Exhibit 10.17

1996 RESTRICTED STOCK INCENTIVE PLAN OF
FLUSHING FINANCIAL CORPORATION
(as restated as of December 31, 2003 to reflect the three-for-two stock split
paid on December 15, 2003 in the form of a stock dividend)

I.  GENERAL

1.1 Purposes of the Plan

The 1996 Restricted Stock Incentive Plan (the “Plan”) of Flushing Financial
Corporation (the “Company”) is intended to advance the best interests of the
Company and its subsidiaries by providing employees of the Company and its
subsidiaries and Outside Directors (as defined in Section 1.3(a)) with
additional incentives through the award of shares of restricted common stock of
the Company (“Restricted Stock”), thereby increasing the personal stake of such
employees and Outside Directors in the continued success and growth of the
Company and encouraging them to remain in the employ or service of the Company.

1.2 Administration of the Plan

(a)  The Plan shall be administered by the Board of Directors of the Company
(the “Board of Directors”).

(b)  All awards granted under the Plan shall be on the terms and subject to the
conditions hereinafter provided.  Awards granted to participants other than
Outside Directors shall be granted by the Board of Directors upon recommendation
of the Compensation Committee or such other committee of directors as the Board
of Directors shall designate (the “Committee”), which shall consist of not less
than two directors.  The Board of Directors shall have no authority to grant
awards to any employee covering a number of shares in excess of the number
recommended by the Committee.

(c)  With respect to all awards granted under the Plan, the Board of Directors
shall have authority (i) to interpret conclusively the provisions of the Plan
and any award granted thereunder, (ii) to adopt, amend, and rescind such rules
and regulations for carrying out the Plan as it may deem advisable, (iii) to
decide conclusively all questions of fact arising in the application of the
Plan, (iv) to make grants of awards to eligible employees and to specify the
amount and terms of such awards, except that such grants to participants other
than Outside Directors shall be made only upon recommendation of the Committee,
and (v) to take all other action and to make all other determinations necessary
or advisable for the administration of the Plan.  All determinations and acts of
the Board of Directors shall be final and binding on all persons, including the
Company and recipients of awards under the Plan and their heirs and personal
representatives.

(d)  Without limiting its authority and powers, the Board of Directors (upon
recommendation of the Committee) shall have the authority with respect to awards
granted to participants other than Outside Directors:

 

(i)  to determine that amounts equal to the amount of any dividends declared
with respect to the number of shares covered by an award (A) will be paid to the
employee currently or (B) will be deferred and deemed to be reinvested or (C)
will otherwise be credited to the employee, or that the employee has no right
with respect to such dividends;

 

 

 

(ii) to provide that the shares of Common Stock received as a result of an award
shall be subject to a right of first refusal, pursuant to which the employee
shall be required to offer first to the Company any shares that the employee
wishes to sell, subject to such terms and conditions as the Board of Directors
may specify;

 

 

 

(iii) to amend the terms of any award, prospectively or retroactively; provided,
however, that no amendment shall impair the rights of the award holder without
his or her written consent; and

 

 

 

(iv) to accelerate the vesting of any award.

(e)  Determinations by the Board of Directors under the Plan with respect to
Restricted Stock awarded to participants other than Outside Directors
(including, without limitation, determinations of the persons to receive awards;
the form, amount and timing of such awards; the terms and provisions of such
awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made

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by the Board of Directors (upon recommendation of the Committee) selectively
among persons who receive, or are eligible to receive, awards under the Plan,
whether or not such persons are similarly situated.

(f)  The Board of Directors shall have no discretion to vary the amount or terms
of awards to Outside Directors as set forth in Article III, except as provided
in Section 1.5(c).

1.3 Eligible Participants

(a)  All employees, including officers, of the Company and of any subsidiaries,
partnerships, joint ventures or other entities in which the Company owns,
directly or indirectly, at least a 20% beneficial ownership interest (all of
such subsidiaries, partnerships and joint ventures being referred to as
“Subsidiaries”) shall be eligible to receive awards under the Plan, other than
under Article III.  Except as provided in Section 1.3(b) and Article III,
directors of the Company or any Subsidiary who are not employees of the Company
or its Subsidiaries (“Outside Directors”) shall not be eligible to receive
awards under the Plan.  The participants under the Plan other than Outside
Directors shall be selected from time to time by the Board of Directors upon
recommendation of the Committee, in their discretion, from among those eligible.

(b)  Awards under Article III of the Plan shall be made solely to Outside
Directors.

1.4 Type of Awards Under the Plan

Awards under the Plan shall be in the form of shares of Restricted Stock.

1.5 Shares Subject to the Plan

(a)  The total number of shares of common stock of the Company (“Common Stock”)
which may be received in the form of Restricted Stock by participants other than
Outside Directors shall be 1,225,687 shares, subject to adjustment as provided
in Section 1.5(c).  The total number of shares of Common Stock which may be
received in the form of Restricted Stock by Outside Directors shall be 394,312
shares, subject to adjustment as provided in Section 1.5(c).  Shares distributed
pursuant to the Plan may consist of authorized but unissued shares or treasury
shares of the Company, as shall be determined from time to time by the Board of
Directors.

(b)  If any shares of Restricted Stock shall be forfeited to the Company, the
forfeited shares of Restricted Stock shall again become available for awards
under the Plan.  Shares of Common Stock which are withheld in order to satisfy
federal, state or local tax liability shall not count against the Plan’s share
limits set forth in Section 1.5(a).

(c)  In the event of any dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property), merger, consolidation,
reorganization, sale of assets, recapitalization, stock dividend, stock split,
spin-off, split-up, split-off, issuance, repurchase or exchange of securities,
or other change in corporate structure affecting the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of benefits under the Plan, then the Board shall, in its
sole discretion, in such a manner as it may deem equitable, adjust any or all of
(i) the aggregate number and kind of shares reserved for issuance under the
Plan, (ii) the number and kind of shares or other property subject to
outstanding awards, and (iii) the amounts to be paid by award holders or the
Company, as the case may be, with respect to outstanding awards; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding award except in insignificant amounts due to rounding.  The Board’s
determination as to which adjustments shall be made and the extent thereof shall
be final, binding and conclusive.

1.6 Other Compensation Programs

The existence and terms of the Plan shall not limit the authority of the Board
of Directors in compensating employees of the Company and its Subsidiaries and
the Outside Directors in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.

II.  RESTRICTED STOCK FOR EMPLOYEES

2.1 Terms and Conditions of Restricted Stock Awards

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Subject to the following provisions, all awards of Restricted Stock to
participants other than Outside Directors shall be in such form and shall have
such terms and conditions as the Board of Directors (upon recommendation of the
Committee), in its discretion, may from time to time determine:

(a)  The Restricted Stock award shall specify the number of shares of Restricted
Stock to be awarded, the price, if any, to be paid by the recipient of the
Restricted Stock, and the date or dates on which the Restricted Stock will vest,
subject to the following:

 

(i) The Restricted Stock shall become vested in full on the date the respective
participant terminates his or her employment with the Company or Subsidiary
because of his or her death or disability.  For these purposes, “disability”
shall mean that the participant has been unable to perform the essential
functions of his or her employment due to disability or incapacity for 270
consecutive days or such lesser period as may be determined by the Board of
Directors (upon recommendation of the Committee) at the time of grant or
thereafter; and

 

 

 

(ii) The Restricted Stock shall become vested in full on the date the respective
participant terminates his or her employment with the Company or Subsidiary
because of retirement.  For these purposes, “retirement” shall mean termination
at a time when the participant is eligible to retire under a retirement program
of the Company or one of its Subsidiaries or as otherwise determined by the
Committee.

(b)  Stock certificates representing the Restricted Stock awarded to an employee
shall be registered in the employee’s name.  Such certificates shall either be
held by the Company on behalf of the employee, or delivered to the employee
bearing a legend to restrict transfer of the certificate until the Restricted
Stock has vested, as provided in the grant letter.  The grant letter shall state
whether the employee shall have the right to vote and/or receive dividends on
the Restricted Stock before it has vested.  No share of Restricted Stock may be
sold, transferred, assigned, or pledged by the employee until such share has
vested in accordance with the terms of the Restricted Stock award.  Except as
may be provided in the grant letter in accordance with Section 2.1(a), in the
event of an employee’s termination of employment before all of his Restricted
Stock has vested, the shares of Restricted Stock which have not vested shall be
forfeited and any purchase price paid by the employee (or the fair market value
of the Restricted Stock on the date of forfeiture, if lower) shall be paid to
the employee.  At the time Restricted Stock vests (and, if the employee has been
issued legended certificates of Restricted Stock, upon the return of such
certificates to the Company), a certificate for such vested shares shall be
delivered to the employee (or the beneficiary designated by the employee in the
event of death), free of all restrictions.

(c)  Notwithstanding any other provision of this Section 2.1, all shares of
Restricted Stock awarded to participants other than Outside Directors shall vest
upon the occurrence of a Change of Control (as defined in Section 4.7) if the
holder of such Restricted Stock is an employee or Outside Director of the
Company or its Subsidiaries at the time of such Change of Control.

III. RESTRICTED STOCK FOR OUTSIDE DIRECTORS

3.1 Terms and Conditions of Restricted Stock Awards

Each person who becomes an Outside Director after May 22, 2001 shall be granted,
as of the date of his or her first election, an initial award (the “Initial
Award”) of 8,437 shares of Restricted Stock.  As of June 1 of each year, each
person then serving as an Outside Director shall be granted an annual award (the
“Annual Award”) of 1,687 shares of Restricted Stock.  If on any date on which
Restricted Stock is to be granted under this Section 3.1 the remaining shares
reserved for receipt by Outside Directors under the Plan are insufficient to
enable each Outside Director to receive an award for the number of shares of
Restricted Stock set forth above, each Outside Director shall be awarded his or
her pro rata portion of such remaining shares.  Notwithstanding the foregoing,
no award of Restricted Stock shall be made under this Section 3.1 to any person
who has previously received an employee grant under Article II of the Plan
unless the Board of Directors expressly authorizes awards for such person.  All
awards of Restricted Stock under this Article III shall have the following terms
and conditions:

(a)  An Outside Director shall not be required to make any payment to the
Company in consideration of the Restricted Stock received by such Outside
Director.

(b)  No Restricted Stock granted under this Article III shall vest until the
first anniversary of the date of its grant.  Each Initial Award shall vest with
respect to 20% of the underlying shares on the first anniversary of the date

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of grant, and an additional 20% of the underlying shares on each subsequent
anniversary thereof, provided that the participant is a Director on each such
anniversary date.  Each Annual Award shall vest with respect to one-third of the
underlying shares on the first anniversary of the date of grant, and an
additional one-third of the underlying shares on each subsequent anniversary
thereof, provided that the participant is a Director on each such anniversary
date.

(c)  Notwithstanding the provisions of Section 3.1(b), in the event of the
Outside Director’s death while in service or the termination of the Outside
Director’s service for disability, all shares of Restricted Stock awarded to the
Outside Director under this Section 3.1 shall become fully vested.  For purposes
of this Section 3.1(c), termination for “disability” shall mean termination on
account of the director’s inability to perform his or her duties as an Outside
Director due to disability or incapacity as determined by the Board of
Directors.

(d) Notwithstanding the provisions of Section 3.1(b), Restricted Stock shall
become vested in full upon an Outside Director’s retirement.  For purposes of
this Section 3.1(d), “retirement” shall mean termination of Board service, other
than for Cause, after at least five years of service as an Outside Director. 
For purposes of this Plan, termination for “Cause” shall mean termination for
dishonesty or willful misconduct involving moral turpitude.

(e) Stock certificates representing the Restricted Stock awarded to an Outside
Director shall be registered in the Outside Director’s name and shall be held by
the Company on behalf of the Outside Director until it has vested.  The Outside
Director shall have the right to vote and to receive dividends on the Restricted
Stock before it has vested.  The Outside Director shall not be entitled to
delivery of the stock certificates, and no share of Restricted Stock may be
sold, transferred, assigned, or pledged by the Outside Director, until such
share has vested in accordance with this Section 3.1.  In the event the Outside
Director ceases to be a director of the Company or a Subsidiary before all of
his or her Restricted Stock has vested, all of such Outside Director’s
Restricted Stock which has not vested shall be forfeited to the Company and the
Company shall not be required to make any payment therefor.  At the time
Restricted Stock vests, a certificate for such vested shares shall be delivered
to the Outside Director (or the heirs or personal representatives of the Outside
Director, in the event of death), free of all restrictions.

(f) Notwithstanding any other provision of this Section 3.1, all shares of
Restricted Stock awarded to Outside Directors shall become vested in full upon
the occurrence of a Change of Control if the holder of such Restricted Stock is
a Director of the Company or a Subsidiary at the time of such Change of Control.

IV.  ADDITIONAL PROVISIONS

4.1 General Restrictions

Each award under the Plan shall be subject to the requirement that, if at any
time the Board of Directors shall determine that (i) the listing, registration
or qualification of the shares of Common Stock subject or related thereto upon
any securities exchange or under any state or federal law, or (ii) the consent
or approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of shares of Common Stock
is necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities or banking law, rule or regulation) as a
condition of, or in connection with, the making of such award or the issuance or
delivery of shares of Common Stock thereunder, such award may not be made or
stock certificates shall not be issued or delivered in whole or in part unless
such listing, registration, qualification, consent, approval or agreement shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors.

4.2 Amendments

(a)  The Board of Directors may amend the Plan from time to time.  No such
amendment shall require approval by the stockholders unless stockholder approval
is required by applicable law, regulation, or stock exchange requirement.  No
amendment shall adversely affect any award previously granted without the award
holder’s written consent.

(b)  The Board of Directors (upon recommendation of the Committee) shall have
the authority to amend any award to include any provision which, at the time of
such amendment, is authorized under the terms of the Plan; provided, however,
that no outstanding award may be revoked or altered in a manner unfavorable to
the holder without the written consent of the holder.

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4.3 Cancellation of Awards

Any award granted under the Plan other than an award to an Outside Director may
be canceled at any time with the consent of the holder and a new award may be
made to such holder in lieu thereof, which award may, in the discretion of the
Board of Directors (upon recommendation of the Committee), be on more favorable
terms and conditions than the canceled award.

4.4 Tax Withholding

(a)  Whenever the value of an award first becomes includible in an employee’s
gross income for applicable tax purposes, the Company shall have the right to
require the employee to remit to the Company, or make arrangements satisfactory
to the Board of Directors regarding payment of, an amount sufficient to satisfy
any federal, state or local withholding tax liability prior to the delivery of
any certificate for such shares or the time of such income inclusion.  Whenever
under the Plan payments by the Company are to be made in cash, such payments
shall be net of an amount sufficient to satisfy any federal, state or local
withholding tax liability.

(b)  To the extent permitted in the grant letter, and subject to any terms and
conditions imposed therein, an employee entitled to receive Common Stock under
the Plan may elect to have the federal, state, and local withholding tax
liability (or a specified portion thereof) with respect to such Common Stock
satisfied by having the Company withhold from the shares otherwise deliverable
to the employee shares of Common Stock having a value equal to the amount of the
withholding tax liability to be satisfied with respect to the Common Stock or by
delivering to the Company shares of unrestricted Common Stock.  Alternatively,
the grant letter may require that a portion of the shares of Common Stock
otherwise deliverable be withheld and applied to satisfy the withholding tax
obligations with respect to the award.

4.5 Non-Assignability

Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution.

4.6 No Guarantee of Employment or Service

Neither the adoption of the Plan nor the grant of an award under the Plan shall
constitute an assurance of continued employment or continued service as an
Outside Director for any period.

4.7 Change of Control

A “Change of Control” shall be deemed to have occurred upon:

(a)  the acquisition of all or substantially all of the assets of the Bank or
the 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 or the board of directors of
the Bank or of any successor corporation shall consist of persons other than
Current Members (for these purposes, a “Current Member” shall mean any member of
the Board of Directors or the board of directors of the Bank as of the effective
date of the conversion of the Bank from the mutual to capital stock form of
ownership and any successor of a Current Member whose nomination or election has
been approved by a majority of the Current Members then on the respective board
of directors);

(c)  the acquisition of the beneficial ownership, directly or indirectly (as
provided in Rule 13d-3 under 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
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 Company of an agreement
providing for the merger or consolidation of the Bank or the Company with
another corporation where the stockholders of the Bank or the 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.

4.8 Duration and Termination

(a)  The Plan shall be of unlimited duration.

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(b)  The Board of Directors may discontinue or terminate the Plan at any time. 
Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan’s discontinuance or termination without the
holder’s written consent.

4.9 No Liability

No member of the Board of Directors or the Committee, nor any officer or
employee of the Company or the Bank acting on behalf of the Board of Directors
or the Committee, shall be personally liable for any action, determination or
interpretation taken or made with respect to the Plan, and all members of the
Board or the Committee and all officers or employees of the Company or the Bank
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

4.10 Effective Date

The Plan became effective upon approval by the Company’s stockholders at the
1996 annual meeting.

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