expressed as a number of years
(rounded, if such period is not a whole number, to the next
highest whole number).
The Bonus Severance Payment shall be made within thirty (30)
days after the Officer's termination of employment and shall
be in lieu of any claim to a continuation of participation in
annual bonus plans of the Bank which the Officer might
otherwise have.
The payments and benefits described in section 6(b) are referred to in
this Agreement as the "Additional Termination Entitlements". The payments
described in section 6(b)(ii) and (iii) shall be computed at the expense
of the Company by an attorney of the firm of Xxxxxxx Xxxxxxxx & Xxxx, Two
World Trade Center, New York, New York 10048 or, if such firm is
unavailable or unwilling to perform such calculation, by a firm of
independent certified public accountants selected by the Officer and
reasonably satisfactory to the Company (the "Computation Advisor"). The
determination of the Computation Advisor as to the amount of such payments
shall be final and binding in the absence of manifest error.
Section 7. Tax Indemnification.
(a) If the Officer's employment terminates under circumstances entitling
the Officer or, in the event of the Officer's death following such
termination but before payment, his or her estate to the Additional
Termination Entitlements, the Company shall pay to the Officer or,
in the event of the Officer's death, his or her estate an additional
amount intended to indemnify the Officer against the financial
effects of the excise tax imposed on excess parachute payments under
section 280G of the Code (the "Tax Indemnity Payment"). The Tax
Indemnity Payment shall be determined under the following formula:
E x P
TIP = ---------------------------------------
1 - (( FI x ( 1 - SLI )) + SLI + E + M )
where:
"TIP" is the Tax Indemnity Payment, before the deduction of
applicable federal, state and local withholding taxes;
"E" is the percentage rate at which an excise tax is assessed under
section 4999 of the Code;
"P" is the amount with respect to which such excise tax is assessed,
determined without regard to this section 16;
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"FI" is the highest marginal rate of income tax applicable to the
Officer under the Code for the taxable year in question;
"SLI" is the sum of the highest marginal rates of income tax
applicable to the Officer under all applicable state and local laws
for the taxable year in question; and
"M" is the highest marginal rate of Medicare tax applicable to the
Officer under the Code for the taxable year in question.
Such computation shall be made at the expense of the Company by the
Computation Advisor and shall be based on the following assumptions:
(i) that a change in ownership, a change in effective ownership or
control or a change in the ownership of a substantial portion
of the assets of the Bank or the Company has occurred within
the meaning of section 28OG of the Code (a "28OG Change of
Control");
(ii) that all direct or indirect payments made to or benefits
conferred upon the Officer on account of the Officer's
termination of employment are "parachute payments" within the
meaning of section 28OG of the Code; and
(iii) that no portion of such payments is reasonable compensation
for services rendered prior to the Officer's termination of
employment.
(b) With respect to any payment that is presumed to be a parachute
payment for purposes of section 28OG of the Code, the Tax Indemnity
Payment shall be made to the Officer on the earlier of the date the
Company, the Bank or any direct or indirect subsidiary or affiliate
of the Company or the Bank is required to withhold such tax or the
date the tax is required to be paid by the Officer, unless, prior to
such date, the Company delivers to the Officer the written opinion
(the "Opinion Letter"), in form and substance reasonably
satisfactory to the Officer, of the Computation Advisor or, if the
Computation Advisor is unable to provide such opinion, of an
attorney or firm of independent certified public accountants
selected by the Company and reasonably satisfactory to the Officer,
to the effect that the Officer has a reasonable basis on which to
conclude that:
(i) no 28OG Change in Control has occurred, or
(ii) all or part of the payment or benefit in question is not a
parachute payment for purposes of section 28OG of the Code, or
(iii) all or a part of such payment or benefit constitutes
reasonable compensation for services rendered prior to the
28OG Change of Control, or
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(iv) for some other reason which shall be set forth in detail in
such letter, no excise tax is due under section 4999 of the
Code with respect to such payment or benefit.
If the Company delivers an Opinion Letter, the Computation Advisor
shall recompute, and the Company shall make, the Tax Indemnity
Payment in reliance on the information contained in the Opinion
Letter.
(c) In the event that the Officer's liability for the excise tax under
section 4999 of the Code for a taxable year is subsequently
determined to be different than the amount with respect to which the
Tax Indemnity Payment is made, the Officer or the Company, as the
case may be, shall pay to the other party at the time that the
amount of such excise tax is finally determined, an appropriate
amount, plus interest, such that the payment made pursuant to
sections 7(a) or 7(b), when increased by the amount of the payment
made to the Officer pursuant to this section 7(c), or when reduced
by the amount of the payment made to the Company pursuant to this
section 7(c), equals the amount that should have properly been paid
to the Officer under section 7(a). The interest paid to the Company
under this section 7(c) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code. The payment made to the
Officer shall include such amount of interest as is necessary to
satisfy any interest assessment made by the Internal Revenue Service
and an additional amount equal to any monetary penalties assessed by
the Internal Revenue Service on account of an underpayment of the
excise tax. To confirm that the proper amount, if any, was paid to
the Officer under this section 7, the Officer shall furnish to the
Company a copy of each tax return which reflects a liability for an
excise tax, at least 20 days before the date on which such return is
required to be filed with the Internal Revenue Service. Nothing in
this Agreement shall give the Company any right to control or
otherwise participate in any action, suit or proceeding to which the
Officer is a party as a result of positions taken on the Officer's
federal income tax return with respect to the Officer's liability
for excise taxes under section 4999 of the Code.
Section 8. Indemnification upon and following a Change of Control.
(a) From and after the effective date of a Change of Control through the
sixth anniversary of such effective date, the Bank and the Company
agree to indemnify and hold harmless the Officer, against any costs
or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative
or investigative, arising out of matters existing or occurring at or
prior to the time the Change of Control became effective whether
asserted or claimed prior to, at or after the effective date of the
Change of Control, and to advance any such Costs to the Officer as
they are from
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time to time incurred, in each case to the fullest extent the
Officer would have been indemnified as a director or officer of the
Bank or the Company, as applicable, and as then permitted under
applicable law.
(b) The Officer, seeking to claim indemnification under section 8(a) of
this Agreement and upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Bank thereof,
but the failure to so notify shall not relieve the Bank or the
Company of any liability it may have pursuant to this Agreement to
the Officer if such failure does not materially and substantially
prejudice the Bank or the Company. In the event of any such claim,
action, suit, proceeding or investigation,
(i) the Bank and the Company shall have the right to assume the
defense thereof with counsel reasonably acceptable to the
Officer, and the Bank and the Company shall not be liable to
the Officer for any legal expenses of other counsel
subsequently incurred by the Officer in connection with the
defense thereof, except that if the Bank and the Company do
not elect to assume such defense within a reasonable time or
counsel for the Officer at any time advises that there are
issues which raise conflicts of interest between the Bank or
the Company and the Officer (and counsel for the Bank or the
Company does not disagree), the Officer may retain counsel
satisfactory to the Officer, and the Bank and the Company
shall remain responsible for the reasonable fees and expenses
of such counsel as set forth above, to be paid promptly as
statements therefor are received; provided, however, that the
Bank and the Company shall be obligated pursuant to this
paragraph (b)(i) to pay for only one firm of counsel for all
indemnified parties in any one jurisdiction with respect to
any given claim, action, suit, proceeding or investigation
unless the use of one counsel for such indemnified parties,
including the Officer, would present such counsel with a
conflict of interest;
(ii) the Officer will reasonably cooperate in the defense of any
such matter; and
(iii) the Bank and the Company shall not be liable for any
settlement effected by the Officer without their prior written
consent, which shall not be unreasonably withheld.
Section 9. Resignation.
(a) The Officer may resign from the Officer's employment with the Bank
at any time. A resignation under this section 9 shall be effected by
notice of resignation given by the Officer to the Bank and shall
take effect on the later of the effective date of termination
specified in such notice or the date on which the notice of
termination is deemed given by the Officer. For purposes of this
Agreement, retirement of the Officer from the employment of the Bank
or the Company under circumstances
Page - 14 -
15
defined as "normal retirement" or "early retirement" pursuant to any
qualified defined benefit or qualified defined contribution pension
plan maintained by the Bank shall be deemed a resignation by the
Officer's of the Officer's employment with the Bank. A resignation
by the Officer as described in section 5(a)(ii) of this Agreement,
for purposes of this Agreement shall be deemed to be termination
with "Cause". The Officer's resignation of any of the positions
within the Bank or the Company to which he has been assigned shall
be deemed a resignation from all such positions.
(b) The Officer's resignation shall be deemed to be for "Good Reason" if
the effective date of resignation occurs during the Term, but on or
after the effective date of a Pending Change of Control or Change of
Control, and is on account of:
(i) the failure of the Bank (whether by act or omission of the
Board of Directors, or otherwise) to appoint, re-appoint,
elect or re-elect the Officer to the office and position with
the Bank that he held immediately prior to the Change of
Control or Pending Change of Control (the "Assigned Office")
or to a more senior office and position;
(ii) if the Officer is or becomes a member of the Board of
Directors of the Bank, the failure of the shareholders of the
Bank (whether in an election in which the Officer stands as a
nominee or in an election where the Officer is not a nominee),
to elect or re-elect the Officer to such directorship at the
expiration of the Officer's term as a director, unless such
failure is a result of the Officer's refusal to stand for
election;
(iii) a material failure by the Bank, whether by amendment of the
charter or organization, by-laws, action of the Board of
Directors of the Bank or otherwise, to vest in the Officer the
functions, duties, or responsibilities customarily associated
with the Assigned Office; provided that the Officer shall have
given notice of such failure to the Bank, and the Bank has not
fully cured such failure within thirty (30) days after such
notice is deemed given;
(iv) any reduction of the Officer's rate of base salary in effect
from time to time, whether or not material, or any failure,
other than due to reasonable administrative error that is
fully cured within 5 days after notice of such administrative
error is deemed given, to pay any portion of the Officer's
compensation as and when due;
(v) any change in the terms and conditions of any compensation or
benefit program in which the Officer participates which,
either individually or together with other changes, has a
material adverse effect on the aggregate value of the
Officer's total compensation package; provided that the
Officer shall have given notice of such material adverse
effect to the Bank, and the
Page - 15 -
16
Bank has not fully cured such failure within thirty (30) days
after such notice is deemed given;
(vi) any material breach by the Company or the Bank of any material
term, condition or covenant contained in this Agreement;
provided that the Officer shall have given notice to the
Company and the Bank of such material adverse effect, and the
Company or the Bank have not fully cured such failure within
thirty (30) days after such notice is deemed given; or
(vii) a change in the Officer's principal place of employment to a
location that is outside of Nassau County or Queens County,
New York.
In all other cases, a resignation by the Officer shall be deemed to
be without Good Reason. In the event of resignation, the Officer
shall state in the Officer's notice of resignation whether the
Officer considers his or her resignation to be a resignation with
Good Reason, and if he does, he shall state in such notice the
grounds which constitute Good Reason. The Officer's determination of
the existence of Good Reason shall be conclusive in the absence of
fraud, bad faith or manifest error.
(c) In the event of the Officer's resignation for any reason, the Bank
shall pay and deliver the Standard Termination Entitlements. In the
event of the Officer's resignation with Good Reason and such
resignation is effective within six (6) months of the effective date
of the Change of Control (the "Resignation Window Period"), the Bank
shall also pay and deliver the Additional Termination Entitlements.
In the event the Officer's resignation with Good Reason is based
upon section 9(b)(iii),(iv),(v) or (vi) and the notice required by
such provision has been given within six months of the effective
date of the Change of Control but the applicable cure period will
not expire until on or after the date which is six months following
the effective date of the Change of Control, the Resignation Window
Period shall be extended so as expire 30 days following the
expiration of the applicable cure period.
Section 10. Terms and Conditions of the Additional Termination
Entitlements.
The Bank and the Officer hereby stipulate that the damages which may be
incurred by the Officer following any termination of employment are not capable
of accurate measurement as of the date first above written and that the
Additional Termination Entitlements constitute reasonable damages under the
circumstances and shall be payable without any requirement of proof of actual
damage and without regard to the Officer's efforts, if any, to mitigate damages.
The Bank and the Officer further agree that the Bank may condition the payment
and delivery of the Additional Termination Entitlements on the receipt of:
(a) the Officer's resignation from any and all positions which he holds
as an officer, director or committee member with respect to the Bank
or any subsidiary or affiliate
Page - 16 -
17
of the Bank; and
(b) a release of the Bank and the Company and their officers, directors,
shareholders, subsidiaries and affiliates, in form and substance
satisfactory to the Bank, of any liability to the Officer, whether
for compensation or damages, in connection with the Officer's
employment with the Bank and the termination of such employment,
except for the Standard Termination Entitlements, the Additional
Termination Entitlements, the Tax Indemnity Payment and
indemnification payments due the Officer pursuant to section 8 or
section 16 of this Agreement.
To the extent the Bank conditions the payment and delivery of the Additional
Termination Entitlements or any other amount due under this Agreement upon the
receipt of the release provided in section 10(b) of this Agreement and such
release by law may not be effective until the expiration of a required prior
notice and/or a recission period following its execution by the Officer, then
any payment required to be made pursuant to this Agreement may be deferred until
the expiration of the period which is the sum of the period within which such
payment was required to be made under the terms of this Agreement but for this
section 10 and the period of any required prior notice and recission periods,
provided, however, that the Bank shall pay to the Officer for each day of such
deferral interest in addition to any other amounts due and owing under this
Agreement at the rate of the federal short term rate established under section
1274 of the Code for the month in which the Officer's termination of employment
occurs calculated on the basis of a 360 day year for the actual number of days
of such deferral on the amount so deferred.
Section 11. Confidentiality.
Unless the Officer obtains the prior written consent of the Bank or the
Company, the Officer shall keep confidential and shall refrain from using for
the benefit of himself or herself, or any person or entity other than the
Company or any entity which is a subsidiary of the Company or of which the
Company is a subsidiary, any material document or information obtained from the
Company, or from its parent or subsidiaries, in the course of the Officer's
employment with any of them concerning their properties, operations or business
(unless such document or information is readily ascertainable from public or
published information or trade sources or has otherwise been made available to
the public through no fault of the Officer) until the same ceases to be material
(or becomes so ascertainable or available); provided, however, that nothing in
this section 11 shall prevent the Officer, with or without the Company's
consent, from participating in or disclosing documents or information in
connection with any judicial or administrative investigation, inquiry or
proceeding to the extent that such participation or disclosure is required under
applicable law.
Section 12. No Effect on Employee Benefit Plans or Programs.
Except to the extent specifically provided herein, the termination of the
Officer's employment during the Assurance Period or thereafter, whether by the
Bank or by the Officer, shall have no effect on the rights and obligations of
the parties hereto under the Bank's qualified or non-qualified
Page - 17 -
18
retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group
life, health (including hospitalization, medical and major medical), dental,
accident and long term disability insurance plans or such other employee benefit
plans or programs, or compensation plans or programs, as may be maintained by,
or cover employees of, the Bank from time to time; provided, however, that
nothing in this Agreement shall be deemed to duplicate any compensation or
benefits provided under any severance agreement, plan or program covering the
Officer to which the Bank or Company is a party and any duplicative amount
payable under any such agreement, plan or program shall be applied as an offset
to reduce the amounts otherwise payable hereunder. The Additional Termination
Entitlements provided hereunder, when due and payable or provided to the
Officer, or in the case of the Officer's death, to his or her estate, surviving
dependants or designated beneficiaries, as applicable, are acknowledged to be in
lieu of any benefits that would otherwise be provided under such circumstances
pursuant to the Bank's Severance Pay Plan, as amended, or Severance Compensation
Plan, as amended.
Page - 18 -
19
Section 13. Successors and Assigns.
This Agreement will inure to the benefit of and be binding upon the
Officer, the Officer's legal representatives and testate or intestate
distributees, and the Company and the Bank and their respective successors and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Company or the Bank may be
sold or otherwise transferred. Failure of the Company to obtain from any
successor its express written assumption of the Company's or Bank's obligations
hereunder at least 60 days in advance of the scheduled effective date of any
such succession shall, if such succession constitutes a Change of Control,
constitute Good Reason for the Officer's resignation on or at any time during
the Term following the occurrence of such succession.
Section 14. No Attachment.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
Section 15. Notices.
Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to the Officer:
Xxx X. Xxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxx Xxx, Xxx Xxxx 00000
If to the Company or the Bank:
Astoria Financial Corporation
Xxx Xxxxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000
Page - 19 -
20
Attention: Chairman, President and Chief Executive Officer
with a copy to:
Xxxxxxx Xxxxxxxx & Xxxx
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxx, Esq.
Section 16. Indemnification for Attorneys' Fees.
(a) The Bank shall indemnify, hold harmless and defend the Officer
against reasonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in
which he may be involved, as a result of the Officer's efforts, in
good faith, to defend or enforce the terms of this Agreement;
provided, however, that the Officer shall have substantially
prevailed on the merits pursuant to a judgment, decree or order of a
court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or in a settlement.. For purposes of this
Agreement, any settlement agreement which provides for payment of
any amounts in settlement of the Bank's obligations under this
Agreement shall be conclusive evidence of the Officer's entitlement
to indemnification under this Agreement, and any such
indemnification payments shall be in addition to amounts payable
pursuant to such settlement agreement, unless such settlement
agreement expressly provides otherwise.
(b) The Bank's or the Company's obligation to make the payments provided
for in this Agreement and otherwise to perform their respective
obligations under this Agreement shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or
action which the Bank or the Company may have against the Officer or
others. In no event shall the Officer be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to the Officer under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the
Officer obtains other employment. Unless it is determined that the
Officer has acted frivolously or in bad faith, the Bank shall pay as
incurred, to the full extent permitted by law, all legal fees and
expenses which the Officer may reasonably incur as a result of or in
connection with the Officer's consultation with legal counsel or
arising out of any action, suit, proceeding, tax controversy, appeal
or contest (regardless of the outcome thereof) by the Bank, the
Company, the Officer or others regarding the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Officer about the amount of any payment
pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable
Page - 20 -
21
Federal rate provided for in section 7872(f)(2)(A) of the Code.
Page - 21 -
22
Section 17. Employment Rights and Funding Obligations.
(a) Nothing expressed or implied in this Agreement shall create any
right or duty on the part of the Bank, the Company or the Officer to
have the Officer continue as an officer of the Bank or the Company
or to remain in the employment of the Bank, the Company.
(b) Nothing expressed or implied in this Agreement shall create any
right or duty on the part of the Bank, the Company or the Officer to
create a trust of any kind to fund any benefits which may be payable
pursuant to this Agreement, and to the extent that the Officer
acquires a right to receive benefits from the Bank or the Company
pursuant to this Agreement, such right shall be no greater than the
right of any unsecured general creditor of the Bank or the Company,
respectively.
Section 18. Withholding.
The Bank or the Company, as applicable, shall have the right to deduct and
withhold from any amounts paid in cash pursuant to this Agreement by the Bank or
the Company, respectively, any taxes or other amounts required by law to be
withheld with respect to such payment.
Section 19. Severability.
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
Section 20. Survival.
The rights and obligations of the Bank, the Company and the Officer under
this Agreement, unless otherwise expressly provided in this Agreement, shall
survive the expiration of the term or other termination of this Agreement.
Section 21. Waiver.
Failure to insist upon strict compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant, or
condition. A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
Section 22. Counterparts.
Page - 22 -
23
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
Agreement.
Section 23. Governing Law.
Except to the extent preempted by federal law, this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York applicable to contracts entered into and to be performed entirely
within the State of New York.
Section 24. Headings and Construction.
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
Section 25. Entire Agreement; Modifications.
This instrument contains the entire agreement of the parties relating to
the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
Section 26. Required Regulatory Provisions.
The following provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the Bank:
(a) Notwithstanding anything herein contained to the contrary, in no
event shall the aggregate amount of compensation payable to the
Officer on account of the Officer's termination of employment exceed
three times the Officer's average annual total compensation for the
last five consecutive calendar years to end prior to the Officer's
termination of employment with the Bank (or for the Officer's entire
period of employment with the Bank if less than five calendar
years).
(b) Notwithstanding anything herein contained to the contrary, any
payments to the Officer by the Bank, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act
("FDI Act"), 12 U.S.C. Section 1828(k), and any regulations
promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary, if the
Officer is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to
a notice served under section 8(e)(3)
Page - 23 -
24
or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(3) or
1818(g)(1), the Bank's obligations under this Agreement shall be
suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in such notice are
dismissed, the Bank, in its discretion, may (i) pay to the Officer
all or part of the compensation withheld while the Bank's
obligations hereunder were suspended and (ii) reinstate, in whole or
in part, any of the obligations which were suspended.
(d) Notwithstanding anything herein contained to the contrary, if the
Officer is removed and/or permanently prohibited from participating
in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(4) or (g)(1), all prospective obligations of the Bank under
this Agreement shall terminate as of the effective date of the
order, but vested rights and obligations of the Bank and the Officer
shall not be affected.
(e) Notwithstanding anything herein contained to the contrary, if the
Bank is in default (within the meaning of section 3(x)(1) of the FDI
Act, 12 U.S.C. Section 1813(x)(1), all prospective obligations of
the Bank under this Agreement shall terminate as of the date of
default, but vested rights and obligations of the Bank and the
Officer shall not be affected.
(f) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated,
except to the extent that a continuation of this Agreement is
necessary for the continued operation of the Bank: (i) by the
Director of the Office of Thrift Supervision ("OTS") or his designee
or the Federal Deposit Insurance Corporation ("FDIC"), at the time
the FDIC enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in section 13(c) of
the FDI Act, 12 U.S.C.Section 1823(c); (ii) by the Director of the
OTS or his designee at the time such Director or designee approves a
supervisory merger to resolve problems related to the operation of
the Bank or when the Bank is determined by such Director to be in an
unsafe or unsound condition. The vested rights and obligations of
the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement. None of
the foregoing provisions, other than section 26(b) shall limit any obligations
of the Company under this Agreement.
Section 27. Guaranty.
The Company hereby irrevocably and unconditionally guarantees to the
Officer the payment of all amounts, and the performance of all other
obligations, due from the Bank in accordance with the terms of this Agreement as
and when due without any requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment. Solely for purposes of determining the
extent
Page - 24 -
25
of the Company's guarantee, the obligations of the Bank under this Agreement
shall be determined as though section 26(a), (c), (d), (e) and (f) did not apply
to the Bank.
IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to
be executed and the Officer has hereunto set the Officer's hand, all as of the
day and year first above written.
/S/ Xxx X. Xxxxxxx
-------------------------------------
XXX X. XXXXXXX
Attest:
By: /S/ Xxxxxxx X. Xxxxxxx ASTORIA FEDERAL SAVINGS AND LOAN
------------------------------------ ASSOCIATION
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and
Secretary
By: /S/ Xxxxxx X. Xxxxxxx, Xx.
Attest: ------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chairman, President and Chief
Executive Officer
By: /S/ Xxxxxxx X. Xxxxxxx
------------------------------------ ASTORIA FINANCIAL CORPORATION
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and
Secretary
By: /S/ Xxxxxx X. Xxxxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chairman, President and Chief
Executive Officer
Page - 25 -
