Afs Employee Stock Ownership Agreement

ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP TRUST
LOAN AND SECURITY AGREEMENT


Astoria Financial Corporation Lake Success, New York November 18, 1993


Gentlemen:


The undersigned, Nationar, not individually but solely as Trustee under the Astoria Federal Savings and Loan Association Employee Stock Ownership Trust (the "Trust") effective November 18, 1993 (the "Borrower"), applies to you for your commitment, subject to all of the terms and conditions hereof and on the basis of the representations hereinafter set forth, to make a loan available to the Borrower as hereinafter set forth. Astoria Financial Corporation is hereinafter referred to as the "Lender". The term "Company" as used herein refers to Astoria Federal Savings and Loan Association, as the sponsoring employer of the Astoria Federal Savings and Loan Association Employee Stock Ownership Plan (the "ESOP").


SECTION ONE. THE TERM LOAN.


1.1 Amount and Terms. By its acceptance hereof the Lender agrees, subject to all of the terms and conditions hereof and on the basis of the representations hereinafter set forth, to make a loan (the "Loan") of up to thirty-three million, twenty-nine thousand, four hundred and twenty-five dollars ($33,029,425) (the "Commitment"), such proceeds to be used by the Borrower entirely to acquire shares (the "Shares") of the common stock, par value $.01 of Astoria Financial Corporation, a Delaware corporation.


The Loan is intended to be an "exempt loan" as described in Section 4975(d) of the Internal Revenue Code of 1986 (the "Code"), as defined in Section 54.4975-7(b) of the Treasury Regulations (the "Regulations"), as described in Section 408(b)(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") and as described in Department of Labor Regulations Section 2550.408b-3 (collectively, the "Exempt Loan Rules").


1.2 The Note. The disbursement of the Loan pursuant to Section 1.1 hereof shall be made against and evidenced by a promissory note of the Borrower in the form annexed hereto as Exhibit A (the "Note"), such Note to bear interest as hereinafter provided, and to mature in consecutive annual principal installments commencing on December 31, 1994 and on the last day of each December each year thereafter, each such installment to be in an amount equal to 1/12th of the outstanding principal amount of the Loan made under Section 1.1 hereof, except that the final installment in the amount of all principal and interest not sooner paid shall be due on December 31, 2005, the final maturity thereof.


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Without regard to the principal amount of the Note stated on its face, the actual principal amount at any time outstanding and owed by the Borrower on account of the Note shall be the amount of the disbursement of the Loan made by the Lender under Section 1.1 hereof less all payments of principal actually received by the Lender. The amount of such disbursement made by the Lender and any repayments of principal thereof shall be recorded by the Lender on its books or records or, at its option, endorsed on the reverse side of the Note by the Lender and the unpaid principal balance at any time so recorded or endorsed by the Lender shall be prima facie evidence in any court or other proceedings brought to enforce the Note of the principal amount remaining unpaid thereon.


1.3 Notwithstanding anything to the contrary contained in this Agreement or in the Note, the Borrower shall be obligated to make repayments of the Loan only to the extent that such repayments when added to the repayments theretofore made during the applicable plan year would not exceed an amount which would cause the limitations of Section 415 of the Code to be exceeded for any ESOP participant.


Except as set forth in the next succeeding sentence and to the extent permitted by applicable law, including, without limitation, the Exempt Loan Rules, the principal amount of the Loan and any interest thereon shall be payable solely from contributions (other than contributions of employer securities) made to the Trust in accordance with the ESOP, and cash dividends received on the Shares, to enable the Borrower to pay its obligations under the Loan and from earnings attributable to the Shares and the investment of such contributions and dividends.


The Lender acknowledges and agrees that it shall have no other recourse against the Borrower for repayment of the Loan and that it shall have no recourse against assets of the ESOP included in the Trust other than pursuant to Sections 3 and 8 hereof.


SECTION TWO. INTEREST AND FEES.


2.1 Interest Rate. The Loan shall bear interest (which the Borrower hereby promises to pay) prior to maturity (whether by lapse of time, acceleration otherwise) at a rate per annum equal at all times to 6.0%.


2.2 Basis and Payment Dates. All interest accruing on the Note prior to maturity shall be due and payable on an annual basis and on the last day of each December in each year (commencing December 31, 1994) and at maturity (unless prepaid in whole prior to such date, then on the date of such prepayment in whole) and interest accruing after maturity shall be due and payable upon demand. All interest on the Note shall be computed on the basis of a year of 360 days for the actual number of days elapsed.


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SECTION THREE. COLLATERAL.


3.1 Grant of Security Interest-Pledged Shares. The Borrower hereby grants, pledges and assigns to the Lender 1,321,177 shares of the issued and outstanding common stock, par value $.01 per share all of which were either (i) purchased by the Borrower from the proceeds of the disbursement of the Loan; (ii) acquired by the Borrower with the proceeds of a prior exempt loan within the meaning of Section 54.4975-7(b) of the Treasury Regulations, and pledged as collateral for such prior exempt loan, where the balance of such prior exempt loan has been repaid with the proceeds of the disbursement of the Loan (the "Pledged Shares" being hereinafter referred to as the "Collateral"). The Pledged Shares shall be evidenced by a stock certificate. The assignment and pledge herein granted and provided for is made and given to secure and shall secure the prompt payment of principal of and interest on the Note as and when the same becomes due and payable and the payment, observance and performance of any and all obligations and liabilities arising under or provided for in this Loan and Security Agreement (the "Agreement") or the Note or any of them in each instance as the same may be amended modified and whether now existing hereafter arising.


3.2 Further Assurances. The Borrower covenants and agrees that it will at any time and from time to time as requested by the Lender execute and deliver such further instruments and do and perform such other acts as the Lender may reasonably deem necessary or desirable to provide for or perfect the lien of the Lender in the Collateral hereunder.


3.3 Voting. Upon the occurrence of a Default or an Event of Default hereunder, the Lender sh all have the right to transfer the Collateral or any part thereof into its name or into the name of its nominee. The Lender shall not be entitled to vote the Pledged Shares unless and until an Event of Default has occurred and so long as the same shall not have been waived by the Lender.


3.4 Partial Releases. The Lender agrees, provided always that no Default or Event of Default shall have occurred and be continuing, as promptly as is practicable after December 31 in each year (the period commencing the date hereof and ending December 31, 1994 and each subsequent 12-month period ending on December 31 being hereinafter referred to as a "Plan Year"), to release that number of Pledged Shares then being held to secure the Loan which is equal to the number of such Pledged Shares held as of the last day of the Plan Year multiplied by a fraction, the numerator of which is the aggregate amount of all principal payments made on the Note during the Plan Year and the denominator of which is the sum of the numerator plus the principal to be paid for all future years under the Note.


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SECTION FOUR. PAYMENTS.


4.1 Place and Application. All payments of principal, interest, fees and all other amounts payable hereunder shall be made to the Lender at One Astoria Federal Plaza, Lake Success, New York 11042-1085 for the account of the Lender ( or at such other place for the account of the Lender as the Lender may from time to time in writing specify to the Borrower) in immediately available and freely transferable funds at the place of payment. All payments shall be paid in full without setoff or counterclaim and without reduction for and free from any and all taxes, levies, duties, fees, charges, deductions, withholdings, restrictions or conditions of any nature imposed by any government or any political subdivision or taxing authority thereof.


4.2 Prepayments. The Borrower shall have the privilege of prepaying in whole or in part the Note at any time upon giving five (5) Business Days' prior notice to the Lender, each such prepayment to be made by the payment of the principal amount to be prepaid and accrued interest thereon to the date fixed for prepayment. All such prepayments shall be made without premium or penalty.


SECTION FIVE. REPRESENTATIONS AND WARRANTIES.


The Borrower represents and warrants to the Lender as follows:


5.1 The Trust is a duly organized, validly existing employee stock ownership trust.


5.2 The proceeds of the disbursement of the Loan shall be applied in their entirety to the payment of the purchase price for the Pledged Shares.


5.3 The Borrower has full right, power and authority to enter into this Agreement, to make the borrowings hereunder provided for, to issue the Note in evidence thereof and to perform each and all of the matters and things herein and therein provided for and this Agreement does not, and the Note when issued will not, nor will the performance or observance by the Borrower of any of the matters or things herein or therein provided, contravene any provision of law or the Trust or any other covenant or agreement affecting the Trust or any of its assets. As of the date of the disbursement of the Loan, the Pledged Shares will be fully paid and non-assessable and the Pledged Shares will be owned by the Borrower free and clear of all liens, charges and encumbrances whatsoever, except for any lien of Lender provided for herein.


5.4 Except as disclosed to the Lender in writing, there is no litigation or governmental proceeding pending, nor to the knowledge of the Borrower threatened, against the ESOP and Trust.


5.5 The ESOP and Trust have no material liabilities, whether absolute or contingent, except for those heretofore disclosed to the Lender.


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SECTION SIX. REPRESENTATIONS AND WARRANTIES OF THE LENDER


The Lender represents and warrants that:


6.1 The Lender is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority and legal right to make and perform this Agreement.


6.2 The execution, delivery and performance by the Lender of this Agreement have been duly authorized by all necessary action by the Lender and is not and will not violate any provisions of law applicable to the Lender, any rules, regulations or orders applicable to the Lender or any judgments or decrees binding upon the Lender. This Agreement is a valid and legally binding obligation of the Lender enforceable against the Lender in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, motorium and similar laws affecting credits' rights generally and the general principles of equity (regardless of whether considered in a proceeding at law or in equity).


6.3 No authorizations, approvals or consents of, and no filings or registrations with, any governmental regulatory authority or agency are required for the execution, delivery performance by the Lender of this Agreement, or any transaction contemplated hereby, or for the validity or enforceability against the Lender hereof except as have already been received or accomplished.


6.4 The execution, delivery and performance of the Agreement and the consummation of the transactions contemplated hereby will not violate, conflict with or constitute a default under (i) any of the provisions of the Company's Certificate of Incorporation or Bylaws, (ii) any provision of any agreement, instrument, order, arbitration award, judgment or decree to which the Company is a party or by which it is or its assets are bound, (iii) any statute, rule or regulation of any federal, state or local government or agency applicable to the Company, except in any such case (i), (ii) or (iii) above, for any such conflicts, violations or defaults which either individually or in the aggregate do not have a material adverse effect on the business properties of the Company and its subsidiaries, taken as a whole.


6.5 The Company has taken such actions as are required by applicable law to be taken by it to establish the ESOP and the Trust.


6.6 There is no action, suit, investigation or proceeding pending, or to the best knowledge of the Company, threatened against or affecting the ESOP or the Trust before any court or governmental department, agency or instrumentality.


6.7 The Loan will be an "exempt loan" as that term is defined under Regulation Section 54.4975-7(b)(1)(iii), provided the Borrower determines that the interest rate is not more than reasonable; and the transactions contemplated by this Agreement are not "prohibited transactions" within the meaning of Section 4975 of Code Section 406(a) of ERISA.


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6.8 Except as otherwise provided in this Agreement, the Shares are not subject to any restriction on transfer under applicable Federal securities law and may be freely traded over-the-counter.


SECTION SEVEN. CONDITIONS PRECEDENT.


The obligation of the Lender to make the Loan shall be subject to satisfaction of the following conditions precedent:


7.1 The Lender shall have received executed originals of this Agreement and the Note duly signed and properly completed.


7.2 The Lender shall have received either (i) the certificate evidencing all the Pledged Shares together with duly executed blank stock power therefore or (ii) if such Pledged Shares are not yet available, a duly executed agreement to pledge such stock in the form attached hereto as Exhibit B (in which event such certificate and stock power will be delivered within 10 days of the date of the Lender makes the Loan).


7.3 The Lender shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Agreement and the Note.


SECTION EIGHT. COVENANTS.


The Borrower covenants and agrees that so long as any amount remains unpaid on the Note or the Commitment is outstanding, except to the extent compliance in any case or cases is waived in writing by the Lender:


8.1 Compliance.


The Borrower will comply with all requirements of the Code, ERISA and any other law, rule or regulation applicable to it as such laws, rules or regulations affect the Plan or the Trust.


8.2 Reports.


(a) Th ...