EXHIBIT 10.20

 
 

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2001 STOCK OPTION PLAN FOR

OUTSIDE DIRECTORS, OFFICERS AND EMPLOYEES

Adopted September 20, 2001
Effective as of November 15, 2001
                Amended as of June 16, 2011
 
 

 
 

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TABLE OF CONTENTS
 
 
Page
       
ARTICLE I - PURPOSE
     
Section 1.1
General Purpose of the Plan
1
       
ARTICLE II - DEFINITIONS
     
Section 2.1
Bank
1
Section 2.2
Board
1
Section 2.3
Change in Control
1
Section 2.4
Code
2
Section 2.5
Committee
2
Section 2.6
Company
2
Section 2.7
Disability
2
Section 2.8
Disinterested Board Member
2
Section 2.9
Effective Date
2
Section 2.10
Eligible Director
2
Section 2.11
Eligible Employee3
 
Section 2.12
Employer
2
Section 2.13
Exchange Act
3
Section 2.14
Exercise Price
3
Section 2.15
Fair Market Value
3
Section 2.16
Family Member
3
Section 2.17
Incentive Stock Option
3
Section 2.18
Non-Profit Organization
3
Section 2.19
Non-Qualified Stock Option
3
Section 2.20
Option
3
Section 2.21
Option Period
3
Section 2.22
Person
3
Section 2.23
Plan
3
Section 2.24
Retirement
3
Section 2.25
Share
4
Section 2.26
Termination for Cause
4
       
ARTICLE III - AVAILABLE SHARES
     
Section 3.1
Available Shares — In General
4
Section 3.2
Available Options — Certain Executive Officers
5
       
ARTICLE IV- ADMINISTRATION
     
Section 4.1
Committee
5
Section 4.2
Committee Action
5
Section 4.3
Committee Responsibilities
5
Section 4.4
Delegation of Power to Officers or Employees
5
       
ARTICLE V -  STOCK OPTIONS FOR ELIGIBLE DIRECTORS
     
Section 5.1
In General
6
Section 5.2
Exercise Price
6
Section 5.3
Option Period
6
       
ARTICLE VI  - STOCK OPTIONS FOR ELIGIBLE EMPLOYEES
Section 6.1
Size of Option
7
Section 6.2
Other Terms of Options
7
Section 6.3
Exercise Price
7
Section 6.4
Option Period; Vesting
7
Section 6.5
Additional Provisions Applicable to Incentive Stock Options
8
       
ARTICLE VII - OPTIONS — IN GENERAL
     
Section 7.1
Method of Exercise
9
Section 7.2
Limitations on Options
10
       
ARTICLE VIII- AMENDMENT AND TERMINATION
     
Section 8.1
Termination
11
Section 8.2
Amendment
11
Section 8.3
Adjustments in the Event of a Business Reorganization
11
       
ARTICLE IX - MISCELLANEOUS
     
Section 9.1
Status as an Employee Benefit Plan
12
Section 9.2
No Right to Continued Employment
12
Section 9.3
Construction of Language
12
Section 9.4
Governing Law
12
Section 9.5
Headings
13
Section 9.6
Non-Alienation of Benefits
13
Section 9.7
Taxes
13
Section 9.8
Approval of Shareholders
13
Section 9.9
Notices
13

 

 
 

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Dime Community Bancshares, Inc. 2001 Stock Option Plan

for

Outside Directors, Officers and Employees

ARTICLE I

PURPOSE

Section 1.1                      General Purpose of the Plan.

The purpose of the Plan is to promote the growth and profitability of Dime
Community Bancshares, Inc., to provide eligible directors, certain key officers
and employees of Dime Community Bancshares, Inc. and its affiliates with an
incentive to achieve corporate objectives, to attract and retain individuals of
outstanding competence and to provide such individuals with an equity interest
in Dime Community Bancshares, Inc.

ARTICLE II

DEFINITIONS

The following definitions shall apply for the purposes of this Plan, unless a
different meaning is plainly indicated by the context:

Section 2.1                      Bank means The Dime Savings Bank of
Williamsburgh, a federally chartered savings institution, and any successor
thereto.

Section 2.2                      Board means the board of directors of the
Company.

Section 2.3                      Change in Control means any of the following
events:

(a)           the occurrence of any event (other than an event described in
section  2.3(c)(i))  upon which any "person" (as such term is used in sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act")), other than (A) a trustee or other fiduciary holding securities under an
employee benefit plan maintained for the benefit of employees of the Company;
(B) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company; or (C) any group constituting a person in which employees of the
Company are substantial members, becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities issued by the Company representing 25% or more of the combined voting
power of all of the Company's then outstanding securities; or

(b)           the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with individuals
whose election by the Board or nomination for election by the Company's
stockholders was approved by the affirmative vote of at least two-thirds of the
members of the Board then in office who were either members of the Board on the
date this Plan is adopted or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members of the
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or

(c)           the shareholders of the Company approve either:

 
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(i)           a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation following which both of the
following conditions are satisfied:

(A)           either (I) the members of the Board of the Company immediately
prior to such merger or consolidation constitute at least a majority of the
members of the governing body of the institution resulting from such merger or
consolidation; or (II) the shareholders of the Company own securities of the
institution resulting from such merger or consolidation representing 80% or more
of the combined voting power of all such securities of the resulting institution
then outstanding in substantially the same proportions as their ownership of
voting securities of the Company immediately before such merger or
consolidation; and

(B)           the entity which results from such merger or consolidation
expressly agrees in writing to assume and perform the Company's obligations
under the Plan; or

(ii)           a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of its
assets; and

(d)           any event that would be described in section 2.3(a), (b) or (c) if
"the Bank" were substituted for "the Company" therein.

Section 2.4                      Code means the Internal Revenue Code of 1986
(including the corresponding provisions of any succeeding law).

Section 2.5                      Committee means the Committee described in
section 4.1.

Section 2.6                      Company means Dime Community Bancshares, Inc.,
a corporation organized and existing under the laws of the State of Delaware,
and any successor thereto.

Section 2.7                      Disability means a condition of total
incapacity, mental or physical, for further performance of duty with the Company
which the Committee shall have determined, on the basis of competent medical
evidence, is likely to be permanent.

Section 2.8                      Disinterested Board Member means a member of
the Board who (a) is not a current employee of the Company or a subsidiary, (b)
is not a former employee of the Company who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year, (c) has not been an officer of the Company, (d) does not receive
remuneration from the Company or a subsidiary, either directly or indirectly, in
any capacity other than as a director and (e) does not possess an interest in
any other transaction, and is not engaged in a business relationship, for which
disclosure would be required pursuant to Item 404(a) or (b) of the proxy
solicitation rules of the Securities and Exchange Commission.  The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of section 162(m) of the Code or Rule
16b-3 promulgated under the Exchange Act.

Section 2.9                      Effective Date means November 15, 2001 (or such
other date on which the Company’s shareholders approve this Plan).

Section 2.10                      Eligible Director means a member of the board
of directors of an Employer who is not also an employee or an officer of an
Employer.

Section 2.11                      Eligible Employee means any employee whom the
Committee may determine to be a key officer or employee of an Employer and
select to receive a grant of an Option pursuant to the Plan.

Section 2.12                      Employer means the Company, the Bank and any
successor thereto and, with the prior approval of the Board, and subject to such
terms and conditions as may be imposed by the Board, any other savings bank,
savings and loan association, bank, corporation, financial institution or other
business organization or institution.  With respect to any Eligible Employer or
Eligible Director, the Employer shall mean the entity which employs such person
or upon whose board of directors such person serves.

 
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Section 2.13                      Exchange Act means the Securities Exchange Act
of 1934, as amended.

Section 2.14                      Exercise Price means the price per Share at
which Shares subject to an Option may be purchased upon exercise of the Option,
determined in accordance with section 5.4.

Section 2.15                      Fair Market Value means, with respect to a
Share on a specified date:

(a)           the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on which any
reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the principal
United States securities exchange on which the Shares are listed or admitted to
trading, as of the close of the market in New York City and without regard to
after-hours trading activity; or

(b)           if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date, as of
the close of the market in New York City and without regard to after-hours
trading activity, on the National Association of Securities Dealers Automated
Quotations System, or, if no such quotation is provided, on another similar
system, selected by the Committee, then in use; or

(c)           if sections 2.15(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.

Section 2.16                      Family Member means, with respect to any
Eligible Employee or Eligible Director:   (a) the spouse, parent, child or
sibling of the Eligible Director or Eligible Employee; and (b) any corporation,
partnership, limited liability company, trust or other legal entity 100% of the
ownership interests in which are owned by the Eligible Director or Eligible
Employee and persons described in section 2.16(a).

Section 2.17                      Incentive Stock Option means a right to
purchase Shares that is granted to an Eligible Employee pursuant to Article VI,
that is designated by the Committee to be an Incentive Stock Option and that
satisfies the requirements of section 422 of the Code.

Section 2.18                      Non-Profit Organization means any organization
which is exempt from federal income tax under section 501(c)(3), (4), (5), (6),
(7), (8) or (10) of the Internal Revenue Code.

Section 2.19                      Non-Qualified Stock Option means a right to
purchase Shares that is granted pursuant to Article V or VI.  For Eligible
Employees, an Option will be a Non-Qualified Stock Option if (a) it is not
designated by the Committee to be an Incentive Stock Option, or (b) it does not
satisfy the requirements of section 422 of the Code.

Section 2.20                      Option means either an Incentive Stock Option
or a Non-Qualified Stock Option.

Section 2.21                      Option Period means the period during which an
Option may be exercised, determined in accordance with section 5.3 and 6.4.

Section 2.22                      Person means an individual, a corporation, a
bank, a savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.

Section 2.23                      Plan means the Dime Community Bancshares, Inc.
2001 Stock Option Plan for Outside Directors, Officers and Employees, as amended
from time to time.

Section 2.24                      Retirement means termination of service with
the Employer in all capacities at or after attaining age 65 or any earlier
normal or early retirement date set forth in any tax-qualified retirement plan
of the Bank.

 
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Section 2.25                      Share means a share of Common Stock, par value
$.01 per share, of Dime Community Bancshares, Inc.

Section 2.26                      Termination for Cause means one of the
following:

(a)           for an Eligible Employee who is not an officer or employee of any
bank or savings institution regulated by the Office of Thrift Supervision,
termination of employment with the Employer upon the occurrence of any of the
following:  (i) the employee intentionally engages in dishonest conduct in
connection with his performance of services for the Employer resulting in his
conviction of or plea of guilty or nolo contendere to a felony; (ii) the
employee is convicted of, or pleads guilty or nolo contendere to, a felony or
any crime involving moral turpitude; (iii) the employee willfully fails or
refuses to perform his duties under any employment or retention agreement and
fails to cure such breach within sixty (60) days following written notice
thereof from the Employer; (iv) the employee breaches his fiduciary duties to
the Employer for personal profit; or (v) the employee's willful breach or
violation of any law, rule or regulation (other than traffic violations or
similar offenses), or final cease and desist order in connection with his
performance of services for the Employer;

(b)           for an Eligible Employee who is an officer or employee of a bank
or savings institution regulated by the Office of Thrift Supervision,
termination of employment for 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 for any reason constituting cause for termination under any
written employment agreement between the Employer and such Eligible Employee, in
each  case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry; provided, however, that such
individual shall not be deemed to have been discharged for cause unless and
until he shall have received a written notice of termination from the Board,
which notice shall be given to such individual not later than five (5) business
days after the board of directors of the Employer adopts, and shall be
accompanied by, a resolution duly approved by affirmative vote of a majority of
the entire board of directors of the Employer at a meeting called and held for
such purpose (which meeting shall be held not less than fifteen (15) days nor
more than thirty (30) days after notice to the individual), at which meeting
there shall be a reasonable opportunity for the individual to make oral and
written presentations to the members of the board of directors of the Employer,
on his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination) finding that in the good
faith opinion of the board of directors of the Employer grounds exist for
discharging the individual for cause.

ARTICLE III

AVAILABLE SHARES

Section 3.1                      Available Shares — In General.

Subject to section 8.3, the maximum aggregate number of Shares with respect to
which Options may be granted at any time shall be equal to the excess of:

(a)           900,000 Shares; over

(b)           the sum of:

(i)           the number of Shares with respect to which previously granted
Options may then or may in the future be exercised; plus

(ii)           the number of Shares with respect to which previously granted
Options have been exercised.

A maximum aggregate of 787,500 Shares may be issued upon exercise of Options
granted to Eligible Employees and a maximum aggregate of 112,500 Shares may be
issued upon exercise of Options granted to Eligible Directors.  For purposes of
this section 3.1, an Option shall not be considered as having been exercised to
the extent that such Option terminates by reason other than the purchase of
related Shares.

Section 3.2                      Available Options — Certain Executive Officers.

In addition to the limitations of section 3.1, the maximum number of Options
which may be granted to any individual Eligible Employee who is a “covered
employee” described in section 162(m) of the Code, and in the aggregate to all
 
 
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Eligible Employees who are “covered employees” described in section 162(m) of
the Code shall be 787,500 (subject to adjustment as provided in section 8.3).

ARTICLE IV

ADMINISTRATION

Section 4.1                      Committee.

The Plan shall be administered by the members of the Compensation Committee of
Dime Community Bancshares, Inc. who are Disinterested Board Members.  If the
Committee consists of fewer than two Disinterested Board Members, then the Board
shall appoint to the Committee such additional Disinterested Board Members as
shall be necessary to provide for a Committee consisting of at least two
Disinterested Board Members.

Section 4.2                      Committee Action.

The Committee shall hold such meetings, and may make such administrative rules
and regulations, as it may deem proper.  A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the members
of the Committee present at a meeting at which a quorum is present, as well as
actions taken pursuant to the unanimous written consent of all of the members of
the Committee without holding a meeting, shall be deemed to be actions of the
Committee.  All actions of the Committee shall be final and conclusive and shall
be binding upon the Company and all other interested parties.  Any Person
dealing with the Committee shall be fully protected in relying upon any written
notice, instruction, direction or other communication signed by the secretary of
the Committee and one member of the Committee, by two members of the Committee
or by a representative of the Committee authorized to sign the same in its
behalf.

Section 4.3                      Committee Responsibilities.

Subject to the terms and conditions of the Plan and such limitations as may be
imposed from time to time by the Board, the Committee shall be responsible for
the overall management and administration of the Plan and shall have such
authority as shall be necessary or appropriate in order to carry out its
responsibilities, including, without limitation, the authority:

(a)           to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the Plan,
the number of Shares subject to the Options, if any, to be granted, and the
terms and conditions thereof;
(b)           to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and

(c)           to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.

Section 4.4                      Delegation of Power to Officers or Employees.

Notwithstanding anything contained herein to the contrary, the Committee may
authorize one or more officers of the Company to designate the officers and
employees of the Company or its subsidiaries who will be the recipients of
 
 
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Options; to fix the timing of any such grant, and to determine the number of
Options to be received by such officers or employees.  In making any such
delegation:  (a) the Committee shall specify the total number Options such
officer or officers may award; (b) the Committee shall not authorize an officer
to designate himself as the recipient of any Options; and (c) the Committee
shall establish the terms of the Options, including the Exercise Price (which
may include a formula by which such price may determined).

ARTICLE V

STOCK OPTIONS FOR ELIGIBLE DIRECTORS

Section 5.1                      In General.

(a)           On the Effective Date, and on each January 1st that occurs at
least one (1) year after the Effective Date, each Person who is then an Eligible
Director shall be granted an Option to purchase up to Three Thousand (3,000)
Shares; provided, however, that if the scheduled date of grant is not a business
day, such grant shall be made on the first business day after the scheduled
date.  If the aggregate number of Options to granted to Eligible Directors on
any date exceeds the total number of Shares then available for Options to
Eligible Directors, the number of Options granted to each Eligible Director
shall be equal to the quotient of (i) the total number of Shares then available
for Options to Eligible Directors, divided by (ii) the number of Eligible
Directors then being granted Options, such quotient to be rounded down to the
nearest whole Share.  Any Option granted under this section 5.1 shall be
evidenced by a written agreement which shall specify the number of Shares
covered by the Option, the Exercise Price for the Shares subject to the Option
and the Option Period, all as determined pursuant to this Article V.  The Option
agreement shall also set forth specifically or incorporate by reference the
applicable provisions of the Plan.

Section 5.2                      Exercise Price.

The price per Share at which an Option granted to an Eligible Director under
section 5.1 may be exercised shall be the Fair Market Value of a Share on the
date on which the Option is granted.

Section 5.3                      Option Period.

(a)           Subject to section 5.3(b), the Option Period during which an
Option granted to an Eligible Director under section 5.1 may be exercised shall
commence on the date the Option is granted and shall expire on the earliest of:

(i)           removal for cause in accordance with the Employer's bylaws; or

(ii)           the first anniversary of termination of service for the Employer
in all capacities (other than a termination resulting from removal for cause);

(ii)           the last day of the ten-year period commencing on the date on
which the Option was granted.

To the extent that an Option is not exercised before the expiration of the
applicable Option Period, it shall be forfeited at the close of business on the
last day of he Option Period and shall not thereafter be exercised.

(b)           No Option granted under section 5.1 shall be exercised to the
extent that is not vested.  An Option granted under section 5.1 shall become
vested on the earlier of:

(i)           the first anniversary of the date of grant;

(ii)           termination of service of the person to whom the Option was
granted by reason of death or disability.

 
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If the person to whom an Option is granted terminates service with the Employer
in all capacities, other than by reason of death or Disability, before the
Option has become vested, the Option shall be forfeited and shall not thereafter
become vested or be exercised.

(c)           Each Option granted to an Eligible Director that is outstanding
under the Plan on the date on which a Change of Control occurs shall, on such
date be 100% vested and exercisable.

ARTICLE VI

STOCK OPTIONS FOR ELIGIBLE EMPLOYEES

Section 6.1                      Size of Option.

Subject to the limitations of the Plan and such additional limitations as the
Board may from time to time impose:  (a) the number of Shares as to which an
Eligible Employee may be granted Options by the Committee shall be determined by
the Committee, in its discretion; and (b)  subject to such additional
limitations as the Committee may impose, the number of Shares as to which an
Eligible Employee may be granted Options by a duly authorized delegate of the
Committee shall be determined by such delegate in its discretion
 
 
Section 6.2                      Other Terms of Options.

(a)           Each Option granted to an Eligible Employee must be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option and, if not
designated as either, shall be a Non-Qualified Stock Option.

(b)           Any Option granted under this Article VI shall be evidenced by a
written agreement which shall:

(i)           specify the number of Shares covered by the Option;

(ii)           specify the Exercise Price, determined in accordance with section
6.3, for the Shares subject to the Option;

(iii)           specify the Option Period determined in accordance with section
6.4;

(iv)           set forth specifically or incorporate by reference the applicable
provisions of the Plan; and

(v)           contain such other terms and conditions not inconsistent with the
Plan as the Committee (in the case of Options granted by the Committee) or by
the Committee or its delegate (in the case of Options granted by a duly
authorized delegate of the Committee) may, in their discretion, prescribe with
respect to an Option granted to an Eligible Employee.

Section 6.3                      Exercise Price.

The price per Share at which an Option granted to an Eligible Employee (whether
granted by the Committee or by a duly authorized delegate of the Committee) may
be exercised shall be determined by the Committee, in its discretion; provided,
however, that the Exercise Price shall not be less than the Fair Market Value of
a Share on the date on which the Option is granted.

Section 6.4                      Option Period; Vesting.

(a)           The Option Period during which an Option granted to an Eligible
Employee may be exercised shall commence on the date specified by the Committee
in the Option agreement and shall expire on the earlier of the tenth (10th)
anniversary of the date of grant and:

 
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(i)           date specified in the Option agreement; or

(ii)           if no date is specified, on the earliest of:

(A)           the close of business on the last day of the three-month period
commencing on the date of the Eligible Employee's termination of service with
the Employer in all capacities, other than on account of death or Disability,
Retirement or a Termination for Cause;

(B)           the close of business on the last day of the one-year period
commencing on the date of the Eligible Employee's termination of employment due
to death, Disability or Retirement; and

(C)           the date and time when the Eligible Employee ceases to be an
employee of the Employer due to a Termination for Cause.

To the extent that an Option is not exercised before the expiration of the
applicable Option Period, it shall be forfeited at the close of business on the
last day of he Option Period and shall not thereafter be exercised.

(b)           No Option granted under this Article VI shall be exercised to the
extent that is not vested.  An Option granted under this Article VI shall become
vested at the time and in the manner provided in the Option agreement, or if no
provision for vesting is made in the Option Agreement, the Option shall be
vested:

(i)           prior to the first anniversary of the date of grant, as to no
portion thereof ;

(ii)           on and after the first anniversary of the date of grant and prior
to the second anniversary of the date of grant as to an aggregate of 25% of the
Shares subject to the Option as of the date of grant;

(iii)           on and after the second anniversary of the date of grant and
prior to the third anniversary of the date of grant as to an aggregate of 50% of
the Shares subject to the Option as of the date of grant;

(iv)           on and after the third anniversary of the date of grant and prior
to the fourth anniversary of the date of grant, as to an aggregate of  75% of
the Shares subject to the Option as of the date of grant;

(v)           on and after the fourth anniversary of the date of grant, as to an
aggregate of  100% of the Shares subject to the Option as of the date of grant;
and

(vi)           upon the termination of service, prior to the fourth anniversary
of the date on which the Option was granted, of the person to whom the Option
was granted by reason of death, Retirement or Disability, as to an aggregate of
100% of the Shares subject to the Option as of the date of grant.

If the person to whom an Option is granted terminates service with the Employer
in all capacities, other than by reason of death, Retirement or Disability,
before the Option has become vested, the Option shall be forfeited and shall not
thereafter become vested or be exercised.

(c)           Except to the extent that an applicable Option Agreement expressly
provides otherwise, each Option granted to an Eligible Employee that is
outstanding under the Plan on the date on which a Change of Control occurs
shall, on such date, be 100% vested and exercisable.

Section 6.5                      Additional Provisions Applicable to  Incentive
Stock Options.

In addition to the limitations of section 7.3, an Option granted to an Eligible
Employee designated by the Committee or its delegate to be an Incentive Stock
Option shall be subject to the following limitations:

(a)           If, for any calendar year, the sum of (i) plus (ii) exceeds
$100,000, where (i) equals the Fair Market Value (determined as of the date of
the grant) of Shares subject to an Option intended to be an Incentive Stock
Option which
 
 
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first become exercisable during such calendar year, and (ii) equals the Fair
Market Value (determined as of the date of grant) of Shares subject to any other
options intended to be Incentive Stock Options and previously granted to the
same Eligible Employee which first become exercisable in such calendar year,
then that number of Shares optioned which causes the sum of (i) and (ii) to
exceed $100,000 shall be deemed to be Shares optioned pursuant to a
Non-Qualified Stock Option or Non-Qualified Stock Options with the same terms as
the Option or Options intended to be an Incentive Stock Option, and the options
shall be recharacterized in inverse order of the order in which they were
granted;

(b)           The Exercise Price of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares comprising
more than 10% of the total combined voting power of all classes of stock of the
Company shall not be less than 110% of the Fair Market Value of a Share, and if
an Option designated as an Incentive Stock Option shall be granted at an
Exercise Price that does not satisfy this requirement, the designated Exercise
Price shall be observed and the Option shall be treated as a Non-Qualified Stock
Option;

(c)           The Option Period of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares comprising
more than 10% of the total combined voting power of all classes of stock of the
Company, shall expire no later than the fifth anniversary of the date on which
the Option was granted, and if an Option designated as an Incentive Stock Option
shall be granted for an Option Period that does not satisfy this requirement,
the designated Option Period shall be observed and the Option shall be treated
as a Non-Qualified Stock Option;

(d)           An Incentive Stock Option that is exercised during its designated
Option Period but more than:

(i)           three (3) months after the termination of employment with the
Company, and all parent and subsidiary entities (other than on account of
disability within the meaning of section 22(e)(3) of the Code or death) of the
Eligible Employee to whom it was granted; and

(ii)           one (1) year after such individual's termination of employment
with the Company, a parent or a subsidiary due to disability (within the meaning
of section 22(e)(3) of the Code) or death;

may be exercised in accordance with the terms but shall at the time of exercise
be treated as a Non-Qualified Stock Option; and

(e)           Except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of an
Incentive Stock Option until after the later of (i) the second anniversary of
the date on which the Incentive Stock Option was granted, or (ii) the first
anniversary of the date on which the Shares were acquired.

ARTICLE VII

OPTIONS — IN GENERAL

Section 7.1                      Method of Exercise.

(a)  Subject to the limitations of the Plan and the Option agreement, an Option
holder may, at any time during the Option Period, exercise his or her right to
purchase all or any part of the Shares to which the Option relates and as to
which the Option has become vested but has not been exercised; provided,
however, that the minimum number of Shares which may be purchased at any time
shall be 100, or, if less, the total number of Shares relating to the Option
which remain unpurchased.  An Option holder shall exercise an Option to purchase
Shares by:

(i)           giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Option;

 
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(ii)           delivering to the Committee full payment, consistent with section
7.1(b), for the Shares as to which the Option is to be exercised; and

(iii)           satisfying such other conditions as may be prescribed in the
Option agreement.

(b)           The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent permitted by the
Committee, by one or more of the following:  (i) in the form of Shares already
owned by the Option holder for a minimum period of six (6) months and having an
aggregate Fair Market Value on the date the Option is exercised equal to the
aggregate Exercise Price to be paid; or (ii) by requesting the Company to cancel
without payment Options outstanding to such Person for that number of Shares
whose aggregate Fair Market Value on the date of exercise, when reduced by their
aggregate Exercise Price, equals the aggregate Exercise Price of the Options
being exercised; or (iii) by a combination thereof.  Payment for any Shares to
be purchased upon exercise of an Option may also be made by delivering a
properly executed exercise notice to the Company, together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the purchase price.  To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

(c)           When the requirements of section 7.1(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause the
issuance of a stock certificate evidencing the Option holder's ownership of such
Shares.  The person exercising the Option shall have no right to vote or to
receive dividends, nor have any other rights with respect to the Shares, prior
to the date as of which such Shares are transferred to such Person on the stock
transfer records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 8.3.

Section 7.2                      Limitations on Options.

(a)           An Option by its terms shall not be transferable by the Option
holder other than (i) in the case of a Non-Qualified Stock Option granted to an
Option holder who is the person to whom the Option was granted, to Family
Members or Non-profit Organizations or (ii) in the case of any Option held by
any Option Holder, by will or by the laws of descent and distribution and shall
be exercisable, during the lifetime of the Option holder, only by the Option
holder, a Family Member or a Non-profit Organization. Any such transfer shall be
effected by written notice to the Company given in such form and manner as the
Committee may prescribe and shall be recognized only if such notice is received
by the Company prior to the death of the person giving it. After the transfer
has taken effect, the transferee shall have, with respect to such Option, all of
the rights, privileges and obligations, other than the privilege to effect a
subsequent inter vivos transfer to a Family Member or Non-Profit Organization,
which would attach thereunder to the transferor if the Option were issued to
such transferor. If a privilege of the Option depends on the life, employment or
other status of the transferor, such privilege of the Option for the transferee
shall continue to depend on the life, employment or other status of the
transferor. The Committee shall have full and exclusive authority to interpret
and apply the provisions of this Plan to transferees to the extent not
specifically described herein.  Notwithstanding the foregoing, an Option Holder
may transfer an Option remaining unexercised at his death to a Beneficiary. An
Option Holder may designate a beneficiary to receive any Options that may be
exercised after his death. Such designation (and any change or revocation of
such designation) shall be made in writing in the form and manner prescribed by
the Committee. In the event that the designated beneficiary dies prior to the
Option Holder, or in the event that no beneficiary has been designated, any
Options that may be exercised following the Option Holder’s death shall be
transferred to the executor or administrator of the Option holder’s estate, or
if no such executor or administrator is appointed within such time as the
Committee, in its sole discretion, shall deem reasonable, to such one or more of
the spouse and descendants and blood relatives of such deceased person as the
Committee may select. If the Option holder and his beneficiary shall die in
circumstances that cause the Committee, in its discretion, to be uncertain which
shall have been the first to die, the Option holder shall be deemed to have
survived the beneficiary.
     

 
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(b)            The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Option holder to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law.  It may be provided that any such representation shall
become inoperative upon a registration of the Shares or upon the occurrence of
any other event eliminating the necessity of such representation.  The Company
shall not be required to deliver any Shares under the Plan prior to (i) the
admission of such Shares to listing on any stock exchange on which Shares may
then be listed, or (ii) the completion of such registration or other
qualification under any state or federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.

ARTICLE VIII

AMENDMENT AND TERMINATION

Section 8.1                      Termination.

The Board may suspend or terminate the Plan in whole or in part at any time
prior to the tenth anniversary of the Effective Date by giving written notice of
such suspension or termination to the Committee.  Unless sooner terminated, the
Plan shall terminate automatically on the day preceding the tenth anniversary of
the Effective Date.  In the event of any suspension or termination of the Plan,
all Options theretofore granted under the Plan that are outstanding on the date
of such suspension or termination of the Plan shall remain outstanding and
exercisable for the period and on the terms and conditions set forth in the
Option agreements evidencing such Options.

Section 8.2                      Amendment.

The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that, to the extent required to comply with section 162(m) of
the Code, no such amendment or revision shall be effective if it amends a
material term of the Plan unless approved by the holders of a majority of the
voting Shares of Dime Community Bancshares, Inc.

Section 8.3                      Adjustments in the Event of a Business
Reorganization.

(a)           In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each Person who is then a holder of record of Shares, the number
of Shares  specified or referred to in any provision of this Plan, and the
number of Shares covered by each outstanding Option, shall be adjusted to
account for such event.  Such adjustment shall be effected by multiplying such
number of Shares by an amount equal to the number of Shares that would be owned
after such event by a Person who, immediately prior to such event, was the
holder of record of one Share, and the Exercise Price of the Options shall be
adjusted by dividing the Exercise Price by such number of Shares; provided,
however, that the Committee may, in its discretion, establish another
appropriate method of adjustment.

(b)           In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, each Option
outstanding under the Plan immediately prior to the closing of such transaction
shall, immediately upon the closing of such transaction and without any further
action on the part of any party, be converted into:

(i)           if any of the holders of Shares receives, or has the right to
receive, securities of the surviving entity in full consideration for a Share,
an option (A) to purchase the same number(s) of the same class(es) of securities
of the survivor (rounded up to the nearest whole share) that are issuable in
exchange for one Share; (B) at a unit exercise price equal to the quotient of
Exercise Price of the Option being converted divided by the number determined
under section 8.3(b)(i)(A) and rounded down to the nearest whole cent; and (C)
otherwise on the same terms and conditions as the Option being converted,
subject, in the case of an Incentive Stock Option, to such other adjustments as
 
 
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shall be necessary to preserve incentive stock option tax treatment; and

(ii)           if section 8.3(b)(i) is not applicable, an option (A) to purchase
the that number of the class of common equity securities of the survivor having
the greatest voting rights (rounded up to the nearest whole share) with an
aggregate fair market value (determined immediately prior to the closing of such
transaction) equal to the fair market value of Share (determined immediately
prior to the closing of such transaction); (B) at a unit exercise price equal to
the quotient of the Exercise Price of the Option being converted divided by the
number determined under section 8.3(b)(ii)(A) and rounded down to the nearest
whole cent; and (C) otherwise on the same terms and conditions as the Option
being converted, subject, in the case of an Incentive Stock Option, to such
other adjustments as shall be necessary to preserve incentive stock option tax
treatment;

provided however, that the Committee may, upon written notice given no less than
thirty (30) days in advance of the closing of the transaction to the holders of
any or all outstanding Options, cancel all Options outstanding to the holders to
whom such notice is given, such cancellation to be effective immediately prior
to the closing of the transaction upon payment, in exchange for each Option for
a Share so canceled, of money or property or a combination thereof having a fair
market value (as determined by the Committee in good faith) at least equal to
the excess of the Fair Market Value of the Share subject to the Option
(determined immediately prior to cancellation) over the Exercise Price per Share
of the Option.

ARTICLE IX

MISCELLANEOUS

Section 9.1                      Status as an Employee Benefit Plan.

This Plan is not intended to satisfy the requirements for qualification under
section 401(a) of the Code or to satisfy the definitional requirements for an
"employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.  It is intended to be a non-qualified
incentive compensation program that is exempt from the regulatory requirements
of the Employee Retirement Income Security Act of 1974, as amended.  The Plan
shall be construed and administered so as to effectuate this intent.

Section 9.2                      No Right to Continued Employment.

Neither the establishment of the Plan nor any provisions of the Plan nor any
action of the Board or the Committee with respect to the Plan shall be held or
construed to confer upon any Eligible Director or Eligible Employee any right to
a continuation of his or her position as a director or employee of the
Company.  The Employers reserve the right to remove any Eligible Director or
dismiss any Eligible Employee or otherwise deal with any Eligible Director or
Eligible Employee to the same extent as though the Plan had not been adopted.

Section 9.3                      Construction of Language.

Whenever appropriate in the Plan, words used in the singular may be read in the
plural, words used in the plural may be read in the singular, and words
importing the masculine gender may be read as referring equally to the feminine
or the neuter.  Any reference to an Article or section number shall refer to an
Article or section of this Plan unless otherwise indicated.

Section 9.4                      Governing Law.

The Plan shall be construed, administered and enforced according to the laws of
the State of New York without giving effect to the conflict of laws principles
thereof, except to the extent that such laws are preempted by federal law.

 
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Section 9.5                      Headings.

The headings of Articles and sections are included solely for convenience of
reference.  If there is any conflict between such headings and the text of the
Plan, the text shall control.

Section 9.6                      Non-Alienation of Benefits.

The right to receive a benefit under the Plan shall not be subject in any manner
to anticipation, alienation or assignment, nor shall such right be liable for or
subject to debts, contracts, liabilities, engagements or torts.

Section 9.7                      Taxes.

The Company shall have the right to deduct from all amounts paid by the Company
in cash with respect to an Option under the Plan any taxes required by law to be
withheld with respect to such Option.  Where any person is entitled to receive
Shares pursuant to the exercise of an Option, the Company shall have the right
to require such person to pay the Company the amount of any tax which the
Company is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a sufficient number of Shares to
cover the amount required to be withheld.

Section 9.8                      Approval of Shareholders.

The Plan shall not be effective or implemented unless approved by shareholders
of Dime Community Bancshares, Inc., nor shall any Options be granted prior to
such approval unless expressly contingent thereon nor shall any Exercise Price
be established prior thereto.
 
 

Section 9.9                      Notices.

Any communication required or permitted to be given under the Plan, including
any notice, direction, designation, comment, 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 (5) 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:

(a)           If to the Committee:

Dime Community Bancshares, Inc.
c/o The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York  11211

Attention:  Corporate Secretary

(b)           If to an Option holder, to the Option holder's address as shown in
the employer's records.

 
 
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