EX-10.3 

RETIREMENT PLAN

ATLANTIC LIBERTY SAVINGS, F.A.
Brooklyn, New York

January 1, 2004

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DIRECTORS’ RETIREMENT PLAN

          This Directors’ Retirement Plan (the Plan), effective as of the 1st
day of January 2004, formalizes the understanding by and between Atlantic
Liberty Savings, F.A. (the Bank), a federal stock savings bank, and its
non-employee directors, hereinafter referred to as Director(s).

          This Plan is intended to comply with Internal Revenue Code (Code)
Section 409A and any regulatory or other guidance issued under such Section. At
the effective date of the Plan additional guidance was being promulgated by the
Department of Treasury. Any terms of this Plan that conflict with such future
guidance shall be null and void as of the effective date of the Plan. After such
guidance is issued, the intent is to amend the Plan to delete any conflicting
provisions and to add such other provisions as are required to fully comply with
Section 409A and any other legislative or regulatory requirement applicable to
the Plan. This Plan shall be effective as of January 1, 2005.

W I T N E S S E T H :

          WHEREAS, the Directors serve the Bank as members of the Board of
Directors; and

          WHEREAS, the Bank desires to honor, reward and recognize the Directors
who have provided long and faithful service to the Bank and to ensure the
continued service on the Board by such Directors until retirement age; and

          WHEREAS, the Directors wish to be assured that they will be entitled
to a certain amount of additional compensation for some definite period of time
from and after retirement from active service with the Bank or other termination
of service and wish to provide their beneficiaries with benefits from and after
death; and

          WHEREAS, the Bank and the Directors wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to the
Directors after retirement or other termination of service and/or death benefits
to their beneficiaries after death; and

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          WHEREAS, the Bank and the Directors intend this Plan to be considered
an unfunded arrangement, maintained primarily to provide supplemental retirement
income for such Directors; and

          WHEREAS, the Bank has adopted this Directors Retirement Plan which
controls all issues relating to Retirement Benefits as described herein;

          NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Directors agree as follows:

SECTION I

DEFINITIONS

           When used herein, the following words and phrases shall have the
meanings below unless the context clearly indicates otherwise:

1.1  

Accrued Benefit means that portion of the Retirement Benefit which is required
to be expensed and accrued under generally accepted accounting principles (GAAP)
by any appropriate method which the Bank’s Board of Directors may require in the
exercise of its sole discretion.

1.2  

Act means the Employee Retirement Income Security Act of 1974, as amended from
time to time.

1.3  

Administrator means the Bank.

1.4  

Bank means Atlantic Liberty Savings, F.A. and any successor thereto.

1.5  

Beneficiary means the person or persons (and their heirs) that the Director has
designated as his Beneficiary in a Beneficiary Designation Form, in the form
attached hereto as Exhibit A) filed with the Administrator. If no Beneficiary is
so designated, then the

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Directors Spouse, if living, will be deemed the Beneficiary. If the Directors
Spouse is not living, then the Children of the Director will be deemed the
Beneficiaries and will take on a per stirpes basis. If there are no living
Children, then the Estate of the Director will be deemed the Beneficiary.

1.6  

Benefit Eligibility Date shall be the date on which an eligible Director is
entitled to receive his Retirement Benefit. A Director’s Benefit Eligibility
Date shall occur on the 1st day of the month next following the Directors
Separation from Service.

1.7  

Cause means personal dishonesty, incompetence willful misconduct, willful
malfeasance, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, regulation
(other than traffic violations or similar offenses), or final cease-and-desist
order, material breach of any provision of this Plan, or gross negligence in
matters of material importance to the Bank.

1.8  

Change in Control shall mean a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the
Company, as defined by the Secretary of the Treasury in regulations to be issued
under Section 409A of the Code.

1.9  

Children means the Directors children, or the issue of any deceased Children,
then living at the time payments are due the Children under this Plan. The term
Children shall include both natural and adopted Children.

1.10  

Disabled For purposes of this Plan, a Participant shall be considered disabled
if the Participant:

(a)  

is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, or

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(b)  

is, by reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under and accident and health plan covering
employees of the Participant's employer.

1.11  

Disability Benefit means the monthly benefit payable to the Director following a
determination, in accordance with Subsection 3.6, that the Director is Disabled.

1.12  

Effective Date of this Plan shall be January 1, 2005.

1.13  

Estate means the estate of the Director.

1.14  

Final Years Fees shall mean the rate of Regular Board Fees to which a Director
is entitled in his final Year of Service on the Board.

1.15  

Interest Factor means monthly compounding or discounting, as applicable, at
seven percent (7%) per annum.

1.16  

Payout Period means the time frame during which certain benefits payable
hereunder shall be distributed. Payments shall be made in equal monthly
installments commencing within thirty (30) days following the occurrence of the
event which triggers distribution and continuing for sixty (60) consecutive
months.

1.17  

Plan Year shall mean the calendar year.

1.18  

Regular Board Fees means the annual fee to which a Director is entitled for
service on the Board and attendance at regularly scheduled meetings of the full
Board, and excludes additional fees to which a Director becomes entitled by
serving on additional Committees or attendance at special meetings of the Board.

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1.19  

Retirement Benefit means an annual amount payable to an eligible Director
pursuant to the Plan. Directors shall first become eligible to participate in
the Plan and may receive a Retirement Benefit upon completion of five (5) years
of service with the Bank. For this purpose, credit shall not be granted for
service to the Bank prior to the Effective Date of the Plan. The minimum
Retirement Benefit to which a Director will become entitled upon the
satisfaction of the foregoing applicable conditions shall be equal to fifty
percent (50%) of the highest rate of Regular Board Fees to which such Director
was entitled immediately prior to his termination of service on the Board (Final
Years’ Fees) plus an additional 10% of Final Years’ Fees for each year of
credited service on the Board after five (5) years of service, up to a maximum
of one hundred percent (100%) of Final Years’ Fees.

1.20  

Separation from Service shall mean the termination of the Directors service on
the board, as such term is defined in Section 409A of the Code and Treasury
Regulations.

1.21  

Spouse means the individual to whom the Director is legally married at the time
of the Directors death.

1.22  

Survivor’s Benefit means an annual amount payable to the Beneficiary in monthly
installments throughout the Payout Period, as designated in the Directors
Beneficiary Designation Form. The Survivors Benefit shall be equal to the
Retirement Benefit, calculated as if the Director had completed five (5) years
of service with the Bank after adoption of the Plan, or if the Director has more
than five (5) years of service with the Bank after adoption of the Plan, such
Director’s actual number of years of service with the Bank.

1.23  

Treasury Regulations means the regulations issued by the Treasury Department
and/or other guidance issued by the Treasury Department or Internal Revenue
Service under Code Section 409A.

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1.24  

Years of Service shall mean all calendar years of service beginning with the
year in which the Plan is adopted.

SECTION II

ESTABLISHMENT OF RABBI TRUST

          The Bank intends to establish a rabbi trust into which the Bank
intends to contribute assets which shall be held therein, subject to the claims
of the Banks creditors in the event of the Bank’s Insolvency as defined in the
plan which establishes such rabbi trust, until the contributed assets are paid
to the Directors and their Beneficiaries in such manner and at such times as
specified in this Plan. It is the intention of the Bank to make contributions to
the rabbi trust to provide the Bank with a source of funds to assist it in
meeting the liabilities of this Plan. The rabbi trust and any assets held
therein shall conform to the terms of the rabbi trust agreement which has been
established in conjunction with this Plan. To the extent the language in this
Plan is modified by the language in the rabbi trust agreement, the rabbi trust
agreement shall supersede this Plan. Any contributions to the rabbi trust shall
be made during each Plan Year in accordance with the rabbi trust agreement. The
amount of such contribution(s) shall be equal to the Directors Accrued Benefit,
if any, less: (i) previous contributions made on behalf of the Director to the
rabbi trust, and (ii) earnings to date on all such previous contributions.

SECTION III

BENEFITS

3.1  

Retirement Benefit. If a Director has five (5) Years of Service after adoption
of the Plan, the Director shall be entitled to the Retirement Benefit. Such
Retirement Benefit shall commence on the 1st day of the month following the
Directors actual retirement or other Separation from Service on the Board, and
shall be payable in monthly installments throughout the Payout Period. In the
event a Director dies after commencement of the Retirement Benefit payments but
before completion of all such payments due and owing hereunder, the Bank shall
pay to the Directors Beneficiary a continuation of the monthly installments for
the remainder of the Payout Period.

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3.2  

Death Prior to Benefit Age. If the Director dies while in the service of the
Bank, the Directors Beneficiary shall be entitled to the Survivors Benefit
whether or not the Director has five (5) Years of Service after adoption of the
Plan. The Survivor Benefit shall equal the Retirement Benefit that the Director
is entitled to receive at the time of death, provided however, that if the
Director does not have five (5) Years of Service at the time of death, the
Director shall be credited with additional Years of Service so that the Director
will receive the minimum Retirement Benefit under the Plan. The Survivors
Benefit shall commence within thirty (30) days of the Directors death and shall
be payable in monthly installments throughout the Payout Period.

3.3  

Termination of Service Related to a Change in Control.

(a)  

If a Change in Control occurs at the Bank, and thereafter the Director has a
Separation from Service, the Director shall be entitled to his Retirement
Benefit. Such benefit shall commence on the 1st day of the month following his
termination of service and shall be payable in monthly installments throughout
the Payout Period. In the event of a Change in Control, any Director with less
than five (5) Years of Service with the Bank shall be deemed to have five (5)
years of credited service for purposes of determining benefits hereunder. In the
event that the Director dies at any time after commencement of the payments, but
prior to completion of all such payments due and owing hereunder, the Bank, or
its successor, shall pay to the Directors Beneficiary a continuation of the
monthly installments for the remainder of the Payout Period.

(b)  

If, after such termination, the Director dies prior to commencement of the
benefits hereunder, the Directors Beneficiary shall be entitled to the Survivors
Benefit which shall commence within thirty (30) days of the Director’s death.
The Survivor’s Benefit shall be payable in monthly installments over the Payout
Period.

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3.4  

Termination for Cause. If the Director is terminated for Cause, all benefits
under this Plan shall be forfeited and this Plan shall become null and void as
to the Director.

3.5  

Disability Benefit.

(a)  

Notwithstanding any other provision hereof, if a Director becomes Disabled, the
Director shall be entitled to receive the Disability Benefit hereunder. In the
event the Director does not have five (5) Years of Service after adoption of the
Plan, the Director shall be deemed to have five (5) Years of Service for
purposes of determining his Disability Benefit. In the event the Director dies
while receiving payments pursuant to this Subsection, but prior to the
completion of all payments due and owing hereunder, the Bank shall pay to the
Directors Beneficiary a continuation of the monthly installments for the
remainder of the Payout Period.

(b)  

If the Director dies after approval of the Disability Benefit by the Board of
Directors but before the commencement of such payments, the Directors
Beneficiary shall be entitled to the Directors Accrued Benefit annuitized (using
the Interest Factor) over the Payout Period. Such benefit shall be payable to
the Beneficiary in monthly installments over the Payout Period commencing within
thirty (30) days of the Director’s death.

3.6  

Non-Competition During and After Service on the Board.

(a)  

In consideration of the agreements of the Bank contained herein and of the
payments to be made by the Bank pursuant hereto, the Director hereby agrees
that, so long as he remains in the service of the Bank, he will not actively
engage, either directly or indirectly, in any business or other activity which
is or may be deemed to be in any way competitive with or adverse to the best
interests of the business of the Bank unless the Directors participation therein
has been consented to, in writing, by the Board of Directors.

(b)  

The Director expressly agrees that, as consideration for the covenants of the
Bank contained herein and as a condition to the performance by the Bank of its

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obligations hereunder, from and after any voluntary or involuntary termination
of service, other than a termination of service pursuant to Subsection 3.4, and
continuing throughout the entire Payout Period, as provided herein, he will not,
without the prior written consent of the Bank, become associated with, in the
capacity of an employee, director, officer, principal, agent, trustee or in any
other capacity whatsoever, any enterprise conducted in the trading area of the
business of the Bank which enterprise is, or may be deemed to be, competitive
with any business carried on by the Bank as of the date of the termination of
the Directors service or his retirement.

(c)  

In the event of a termination of the Directors service related to a Change in
Control pursuant to Subsection 3.4, paragraph (b) of this Subsection 3.7 shall
cease to be a condition to the performance by the Bank of its obligations under
this Plan.

3.7  

Breach. In the event of any material breach by the Director of the agreements
and covenants contained herein, the Board of Directors of the Bank shall direct
that any unpaid balance of any payments to the Director under this Plan be
suspended, and shall thereupon notify the Director of such suspensions, in
writing. Thereupon, if the Board of Directors of the Bank shall determine that
said breach by the Director has continued for a period of one (1) month
following notification of such suspension, all rights of the Director and his
Beneficiaries under this Plan, including rights to further payments hereunder,
shall thereupon terminate.

SECTION IV

BENEFICIARY DESIGNATION

          The Director shall make an initial designation of primary and
secondary Beneficiaries in a Beneficiary Designation Form (attached hereto as
Exhibit A) and shall have the right to change such designation, at any
subsequent time, by submitting a new Beneficiary Designation Form to

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the Administrator. Any subsequent Beneficiary designation shall become effective
only when receipt thereof is acknowledged in writing by the Administrator.

SECTION V

DIRECTOR’S RIGHT TO ASSETS

          The rights of the Director, any Beneficiary, or any other person
claiming through the Director under this Plan, shall be solely those of an
unsecured general creditor of the Bank. The Director, the Beneficiary, or any
other person claiming through the Director, shall only have the right to receive
from the Bank those payments so specified under this Plan. The Director agrees
that he, his Beneficiary, or any other person claiming through him shall have no
rights or interests whatsoever in any asset of the Bank, including any insurance
policies or contracts which the Bank may possess or obtain to informally fund
this Plan. Any asset used or acquired by the Bank in connection with the
liabilities it has assumed under this Plan, unless expressly provided herein,
shall not be deemed to be held under any trust for the benefit of the Director
or his Beneficiaries, nor shall any asset be considered security for the
performance of the obligations of the Bank. Any such asset shall be and remain,
a general, unpledged, and unrestricted asset of the Bank.

SECTION VI

RESTRICTIONS UPON FUNDING

          The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Plan. The Director,
his Beneficiaries or any successor in interest to him shall be and remain simply
a general unsecured creditor of the Bank in the same manner as any other
creditor having a general claim for matured and unpaid compensation. The Bank
reserves the absolute right in its sole discretion to either purchase assets to
meet its obligations undertaken by this Plan or to refrain from the same and to
determine the extent, nature, and method of such asset purchases. Should the
Bank decide to purchase assets such as life insurance, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such assets at any time, in whole or

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in part. At no time shall the Director be deemed to have any lien, right, title
or interest in or to any specific investment or to any assets of the Bank. If
the Bank elects to invest in a life insurance, disability or annuity policy upon
the life of the Director, then the Director shall assist the Bank by freely
submitting to a physical examination and by supplying such additional
information necessary to obtain such insurance or annuities.

SECTION VII

ALIENABILITY AND ASSIGNMENT PROHIBITION

          Neither the Director nor any Beneficiary under this Plan shall have
any power or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits payable
hereunder, nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony or separate maintenance owed by the Director or
his Beneficiary, nor be transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. In the event the Director or any
Beneficiary attempts assignment, communication, hypothecation, transfer or
disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease
and terminate.

SECTION VIII

ACT PROVISIONS

8.1  

Named Fiduciary and Administrator. The Bank, as Administrator, shall be the
Named Fiduciary of this Plan. As Administrator, the Bank shall be responsible
for the management, control and administration of the Plan as established
herein. The Administrator may delegate to others certain aspects of the
management and operational responsibilities of the Plan, including the
employment of advisors and the delegation of ministerial duties to qualified
individuals.

8.2  

Claims Procedure and Arbitration. In the event that benefits under this Plan are
not paid to the Director (or to his Beneficiary in the case of the Directors
death) and such claimants feel they are entitled to receive such benefits, then
a written claim must be

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made to the Administrator within sixty (60) days from the date payments are
refused. The Bank and its Board of Directors shall review the written claim and,
if the claim is denied, in whole or in part, they shall provide in writing,
within ninety (90) days of receipt of such claim, their specific reasons for
such denial, reference to the provisions of this Plan upon which the denial is
based, and any additional material or information necessary to perfect the
claim. Such writing by the Bank and its Board of Directors shall further
indicate the additional steps which must be undertaken by claimants if an
additional review of the claim denial is desired.

   

If claimants desire a second review, they shall notify the Administrator in
writing within sixty (60) days of the first claim denial. Claimants may review
this Plan or any documents relating thereto and submit any issues and comments,
in writing, they may feel appropriate. In its sole discretion, the Administrator
shall then review the second claim and provide a written decision within sixty
(60) days of receipt of such claim. This decision shall state the specific
reasons for the decision and shall include reference to specific provisions of
this Plan upon which the decision is based.

   

If claimants continue to dispute the benefit denial based upon completed
performance of this Plan or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to mediation, administered by a
legally recognized arbitration /mediation association in accordance with its
rules. If mediation is not successful in resolving the dispute, it shall be
settled by binding arbitration administered by a legally recognized arbitration
association in accordance with its’ rules, and the judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.

SECTION IX

MISCELLANEOUS

9.1  

No Effect on Directors Rights. Nothing contained herein will confer upon the
Director the right to be retained in the service of the Bank nor limit the right
of the Bank to deal with the Director without regard to the existence of the
Plan.

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9.2  

State Law. The Plan is established under, and will be construed according to,
the laws of the State of New York, to the extent such laws are not preempted by
the Act and valid regulations published thereunder.

9.3  

Severability. In the event that any of the provisions of this Plan or portion
thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative, and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby.

9.4  

Incapacity of Recipient. In the event the Director is declared incompetent and a
conservator or other person legally charged with the care of his person or
Estate is appointed, any benefits under the Plan to which such Director is
entitled shall be paid to such conservator or other person legally charged with
the care of his person or Estate.

9.5  

Unclaimed Benefit. The Director shall keep the Bank informed of his current
address and the current address of his Beneficiaries. The Bank shall not be
obligated to search for the whereabouts of any person. If the location of the
Director is not made known to the Bank as of the date upon which any payment of
any benefits may first be made, the Bank shall delay payment of the Directors
benefit payment(s) until the location of the Director is made known to the Bank;
however, the Bank shall only be obligated to hold such benefit payment(s) for
the Director until the expiration of thirty-six (36) months. Upon expiration of
the thirty-six (36) month period, the Bank may discharge its obligation by
payment to the Directors Beneficiary. If the location of the Directors
Beneficiary is not made known to the Bank by the end of an additional two (2)
month period following expiration of the thirty-six (36) month period, the Bank
may discharge its obligation by payment to the Directors Estate. If there is no
Estate in existence at such time or if such fact cannot be determined by the
Bank, the Director and his Beneficiary(ies) shall thereupon forfeit any rights
to the balance, if any, of any benefits provided for such Director and/or
Beneficiary under this Plan.

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9.6  

Limitations on Liability. Notwithstanding any of the preceding provisions of the
Plan, no individual acting as an employee or agent of the Bank, or as a member
of the Board of Directors shall be personally liable to the Director or any
other person for any claim, loss, liability or expense incurred in connection
with the Plan.

9.7  

Gender. Whenever in this Plan words are used in the masculine or neuter gender,
they shall be read and construed as in the masculine, feminine or neuter gender,
whenever they should so apply.

9.8  

Effect on Other Corporate Benefit Plans. Nothing contained in this Plan shall
affect the right of the Director to participate in or be covered by any other
corporate benefit available to Directors of the Bank constituting a part of the
Bank’s existing or future compensation structure.

9.9  

Inurement. This Plan shall be binding upon and shall inure to the benefit of the
Bank, its successors and assigns, and the Director, his successors, heirs,
executors, administrators, and Beneficiaries.

9.10  

Headings. Headings and sub-headings in this Plan are inserted for reference and
convenience only and shall not be deemed a part of this Plan.

SECTION X

AMENDMENT/REVOCATION

          This Plan shall not be amended, modified or revoked at any time, in
whole or part, as to any Director, without the mutual written consent of the
Director and the Bank, and such mutual consent shall be required even if the
Director is no longer in the service of the Bank. In the event that any of the
provisions of this Plan or portion hereof, are held to be inoperative or invalid
by any court of competent jurisdiction, or in the event that any legislation
adopted by any governmental body having jurisdiction over the Bank would be
retroactively applied to

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invalidate this Plan or any provision hereof or cause the benefits hereunder to
be taxable, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative, and (2) the
validity and enforceability of the remaining provisions will not be affected
thereby. In the event that the intent of any provision shall need to be
construed in a manner to avoid taxability, such construction shall be made by
the Bank, as administrator of the Plan, in a manner that would manifest to the
maximum extent possible the original meaning of such provisions.

SECTION XI

EXECUTION

11.1  

This Plan sets forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject matter hereof
are merged into and superseded by this Plan.

11.2  

This Plan shall be executed in triplicate, each copy of which, when so executed
and delivered, shall be an original, but all three copies shall together
constitute one and the same instrument.

          IN WITNESS WHEREOF, the Bank has caused this Plan to be executed on
the day and date first above written.

ATTEST:
 
    ATLANTIC LIBERTY SAVINGS, F.A.
 
    /s/ Michelle A. Rizzotto

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  /s/ Barry M. Donohue

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  Secretary  By: Barry M. Donohue    Title: President and Chief Executive
Officer   

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