Exhibit 10.7

November 2, 2006

Jeffrey J. Carfora

622 Eagle Rock Avenue

West Orange, NJ 07052-2989

Dear Mr. Carfora:

In connection with the anticipated merger (the “Merger”) of PennFed Financial
Services, Inc. (the “Company”) with and into New York Community Bancorp, Inc.
(“NYB”) as contemplated by the Agreement and Plan of Merger, dated as of
November 2, 2006, by and between NYB and the Company (the “Merger Agreement”),
which is entered into as of today, the Company, NYB and you hereby enter into
this agreement (this “Agreement”). Capitalized terms used but not otherwise
defined in this Agreement shall have the meaning set forth in the Merger
Agreement.

1. 2006 Payment. Prior to December 31, 2006, the Company shall pay you
$1,000,000. This amount is intended to fully compensate you in exchange for your
foregoing the change in control payment due you under Section 7(c) of your
Employment Agreement (the “2.99 Payment Amount”). If the payment under this
Paragraph 1 exceeds the 2.99 Payment Amount, the excess shall be treated as made
pursuant to a separation pay arrangement exempt from Section 409A of the
Internal Revenue Code (the “Code”) (the Paragraph 1 Severance Payment”) and
subject to the separation payment limitations of Paragraph 2(b). For the
avoidance of doubt, and notwithstanding anything herein to the contrary, you
agree that this payment shall not be taken into account in computing any
benefits under any plan, program or arrangement of the Company or its Affiliates
in which you participate or to which you are a party. Not later than 10 business
days prior to the scheduled payment date, NYB shall be provided with sufficient
information by the Company to enable its Tax Advisor (as defined below) to
determine whether such payment is in compliance with Paragraph 5 of this
Agreement.

2. Effective Time Payment. (a) At or immediately following the Effective Time,
the Company or NYB shall pay you $570,000. If your employment with the Company
is terminated prior to the Effective Time due to disability or death, you or
your estate, as applicable, shall be entitled to the foregoing payment at or
immediately following the Effective Time. At your written election prior to the
Effective Time, the foregoing payment shall be reduced by the present value at
the Effective Time of the expected health and dental premiums to be paid by NYB,
to maintain continuing health and dental insurance coverage for you and your
dependents for the three year period following your employment termination (the
“Extended Coverage”) and you and your dependents will be entitled to receive the
Extended Coverage and to receive COBRA benefits thereafter. For the avoidance of
doubt, and notwithstanding anything herein to the contrary, you agree that this
payment shall not be taken into account in computing any benefits under any
plan, program or arrangement of the Company or its Affiliates in which you
participate or to which you are a party. Not later than 10 business days prior
to the scheduled payment date, NYB shall be provided with sufficient information
by the Company to enable its Tax Advisor (as defined below) to determine whether
such payment is in compliance with Paragraph 5 of this Agreement.

--------------------------------------------------------------------------------

(b) The payment under this Paragraph 2 shall be considered made pursuant to a
separation pay arrangement exempt from the application of Section 409A of the
Code, to the extent that the sum of this payment and the Paragraph 1 Severance
Payment does not exceed the separation pay arrangement limitation set forth in
Proposed Treasury Regulation 1.409A-1(b)(9)(iii)(A) (the “Severance Payment
Limit”). To this extent, the payment under this Paragraph 2 shall be referred to
as the “Paragraph 2 Severance Payment”.

(c) The payment under this Paragraph 2 in excess of the Paragraph 2 Severance
Payment shall be treated as deferred compensation to which Section 409A of the
Code applies. Accordingly, pursuant to the 2006 year transition rule guidance
issued under Section 409A of the Code, you agree that under your Employment
Agreement prior to its termination pursuant to Paragraph 4 below and prior to
this Agreement, such amount is not payable to you in 2006, and shall be paid to
you in accordance with Paragraph 2(a) notwithstanding any provision of your
Employment Agreement to the contrary. Your Employment Agreement shall be deemed
amended to permit this payment, prior to its termination pursuant to Paragraph 4
below.

3. Exercise of Nonqualified Stock Options. You agree that, on or before
December 28, 2006, you will exercise all Company nonqualified stock options you
hold as of the date of this Agreement.

4. Termination of Prior Agreement; Agreement to Remain Employed Through
Effective Time; Required Termination of Employment at the End of your Retention
Period. You hereby agree that, in consideration of the Company and NYB entering
into this Agreement, effective as of the date hereof, the amended and restated
Employment Agreement by and between the Company and you, dated as of
November 28, 2004, shall be null and void and no person or entity shall be
obligated to pay you or any person any amounts or provide any benefits in
respect to such Employment Agreement. Further, in consideration of the benefits
conferred upon you pursuant to this Agreement, you hereby agree not to
voluntarily terminate your employment with the Company or any of its Affiliates
prior to the Effective Time, and, prior to the Effective Time, the Company
agrees not to terminate your employment with the Company or its Affiliates,
except for cause as defined in your Employment Agreement. After the end of your
retention period set forth in your retention agreement, your employment with the
Company shall terminate (so that, accordingly, the Paragraph 1 Severance Payment
and the Paragraph 2 Severance Payment are considered made under a separation pay
arrangement within the meaning of Section 409A of the Code).

5. Withholding and Reduction. The Company will withhold and deposit all federal,
state and local income and employment taxes that are owed by you with respect to
all amounts paid or benefits provided to or for you by the Company or any
Affiliate pursuant to this Agreement.

It is the intention of the parties that no payment be made or benefit be
provided to you under this Agreement or otherwise by the Company that would
constitute an “excess parachute payment” within the meaning of Section 280G of
the Code and any regulations thereunder, thereby resulting in a loss of an
income tax deduction by the Company or NYB or the imposition of an excise tax on
you under Section 4999 of the Code. If, at any time, it is determined as
provided below that some or all of the payments or benefits scheduled to be made
or provided under this Agreement, when combined with any other payments or
benefits provided to you by the Company and/or any of its subsidiaries, would
constitute nondeductible excess parachute payments under Section 280G of the
Code, then the payments or benefits scheduled under this Agreement will be
reduced to one dollar less than the maximum amount which may be paid or provided
without causing any such payments or benefits scheduled hereunder to be
nondeductible. The determination made as to the reduction of benefits or
payments required hereunder by the Tax Advisor shall be binding on the parties,
unless within 15 days after such determination, a

 

2

--------------------------------------------------------------------------------

reputable tax advisor retained by you disputes such determination in writing. If
the two (2) tax advisors cannot resolve the dispute within five (5) business
days, they shall jointly appoint a third tax advisor to make the final
determination. If a dispute arises, the joint determination of the two (2) tax
advisors or the determination of the third tax advisor, as applicable, shall be
binding on the parties. You shall have the right to designate within a
reasonable period which payments or benefits scheduled under this Agreement will
be reduced; provided, however, that if you do not provide such direction, the
Company or NYB will implement any necessary reductions in its discretion. For
purposes of this paragraph, “Tax Advisor” shall mean a law firm, benefits
consulting firm or independent accounting firm (which firm may be NYB’s
independent auditors) appointed by NYB to make the determination required by
this paragraph.

6. Successors. This Agreement is personal to you and without the prior written
consent of the Company shall not be assignable by you otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by your legal representatives. This Agreement shall inure
to the benefit of and be binding upon the Company, NYB, and their successors and
assigns.

7. Effect of Termination of the Merger on SERP Entitlements; Repayment of
Benefit.

(a) If you receive the payment described in Paragraph 1 (the “2006 Payment”),
and the Merger Agreement is subsequently terminated, then your 2006 Payment
shall be treated as payment in full satisfaction of, and shall fully discharge
the Company’s obligation to pay to you (notwithstanding any provision of the
SERP to the contrary), that portion of your benefit under the Penn Federal
Savings Bank Supplemental Executive Retirement Plan (the “SERP”) that is not
subject to Section 409A of the Internal Revenue Code (the “Code”); that is, the
present value of that portion of your SERP benefit that had accrued on or prior
to December 31, 2004, and the incremental increases thereon (determined in
accordance with Proposed Treasury Regulation Section 1.409A-6(a) (or its
successor)) (the “Pre-2005 SERP Amount”). The Pre-2005 SERP Amount shall be
deemed to be made in accordance with Section 3.3 of the SERP as in effect on
December 31, 2004, and the SERP shall be interpreted accordingly. You agree to
enter into an amendment to your SERP Agreement consistent with the treatment of
your Pre-2005 SERP Amount herein and that precludes your Pre-2005 SERP Amount
from becoming subject to Section 409A.

(b) If you receive your 2006 Payment and the Merger Agreement is subsequently
terminated, then you shall not be entitled to any other benefit payable on
account of, or in connection with, a change in control involving the Company or
a successor thereto (other than a benefit payable under a plan qualified under
Code Section 401(a)), notwithstanding any provision of any other plan, program
or agreement to the contrary. In consideration for receiving your 2006 Payment,
you agree to waive any and all rights you may now or hereafter may have under
such other plan, program or agreement.

(c) If you receive your 2006 Payment and the Merger Agreement is subsequently
terminated, and you voluntarily terminate employment with the Company prior to
the earlier of (1) the 5th anniversary of this Agreement, or (2) a subsequent
change in control involving the Company or any successor thereto, then you shall
forfeit your entire interest in the SERP in excess of the Pre-2005 SERP Amount
(the “Post-2004 SERP Amount”), and the Company’s obligation to you regarding the
Post-2004 SERP Amount shall be fully discharged, notwithstanding any provision
of the SERP to the contrary. You agree to enter into an amendment to your SERP
Agreement consistent with the provisions of this paragraph.

 

3

--------------------------------------------------------------------------------

(d) If you voluntarily terminate employment with the Company after you receive
your 2006 Payment, but prior to the Effective Time or the termination of the
Merger Agreement, whichever shall first occur, you agree to repay your 2006
Payment to the Company, with interest at a rate of seven percent (7%) per annum,
determined from the date the 2006 Payment is made to you until the date of
repayment. Upon the receipt by the Company of such repayment, then paragraphs
(a) through (c) of this Section 7 shall terminate and have no force or effect.

8. Waiver. Failure of the Company or NYB to demand strict compliance with any of
the terms, covenants or conditions of this Agreement shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any such term, covenant or condition on any occasion or
multiple occasions be deemed a waiver or relinquishment of such term, covenant
or condition.

9. Governing Law and Jurisdiction. The Agreement is governed by and construed
under the laws of the State of New York, without regard to conflict of laws
rules. You, the Company and NYB (i) hereby consent to submit to the exclusive
personal jurisdiction of any Federal court located in the State of New York or
any court of the State of New York in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, and
(ii) hereby waive any right to challenge jurisdiction or venue in such courts
with regard to any suit, action, or proceeding under or in connection with the
Agreement. Each party to this Agreement also hereby waives any right to trial by
jury in connection with any suit, action, or proceeding under or in connection
with this Agreement.

10. Entire and Final Agreement. Except for the Retention Agreement entered into
between you and New York Community Bank dated as of the date hereof (but
effective immediately following the Effective Time), this Agreement shall
supersede any and all prior oral or written representations, understandings and
agreements of the parties with respect to the matters addressed herein and it
contains the entire agreement of the parties with respect to those matters. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. Once signed by the parties hereto, no
provision of this Agreement may be modified or amended unless agreed to in a
writing, signed by you and a duly authorized officer of the Company and NYB.

11. Assignment. Neither this Agreement nor any of the rights, obligations or
interests arising hereunder may be assigned by you. Neither this Agreement nor
any of the rights, obligations or interests arising hereunder may be assigned by
the Company without your prior written consent, to a person or entity other than
an affiliate or parent entity of the Company or its successors or assigns;
provided, however, that, in the event of the merger, consolidation, transfer, or
sale of all or substantially all of the assets of the Company with or to any
other individual or entity, this Agreement shall, subject to the provisions
hereof, be binding upon and inure to the benefit of such successor and such
successor shall discharge and perform all the promises, covenants, duties, and
obligations of the Company hereunder.

12. Section Headings. The section headings contained in this Agreement are
inserted for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.

 

4

--------------------------------------------------------------------------------

13. Notices. All notices required by this Agreement shall be sent in writing and
delivered by one party to the other by overnight express mail to the following
persons and addresses:

If to the Company:

PennFed Financial Services, Inc.

622 Eagle Rock Avenue

West Orange, NJ 07052-2989

Attn: Patrick D. McTernan, Secretary

If to you:

Jeffrey J. Carfora

At the most recent address on file at the Company.

14. Execution in Counterparts. This Agreement may be executed by the parties
hereto in counterparts, and each of which shall be considered an original for
all purposes.

 

5

--------------------------------------------------------------------------------

If the foregoing is satisfactory, please so indicate by signing and returning to
the Company the enclosed copy of this letter whereupon this will constitute our
agreement on the subject.

 

PENNFED FINANCIAL SERVICES, INC.

By:

 

/s/ Joseph L. LaMonica

Name:  

Joseph L. LaMonica, President and CEO

Date:  

November 2, 2006

NEW YORK COMMUNITY BANCORP, INC.

By:

 

/s/ Joseph R. Ficalora

Name:  

Joseph R. Ficalora, President and CEO

Date:  

November 2, 2006

 

ACCEPTED AND AGREED TO:

/s/ Jeffrey J. Carfora

Employee

Date:

 

November 2, 2006

 

6