FLUSHING FINANCIAL CORP
EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>3
<FILENAME>a25246_ex10-5.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>


EXHIBIT 10.5

                           FLUSHING SAVINGS BANK, FSB
                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT


     This AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  ("Agreement") is made and
entered  into as of the 28th day of  November,  2000,  by and  between  Flushing
Savings Bank,  FSB, a savings bank  organized and existing under Federal law and
having its executive offices at 144-51 Northern  Boulevard,  Flushing,  New York
11354 (the  "Bank"),  and  Michael J.  Hegarty,  residing  at  [ADDRESS ON FILE]
("Officer").

                                   WITNESSETH:

     WHEREAS,  the Bank and the Officer are parties to an  Employment  Agreement
dated as of November  21, 1995 and amended as of June 18, 1996 and  November 26,
1996; and

     WHEREAS,  the Bank considers the availability of the Officer's  services to
be important to the successful management and conduct of the Bank's business and
desires to secure for itself the continued availability of his services; and

     WHEREAS,  for  purposes of securing  for the Bank the  Officer's  continued
services, the Board of Directors of the Bank ("Board") has authorized the proper
officers of the Bank to enter into an amended and restated employment  agreement
with the Officer on the terms and conditions set forth herein; and

     WHEREAS,  the Officer is willing to make his services available to the Bank
on the terms and conditions set forth herein;

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and obligations  hereinafter set forth, the Bank and the Officer hereby agree as
follows:

     Section 1. Employment.

     The Bank hereby agrees to employ the Officer, and the Officer hereby agrees
to accept such  employment,  during the period and upon the terms and conditions
set forth in this Agreement.

     Section 2. Employment Period.

     (a) Except as otherwise  provided in this  Agreement to the  contrary,  the
terms and conditions of this Agreement  shall be and remain in effect during the
period of employment ("Employment Period") established under this section 2. The
Employment Period under this Amended and Restated Employment  Agreement shall be
for a term commencing on November 28, 2000 and ending on November 21, 2003, plus
such extensions as are provided pursuant to section 2(b) of this Agreement.

     (b) On or as of July 1, 2001,  and on or as of each July 1 thereafter,  the
Employment  Period shall be extended for one additional  year if and only if the
Board shall have authorized the extension of the Employment Period prior to July
1 of such year and the Officer  shall not have notified the Bank prior to July 1
of such year that the Employment  Period shall not be so extended.  If the Board
shall not have authorized the extension of the Employment Period prior to July 1
of any such year, or if the Officer shall have given notice of  nonextension  to
the Bank prior to July 1 of such year,  then the Employment  Period shall not be
extended  pursuant to this section 2(b) at any time  thereafter and shall end on
the  last  day of its  term as then in  effect.  Notwithstanding  the  foregoing
provisions of this Section 2(b), there shall be no extension of the term of this
Agreement  as of July 1, 2003 and July 1, 2004,  so as to reduce  the  remaining
term of the  Agreement,  and annual  extensions  shall begin again as of July 1,
2005.

<PAGE>

     (c) Upon the  termination  of the Officer's  employment  with the Bank, the
extensions  provided  pursuant to section  2(b) shall cease (if such  extensions
have not previously ceased).

     Section 3. Title and Duties.

     On the date on which the  Employment  Period  commences,  the Officer shall
hold the position of President and Chief Executive Officer of the Bank and shall
be a member of the Board  with all of the powers  and  duties  incident  to such
positions  under law and under the  by-laws of the Bank.  During the  Employment
Period,  the Officer  shall:  (a) devote his full  business  time and  attention
(other than during weekends,  holidays,  vacation periods and periods of illness
or approved  leaves of absence) to the  business and affairs of the Bank and use
his best efforts to advance the Bank's interests,  including  reasonable periods
of  service as an  officer  and/or  board  member of trade  associations,  their
related entities and charitable  organizations;  and (b) perform such reasonable
additional  duties as may be  assigned to him by or under the  authority  of the
Board;  provided,  however,  that the  Officer  shall be  permitted  to devote a
reasonable  amount  of  time  to  service  on  the  Board  of  Directors  of EDO
Corporation,  so long as such service shall not interfere  with his  obligations
under this  Agreement.  The Officer shall have such authority as is necessary or
appropriate to carry out his duties under this Agreement.

     Section 4. Compensation.

     In consideration for services rendered by the Officer under this Agreement:

     (a) The Bank shall pay to the  Officer a salary at an annual  rate equal to
the greater of (i) $420,000 or (ii) such higher annual rate as may be prescribed
by or under the authority of the Board (the "Current Salary"). In addition,  the
Bank shall credit to the Officer 10% of the greater of the amounts  described in
the  preceding  clauses (i) and (ii) to be deferred in  accordance  with section
5(b).  The Officer will undergo an annual  salary and  performance  review on or
about June 30 of each year  commencing in 2001. The Current Salary payable under
this section 4 shall be paid in approximately  equal  installments in accordance
with the Bank's customary payroll practices.

     (b) The  Officer  shall  be  eligible  to  participate  in any  bonus  plan
maintained by the Bank for its officers and employees.

     Section 5. Employee Benefits and Other Compensation.

     (a) Except as  otherwise  provided in this  Agreement,  the Officer  shall,
during the  Employment  Period,  be treated  as an  employee  of the Bank and be
entitled  to  participate  in and  receive  benefits  under the Bank's  employee
benefit plans and programs, as well as such other compensation plans or programs
(whether or not employee  benefit plans or  programs),  as the Bank may maintain
from time to time, in accordance  with the terms and conditions of such employee
benefit  plans and  programs  and  compensation  plans and programs and with the
Bank's customary practices.

     (b) On the last day of each regular  payroll  period during the  Employment
Period,  the Bank shall credit to a bookkeeping  account  maintained by the Bank
(the "Deferred  Compensation  Account") 10% of the Current Salary payable to the
Officer  during such period  pursuant  to section 4. The  deferred  compensation
provided  under this  section 5(b) shall be deemed to be invested in one or more
of the investment funds offered by Retirement System Fund, Inc. or in such other
funds  as  may  be  specified  by the  Bank  with  the  consent  of the  Officer
("Investment  Funds") in  multiples of 10%, as directed by the Officer from time
to time no more  frequently  than  once each  calendar  quarter.  The  Officer's
Deferred  Compensation  Account  shall be credited at least  quarterly  with the
earnings (or losses) on such  investments.  The amount credited to the Officer's
Deferred  Compensation  Account (including  earnings or losses) shall be paid by
the  Bank  to the  Officer  (or in the  event  of his  death  to his  designated
beneficiaries or, in the absence of any designation,  his estate) in a cash lump
sum promptly after the Officer's termination of employment with the Bank for any
reason. For the purpose of determining the amount of such payment,  the value of
the account balance shall be determined ten (10) days prior to the payment date.
The Officer  acknowledges  that the deferred  compensation  provided for in this
section 5(b) shall not be taken into account for

<PAGE>

purposes of computing any pension or other retirement benefit to which he may be
entitled under the Bank's benefit plans or programs.

     (c) The Bank shall provide the Officer with a suitable  automobile  for use
in the  performance of the Officer's  duties  hereunder and shall  reimburse the
Officer for all expenses incurred in connection therewith.

     (d) The Officer shall be entitled, without loss of pay, to vacation time in
accordance  with the policies  periodically  established by the Board for senior
management  officials  of the  Bank,  which  shall in no event be less than four
weeks in each calendar  year.  Except as provided in section  7(b),  the Officer
shall not be entitled to receive any  additional  compensation  from the Bank on
account  of his  failure  to  take a  vacation,  nor  shall  he be  entitled  to
accumulate  unused  vacation  from one  calendar  year to the next except to the
extent authorized by the Board for senior management officials of the Bank.

     (e) On May 27 of each of the years 1996 through 2000, the Bank has credited
to a  bookkeeping  account  maintained  by the  Bank  ("Supplemental  Retirement
Account") a supplemental  retirement benefit of $30,000.  Prior to May 27, 2000,
any interest or earnings obtained from investment of the supplemental retirement
benefit provided under this section 5(e) shall accrue to the Bank. Following May
27, 2000, the supplemental  retirement benefit shall be deemed to be invested in
one or more of the  Investment  Funds in  multiples  of 10%,  as directed by the
Officer from time to time no more  frequently  than once each calendar  quarter,
and the  Officer's  Supplemental  Retirement  Account shall be credited at least
quarterly with the earnings (or losses) on such investments.  Upon the Officer's
termination of employment  with the Bank for any reason,  the amount credited to
the Officer's  Supplemental  Retirement  Account  (including  earnings or losses
credited as described above) shall be paid by the Bank to the Officer (or in the
event of his death to his  designated  beneficiaries  or, in the  absence of any
designation,  his estate) in a cash lump sum. For the purpose of determining the
amount of such payment, the value of the account balance shall be determined ten
(10) days prior to the payment date.

     (f) On May 27 of each of the years 2001 through 2011, the Bank shall credit
to a bookkeeping  account maintained by the Bank (the "Additional SERP Account")
an additional supplemental retirement benefit of $50,000. Prior to May 27, 2011,
any interest or earnings (or losses)  obtained from investment of the additional
supplemental retirement benefit provided under this section 5(f) shall accrue to
the Bank and shall not be credited to the Officer's Additional SERP Account, but
may be utilized by the Bank to  discharge  its  obligations  under this  section
5(f).  Following May 27, 2011, the additional  supplemental  retirement  benefit
shall be  deemed  to be  invested  in one or more of the  Investment  Funds,  in
multiples  of  10%,  as  directed  by the  Officer  from  time  to  time no more
frequently than once each calendar  quarter,  and the Officer's  Additional SERP
Account  shall be credited at least  quarterly  with the earnings (or losses) on
such investments.  Upon the Officer's termination of employment with the Bank by
reason of his death, or upon his voluntary  resignation  without Good Reason, or
upon his termination for "Cause" (as defined in section 8(b) of this Agreement),
the amount then credited to the Officer's Additional SERP Account  (disregarding
earnings and losses prior to May 27, 2011) shall be promptly paid by the Bank to
the Officer (or in the case of his death, to his designated beneficiaries or, in
the  absence  of  any  designation,  to his  estate)  in a cash  lump  sum,  and
thereafter no additional  amounts shall be credited to the Officer's  Additional
SERP Account.  Upon the  Officer's  termination  of employment  with the Bank by
reason of retirement  (which shall mean termination of employment at a time when
the Officer is eligible to receive an Early,  Normal,  or  Postponed  Retirement
Benefit under the Bank's  Retirement  Plan),  Disability  (as defined in section
9(a)), voluntary resignation within one year following an event that constitutes
Good Reason (as defined in section 7(a)(i)), or discharge without "Cause", or in
the event of the Officer's  termination of employment for any reason following a
Change of Control,  the Bank shall  promptly  pay to the Officer a cash lump sum
equal to (i)  $500,000,  without  regard  to the  amount  then  credited  to his
Additional SERP Account, or (ii) the amount then credited to his Additional SERP
Account if such amount is greater than  $500,000 and  termination  of employment
occurs after May 27, 2011. Upon such payment, no further amount shall be payable
under this section 5(f).

     (g) The Bank shall fund in a "rabbi  trust" on an ongoing and current basis
(i) the deferred  compensation  provided  under  section  5(b) hereof,  (ii) the
supplemental  retirement  benefit provided under section 5(e) hereof,  (iii) the
additional  supplemental  retirement benefit provided under section 5(f) hereof,
and  (iv)  the  amount  credited  to the  Officer's  account  under  the  Bank's
Supplemental  Savings Incentive Plan. The Trustee of such "rabbi trust" shall be
an independent bank or trust company.

<PAGE>

     (h) If any  amounts  deferred  pursuant  to this  Agreement  are found in a
"determination"  (within the meaning of Section 1313(a) of the Internal  Revenue
Code of 1986, as amended) to have been includible in gross income by the Officer
prior to payment of such amounts  under this  Agreement,  such amounts  shall be
immediately  paid to the Officer,  notwithstanding  any other  provision of this
Agreement providing for deferral.

     Section 6. Working Facilities and Expenses.

     The  Officer's  principal  place of  employment  shall be at the  executive
offices of the Bank in Queens  County,  New York or at such other  location upon
which the Bank and the Officer may mutually  agree.  The Bank shall  provide the
Officer,  at  his  principal  place  of  employment,   with  a  private  office,
stenographic  services and other support services and facilities consistent with
his position with the Bank and necessary or appropriate  in connection  with the
performance  of his duties under this  Agreement.  The Bank shall  reimburse the
Officer for his ordinary and necessary  business  expenses,  including,  without
limitation,  travel and entertainment expenses,  incurred in connection with the
performance of his duties under this Agreement, upon presentation to the Bank of
an itemized  account of such  expenses  in such form as the Bank may  reasonably
require.

     Section 7. Termination with Bank Liability.

     (a) In the  event  that  the  Officer's  employment  with  the  Bank  shall
terminate during the Employment Period on account of:

                    (i) the Officer's voluntary resignation from employment with
               the Bank  within one year  following  an event  that  constitutes
               "Good Reason," which is defined as:

                         (A) the  failure of the Bank to elect or to reelect the
                    Officer  to  serve  as its  President  and  Chief  Executive
                    Officer  and a member  of its  Board of  Directors,  or such
                    other position as the Officer consents to hold;

                         (B) the failure of the Bank to cure a material  adverse
                    change made by the Bank in the Officer's functions,  duties,
                    or  responsibilities  in his  position  with the Bank within
                    sixty  days  following   written  notice  thereof  from  the
                    Officer;

                         (C) the failure of the Bank to maintain  the  Officer's
                    principal  place of employment  at the executive  offices of
                    the  Bank in  Queens  County,  New  York  or at  such  other
                    location  upon which the Bank and the Officer  may  mutually
                    agree;

                         (D) the  failure of the Board to extend the  Employment
                    Period within the times provided in section 2(b);  provided,
                    however,  that such failure shall not constitute Good Reason
                    until the earlier of 30 days after any  determination by the
                    Board that the Employment Period shall not be so extended or
                    August 1 of such year;

                         (E) the  failure of the Bank to cure a material  breach
                    of this  Agreement by the Bank within  sixty days  following
                    written notice thereof from the Officer; or

                         (F)  after a Change  of  Control,  the  failure  of any
                    successor company to the Bank to assume this Agreement.

                    (ii) the discharge of the Officer by the Bank for any reason
               other than (A) for "Cause" as defined in section  8(b) or (B) the
               Officer's death or "Disability" as defined in section 9(a); or

<PAGE>

                    (iii) the Officer's  voluntary  resignation  from employment
               with  the  Bank  for  any  reason  within  the  sixty-day  period
               commencing six months following a Change of Control as defined in
               section 10;

then the Bank shall  provide the benefits  and pay to the Officer as  liquidated
damages the amounts provided for under section 7(b).

     (b) Upon the  termination of the Officer's  employment  with the Bank under
circumstances  described in section 7(a),  the Bank shall pay and provide to the
Officer:

                    (i) his earned but unpaid  Current  Salary as of the date of
               termination,  plus an amount  representing any accrued but unpaid
               vacation time and floating holidays;

                    (ii) if the Officer's termination of employment occurs after
               a Change of Control, a pro rata portion of his bonus for the year
               of termination, determined by multiplying the amount of the bonus
               earned by the  Officer  for the  preceding  calendar  year by the
               number  of  full  months  of   employment   during  the  year  of
               termination,  and dividing by 12. If the Officer's termination of
               employment occurs prior to a Change of Control,  the Compensation
               Committee  of the Bank  may,  in its sole  discretion,  award the
               Officer  a  bonus  for  the  year of  termination,  in an  amount
               determined by such Committee either at the time of termination of
               employment  or at  the  time  bonuses  to  active  employees  are
               awarded,  which the Bank shall pay to the Officer  promptly after
               it has been awarded;

                    (iii) the  benefits,  if any,  to which he is  entitled as a
               former  employee  under the  Bank's  employee  benefit  plans and
               programs and compensation plans and programs;

                    (iv) continued health and welfare benefits  (including group
               life,  disability,  medical and dental benefits),  in addition to
               that  provided  pursuant  to  section  7(b)(iii),  to the  extent
               necessary to provide  coverage for the Officer for the  Severance
               Period (as  defined  in  section  7(c).  Such  benefits  shall be
               provided  through  the  purchase  of  insurance,   and  shall  be
               equivalent  to  the  health  and  welfare   benefits   (including
               cost-sharing  percentages)  provided to active  employees  of the
               Bank (or any  successor  thereof)  as from time to time in effect
               during the Severance Period. Where the amount of such benefits is
               based on salary,  they shall be provided to the Officer  based on
               the highest annual rate of Current Salary achieved by the Officer
               during  the  Employment  Period.  If the  Officer  had  dependent
               coverage in effect at the time of his  termination of employment,
               he shall  have the  right to  elect to  continue  such  dependent
               coverage for the  Severance  Period.  The benefits to be provided
               under  this  paragraph  (iv)  shall  cease  to  the  extent  that
               substantially  equivalent  benefits  are  provided to the Officer
               (and/or his dependents) by a subsequent employer of the Officer;

                    (v) if the  Officer  is age 55 or  older  at the  end of the
               Severance  Period,  he shall be  entitled to elect  coverage  for
               himself and his dependents  under the Bank's retiree  medical and
               retiree life insurance programs. Such coverage, if elected, shall
               commence upon the  expiration of the  Severance  Period,  without
               regard to whether the Officer  commences  his pension  benefit at
               such time, and shall continue for the life of each of the Officer
               and  his  spouse  and for so  long  as any of his  other  covered
               dependents,   remain  eligible.  The  coverage  and  cost-sharing
               percentage of the Officer and his dependents  under such programs
               shall be those in effect  under such  programs on the date of the
               Officer's  termination of employment with the Bank, and shall not
               be adversely modified without the Officer's written consent; and

                    (vi)  within  thirty  days  following  his   termination  of
               employment  with the Bank,  a cash lump sum  payment in an amount
               equal to the Current Salary, bonus, and

<PAGE>

               deferred compensation that the Officer would have earned pursuant
               to  sections  4(a),  4(b),  and  5(b),  respectively,  if he  had
               continued  working  for the Bank for the  Severance  Period.  For
               purposes of this paragraph,  (A) the amount of bonus shall be the
               highest  bonus,  if any,  paid to the  Officer  by the Bank under
               section  4(b) within the  three-year  period prior to the date of
               termination, and (B) the amount of deferred compensation shall be
               determined  without  any  earnings  on  the  additional  deferred
               compensation  that would have been  credited  under  section 5(b)
               during  the  Severance  Period.  The  calculation  of the  amount
               payable  pursuant  to this clause (vi) is set forth on Schedule A
               hereto; and

                    (vii)  payment of the deferred  compensation  to which he is
               entitled  pursuant to section 5(b), the  supplemental  retirement
               benefit to which he is entitled pursuant to section 5(e), and the
               additional   supplemental  retirement  benefit  to  which  he  is
               entitled  pursuant to Section 5(f) (in each case after  crediting
               to his Accounts  established under such sections any amount which
               was  required  to be credited  to such  Account  pursuant to such
               sections as of the date of his  termination of employment but was
               not so credited).

The lump sum payable  pursuant to clause (vi) of this section 7(b) is to be paid
in  lieu  of  all  other  payments  of  Current  Salary,   bonus,  and  deferred
compensation  provided for under this Agreement relating to the period following
any such  termination  and shall be payable without proof of damages and without
regard to the Officer's efforts,  if any, to mitigate damages.  The Bank and the
Officer  hereby  stipulate that the damages which may be incurred by the Officer
following  any such  termination  of  employment  are not  capable  of  accurate
measurement  as of the date  first  above  written  and that  the  payments  and
benefits provided under this section 7(b) are reasonable under the circumstances
as a combination of liquidated damages and severance benefits. The Officer shall
not be entitled to any payment under this Agreement to make up for benefits that
would have been earned under the Bank's  Retirement  Plan,  401(k) Savings Plan,
and  Supplemental  Savings  Incentive  Plan (SSIP),  and the Flushing  Financial
Corporation ("Holding Company") Stock-Based Profit Sharing Plan had he continued
working for the Bank for the Severance Period.

     (c) For purposes of section 7, the Severance Period means:

                    (i) in the case of  termination  of employment  prior to May
               27, 2004, a period of 36 months;

                    (ii) in the case of  termination  of  employment on or after
               May 27,  2004,  but prior to a Change of Control,  a period of 12
               months; and

                    (iii)  in the  case of  termination  of  employment  after a
               Change of Control, a period of 36 months.

     Section 8.  Termination  for Cause or  Voluntary  Resignation  Without Good
Reason.

     (a) In the  event  that  the  Officer's  employment  with  the  Bank  shall
terminate during the Employment Period on account of:

                    (i) the discharge of the Officer by the Bank for Cause; or

                    (ii) the Officer's  voluntary  resignation  from  employment
               with the Bank for reasons  other than those  constituting  a Good
               Reason;

then the Bank shall have no further obligations under this Agreement, other than
(A) the payment to the Officer of his earned but unpaid Current Salary as of the
date of the  termination  of his  employment;  (B) the  provision  of such other
benefits,  if any, to which he is entitled as a former employee under the Bank's
employee benefit plans and programs and compensation plans and programs; and (C)
the payment of the deferred compensation to which he is

<PAGE>

entitled pursuant to section 5(b), the supplemental  retirement benefit to which
he is  entitled  pursuant  to  section  5(e),  and the  additional  supplemental
retirement  benefit to which he is entitled  pursuant  to Section  5(f) (in each
case after crediting to his Accounts  established under such sections any amount
which was required to be credited to such Account  pursuant to such  sections as
of the date of his termination of employment but was not so credited).

     (b) For purposes of this  Agreement,  the term "Cause"  means the Officer's
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 material breach of any
provision of this Agreement.

     Section 9. Disability or Death.

     (a)  The  Officer's   employment  with  the  Bank  may  be  terminated  for
"Disability"  if the Officer shall become disabled or  incapacitated  during the
Employment Period to the extent that he has been unable to perform the essential
functions of his  employment  for 270  consecutive  days.  Upon a termination of
employment  for  "Disability,"  the Bank  shall pay to the  Officer  in cash the
following  percentages  of his Current  Salary and deferred  compensation  under
sections 4 and 5(b) of this Agreement  until the end of the  Employment  Period:
100% for the first six  months,  75% for the next six months and 60%  thereafter
for the remaining term, if any, of the Employment  Period (less in each case any
benefits  which may be payable to the Officer under the provisions of disability
insurance coverage in effect for Bank employees). In addition, the Officer shall
receive  a  cash  lump  sum  payment  equal  to  the  amount  of  the  Officer's
Supplemental  Retirement  Account  established  pursuant  to section  5(e),  and
payment of his Deferred Compensation Account as provided in section 5(b) and the
additional  supplemental  retirement benefit to which he is entitled pursuant to
section 5(f) (in each case after  crediting to the  Accounts  established  under
such  sections any amounts  which were  required to be credited to such Accounts
pursuant to sections 5(b),  5(e), and 5(f) as of the date of his  termination of
employment but were not so credited).

     (b) In the  event  that  the  Officer's  employment  with  the  Bank  shall
terminate  during the  Employment  Period on  account  of death,  the Bank shall
promptly pay the Officer's designated beneficiaries or, failing any designation,
his estate a cash lump sum payment equal to his earned but unpaid Current Salary
plus the amount of the Officer's  Deferred  Compensation  Account,  Supplemental
Retirement  Account,  and Additional  SERP Account as provided in sections 5(b),
5(e), and 5(f) (after crediting to such Accounts any amounts which were required
to be credited to such Accounts  pursuant to sections 5(b), 5(e), and 5(f) as of
the date of his death but were not so credited).

     (c) In the event of the Officer's  termination  of employment on account of
death or Disability prior to a Change of Control, the Compensation  Committee of
the Bank may, in its sole discretion,  award the Officer a bonus for the year of
termination,  in an amount  determined by such  Committee  either at the time of
termination  of  employment  or at the time  bonuses  to  active  employees  are
awarded,  in which case the Bank shall pay such bonus to the  Officer or, in the
event of death,  his  designated  beneficiaries  or estate,  as the case may be,
promptly  after it is  awarded.  In the event of the  Officer's  termination  of
employment on account of death or Disability after a Change of Control, the Bank
shall  promptly  pay the  Officer  or,  in the event of  death,  his  designated
beneficiaries or estate, as the case may be, a pro rata portion of his bonus for
the year of  termination,  determined  by  multiplying  the  amount of the bonus
earned by the  Officer  for the  preceding  calendar  year by the number of full
months of employment during the year of termination, and dividing by 12.

     Section 10. Change of Control.

     For purposes of this Agreement, the term "Change of Control" means:

     (a) the acquisition of all or  substantially  all of the assets of the Bank
or Flushing Financial  Corporation  ("Holding Company") by any person or entity,
or by any persons or entities acting in concert;

     (b) the  occurrence of any event if,  immediately  following  such event, a
majority  of the  members of the Board of  Directors  of the Bank or the Holding
Company or of any  successor  corporation  shall  consist of persons

<PAGE>

other than Current  Members (for these purposes,  a "Current  Member" shall mean
any member of the Board of  Directors  of the Bank or the Holding  Company as of
July 18, 2000 and any successor of a Current Member whose nomination or election
has been  approved  by a majority of the  Current  Members  then on the Board of
Directors);

     (c) the  acquisition  of beneficial  ownership,  directly or indirectly (as
provided in Rule 13d-3 of the  Securities  Exchange Act of 1934 (the "Act"),  or
any successor  rule),  of 25% or more of the total combined  voting power of all
classes  of stock of the Bank or the  Holding  Company  by any  person  or group
deemed a person under Section 13(d)(3) of the Act; or

     (d) approval by the  stockholders  of the Bank or the Holding Company of an
agreement  providing for the merger or  consolidation of the Bank or the Holding
Company  with  another  corporation  where the  stockholders  of the Bank or the
Holding Company,  immediately  prior to the merger or  consolidation,  would not
beneficially  own,  directly  or  indirectly,  immediately  after the  merger or
consolidation,  shares  entitling such  stockholders to 50% or more of the total
combined voting power of all classes of stock of the surviving corporation.

     Section 11. No Effect on Employee Benefit Plans or Compensation Programs.

     Except as expressly  provided in this  Agreement,  the  termination  of the
Officer's employment during the term of this Agreement 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  employee  benefit  plans or programs or
compensation  plans  or  programs  (whether  or not  employee  benefit  plans or
programs) that the Bank may maintain from time to time.

     Section 12. Successors and Assigns.

     This  Agreement  will  inure  to the  benefit  of and be  binding  upon the
Officer, his legal representatives and estate or intestate distributees, and the
Bank and its  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 Bank may be
sold or otherwise transferred.

     Section 13. Notices.

     Any  communication  to a party required or permitted  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:
               Michael J. Hegarty
               [ADDRESS ON FILE]

          If to the Bank:
               Flushing Savings Bank, FSB
               144-51 Northern Boulevard
               Flushing, New York  11354
               Attention:  Secretary of the Bank

     Section 14. 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.

<PAGE>

     Section 15. 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 16. Counterparts.

     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 17. Governing Law.

     This  Agreement  shall  be  governed  by  and  construed  and  enforced  in
accordance  with  the  laws of the  State  of New  York,  without  reference  to
conflicts of law principles.

     Section 18. Headings.

     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 19. 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, including the Employment Agreement dated as of November 21, 1995, by and
between the Bank and the Officer.  No  modifications  of this Agreement shall be
valid unless made in writing and signed by the parties hereto.

     Section 20. Funding.

     The Bank has agreed to fund certain of its obligations to the Officer under
this Agreement in a "rabbi trust";  provided,  however,  that all assets used by
the Bank to fund its obligations shall be part of the general assets of the Bank
and shall be subject to all claims of the Bank's creditors.

     Section 21. Regulatory Action.

     (a)  Notwithstanding any other provision of this Agreement to the contrary,
this Section 21 shall apply at all times during the Employment Period.

     (b)  If  the  Officer  is  suspended  and/or  temporarily  prohibited  from
participating in the conduct of the affairs of the Bank by a notice served under
12 U.S.C.  1818(e)(3)  and (g)(1),  the Bank's  obligations to the Officer under
this  Agreement  shall be suspended  as of the date of such service  unless such
service is stayed by appropriate proceedings.  If the charges in such notice are
dismissed,  the Bank shall (i) pay the Officer all of the compensation  withheld
while the Bank's  obligations  under this Agreement were so suspended,  and (ii)
reinstate in whole any of its obligations to the Officer which were suspended.

     (c)  If  the  Officer  is  removed  and/or   permanently   prohibited  from
participating  in the conduct of the Bank's  affairs by an order issued under 12
U.S.C.  1818(e)(4) or (g)(1),  all  obligations of the Bank to the Officer under
this Agreement shall terminate as of the effective date of the order, other than
vested rights of the parties accrued as of such effective date,  which shall not
be affected.

<PAGE>

     (d) If the Bank is in default (as defined in section 3(x)(1) of the Federal
Deposit  Insurance  Act), all obligations of the Bank under this Agreement shall
terminate  as of the date of such  default,  but this  Section  21(d)  shall not
affect any vested rights of the Officer accrued as of such date of default.

     (e) All  obligations of the Bank under this Agreement  shall be terminated,
except to the extent it is  determined  that  continuation  of the  Agreement is
necessary to the continued  operation of the Bank, (i) by the Regional  Director
of the Office of Thrift  Supervision or his or her designee  ("Director") at the
time the Federal Deposit  Insurance  Corporation or Resolution Trust Corporation
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority  contained in Section 13(c) of the Federal Deposit  Insurance Act;
or (ii) by the Director at the time the Director  approves a supervisory  merger
to  resolve  problems  related  to  operation  of the  Bank or when  the Bank is
determined  by the Director to be in an unsafe or unsound  condition;  provided,
however,  that this  Section  21(e)  shall not affect  any vested  rights of the
Officer accrued as of such date of termination.

     (f) Any  payments  made  to the  Officer  pursuant  to  this  Agreement  or
otherwise are subject to and  conditioned  upon their  compliance with 12 U.S.C.
ss. 1828(k) and any regulations promulgated thereunder.

     IN WITNESS  WHEREOF,  the parties have signed this  Agreement as of the day
and year first above written.


                                           FLUSHING SAVINGS BANK, FSB


                                           By: /S/ GERARD P. TULLY, SR.
                                              -------------------------------
                                           Name: Gerard P. Tully, Sr
                                           Title: Chairman


                                           /S/ MICHAEL J. HEGARTY
                                           ----------------------------------
                                           Michael J. Hegarty

<PAGE>

                                   Schedule A

     Calculation  of Amount  Payable  pursuant  to  Section  7(b),  Clause  (vi)
Assuming Termination of Employment December 1, 2000


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

     (1)   Current Salary is greater of
              (a)  $420,000
              (b)  annual salary in effect
                                                                $  420,000

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

     (2)   Bonus is greatest of bonus paid in last 3 years
           before termination
              (a)  $140,000        (1999 bonus)
              (b)    90,000        (1998 bonus)
              (c)    78,000        (1997 bonus)
                                                                $  140,000

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

     (3)   Deferred Compensation
              10% of amount in Step (1)                         $   42,000


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

     (4)   Severance Period
              36 months = 3 years


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

     (5)   Amount Payable
              3 times (1)+(2)+(3)                               $1,806,000

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

</TEXT>
</DOCUMENT>
