AMENDED AND
RESTATED
CHANGE OF CONTROL SEVERANCE
AGREEMENT
This AMENDED AND RESTATED CHANGE OF CONTROL
SEVERANCE AGREEMENT (the "Agreement") is made and entered into as
of January 1, 2009 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 Astoria Federal Plaza, Lake Success, New York 11042 (the
"Association"), ASTORIA FINANCIAL CORPORATION, a business
corporation organized and existing under the laws of the State of
Delaware and having an office at One Astoria Federal Plaza, Lake
Success, New York 11042 (the "Company") and Thomas E. Lavery, an
individual residing at 18 Polly Drive, Huntington, New York 11743
(the "Officer").
INTRODUCTORY
STATEMENT
WHEREAS , the Officer is a key officer of the
Association;
WHEREAS , should the possibility of a Pending Change of
Control or Change of Control of the Association or the Company
arise, the Boards of Directors of the Association and the Company
believe it is imperative that the Association, the Company and the
Boards of Directors of the Association and the Company should be
able to rely upon the Officer to continue in his or her position,
and that the Association and the Company should be able to receive
and rely upon the Officer's advice, if requested, as to the best
interests of the Association 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 Association, the Company and their respective
shareholders, and to take such other actions as the Boards of
Directors of the Association and the Company might determine to be
appropriate;
WHEREAS , the Officer currently has a Change of Control
Severance Agreement with the Association and the Company entered
into on December 21, 2005 (such date, the "Initial Effective Date,"
and such agreement, the "Prior Agreement"); and
WHEREAS , the Officer, the Association and the Company
wish to amend and modify the Prior Agreement pursuant to section 26
thereof for the purpose, among others, of compliance with the
applicable requirements of section 409A of the Internal Revenue
Code of 1986 (the "Code");
NOW, THEREFORE , in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the
Association, the Company and the Officer hereby amend
and restate in
its entirety the Prior Agreement so as to provide as follows from
and after the date hereof:
AGREEMENT
Section 1.
Effective Date; Term; Pending Change of Control and Change of
Control Defined.
(a) This Agreement has been in effect since the
Initial Effective Date and shall remain in effect during
the period (the "Term") beginning on the Initial 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 Association
terminates whether by discharge, resignation, death, disability or
retirement, or
(A) the first anniversary of the date on which
the Association notifies the Officer 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 Initial
Effective Date and before the Initial Expiration Date.
(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 transaction that
results in the 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 (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 outstanding equity ownership
interests in the Company; and
(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, or approval by the shareholders of the Company of a
plan for such liquidation or dissolution;
(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 Initial Effective Date;
or
(B) individuals who first became members of the
Board of Directors of the Company after the Initial Effective Date
either:
(I) 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
(II) upon election by the stockholders 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 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 "Association" 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 Association, or an affiliate or subsidiary of either of them,
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
Association 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
Association 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 Association 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 Association 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 Association 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 Association, including the annual bonus (if any) to which he
or she is entitled under any cash-based annual bonus or performance
compensation plan in effect for the year in which his or her
termination occurs, to be paid ate same time and on the terms and
conditions (including but not limited to achievement of performance
goals) applicable under the relevant plan. 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.
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 Association
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 Association 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 Association 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 Association, 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 Association 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 Association 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 Association; 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
Association 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.
Section 5.
Discharge with Cause after a Pending Change of Control or Change
of Control.
(a) The Association 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
Association, by the affirmative vote of 75% of its entire
membership, determines that the Officer is guilty of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform
stated duties, willful 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 Association shall provide
the Officer with notice of the Association'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 Association 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 Association 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 Association, 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 Association
of the Notice of Intent to Discharge specified in section
5(a)(i)(B), resigns his or her employment with the Association
prior to the delivery to the Officer by the Association 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 Association 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 Association or the Company or based upon the
written advice of counsel for the Association 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 Association
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 Association 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 Association 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
Association 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.
Section 6.
Discharge Without Cause after a Pending Change of Control or
Change of Control.
The Association 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 Association 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 Association 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 Association) 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 Association, 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 Association 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 Association
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
"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 sixty (60) 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
Association.
(iii) The Association 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 Association during the period of the same
length as the Assurance Period, beginning on the date after the end
of the current performance period under the Association’s
Annual Incentive Plan for Select Executives 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
"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 Association pursuant to the Association's
Annual Incentive Plan for Select Executives for the year in which
the employment of the Officer by the Association terminates or, if
no target incentive opportunity is established by the Compensation
Committee of the Board of Directors of the Association for such
year with respect to the Officer, then the highest target incentive
opportunity established by the Compensation Committee of the Board
of Directors of the Association 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 Association
pursuant to the Association's Annual Incentive Plan for Select
Executives for the year in which the employment of the Officer by
the Association 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 Association
for the year in which the employment of the Officer by the
Association 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 Association 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 Association pursuant to the Association's Annual Incentive
Plan for Select Executives for the year in which the employment of
the Officer by the Association 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 Association for the year in which the employment of the Officer
by the Association 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 Association
pursuant to the Association's Annual Incentive Plan for Select
Executives during the period of three (3) years ending immediately
prior to the date of termination;
"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 on the date sixty (60) days after
the Officer's termination of employment and shall be in lieu of any
claim to a continuation of participation in any cash-based annual
bonus or performance-based compensation plans of the Association
which the Officer might otherwise have, other than any claim based
on rights the Officer may have with regard to any performance
period under any such plan that begins before the effective date of
the Officer's termination of employment.
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 Thacher
Proffitt & Wood, Two World Financial Center, New York, New York
10281 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 (the “Tax
Indemnity Payment”) intended to indemnify the Officer against
the financial effects of the excise tax imposed on excess parachute
payments under section 280G of the Internal Revenue Code
of
1986, as
amended (the "Code"). The Tax Indemnity Payment shall be determined
under the following formula:
|
TIP =
|
E x P
|
|
1 - (( FI x ( 1 - SLI )) + SLI + E +
M )
|
"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;
"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 fo
