EXHIBIT 10.27

FORM OF EMPLOYEE STOCK OPTION GRANT LETTER

DATE OF GRANT

EMPLOYEE NAME
EMPLOYEE ADDRESS

Dear Employee Name:

                 This letter sets forth the terms and conditions of the stock
option granted to you by Flushing Financial Corporation (the “Company”), in
accordance with the provisions of its 1996 Stock Option Incentive Plan (the
“Plan”). You have been granted an option (the “Option”) to purchase NUMBER
shares of the Company’s Common Stock (“Common Stock”) and a tandem limited stock
appreciation right (the “Limited SAR”). The Option is not  intended to be an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”).

                 The Option is subject to the terms and conditions set forth in
the Plan, any rules and regulations adopted by the Board of Directors of the
Company (the “Board”), and this letter. Any terms used in this letter and not
defined have the meanings set forth in the Plan.

                 This grant is intended to fulfill the Plan’s purpose of
providing additional incentives to employees such as yourself in the form of
options to purchase Common Stock, thereby increasing your personal stake in the
continued success and growth of the Company and encouraging you to remain in the
Company’s employ.

                 In addition to serving as a grant letter, this document
constitutes part of a prospectus covering securities that have been registered
under the Securities Act of 1933. The date of this part of the prospectus is
DATE OF GRANT.

1.             Option Price

                 The price at which you may purchase the shares of Common Stock
covered by the Option is $price per share which is the fair market value of a
share on the date of grant of your Option.

2.             Term of Option

                 Your Option expires in all events on DATE. However, your Option
may terminate prior to such expiration date as provided in paragraphs 6 and 7 of
this letter upon the occurrence of one of the events described in those
paragraphs. Regardless of the provisions of paragraphs 6 and 7, in no event can
your Option be exercised after the expiration date set forth in this
paragraph 2.

3.             Exercisability of Option

 

  (a)           Unless it becomes exercisable on an earlier date as provided in
paragraphs 6 and 7 below, no portion of your Option can be exercised before
DATE.     (b)           Unless it becomes exercisable on an earlier date as
provided in paragraphs 6 and 7 below, your Option will become exercisable in
installments as follows, provided that you are an employee or director of the
Company or its subsidiaries on each such date:  

 

Period Beginning Cumulative Percentage of
Shares as to Which
Option is Exercisable

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Date
Percentage
Date
Percentage
Date
Percentage
Date
Percentage
Date
Percentage

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  (c)           To the extent your Option has become exercisable, you may
exercise the Option to purchase all or any part of such shares at any time on or
before the date the Option expires or terminates.

 

4.             Exercise of Option

                 You may exercise your Option by giving written notice to the
Company of the number of shares of Common Stock desired to be purchased. The
notice must be hand delivered or mailed to the Company , 1979 Marcus Avenue,
Suite E140, Lake Success, New York 11042; Attention: Senior Vice President/Human
Resources. The notice must be accompanied by either (i) tender in full of the
option price, in cash or Common Stock, as provided in paragraphs 5(a) and
5(b) below, or any combination thereof, or (ii) the documents necessary to
arrange for payment of the option price through the “cashless option exercise
program,” as described in paragraph 5(c) below, if the Company has such a
program in effect at the time of such exercise (and such program is available to
executive officers and directors if you are an executive officer or director at
the time of such exercise). A copy of the form of notice to be used in
exercising your Option (the “Option Exercise Form”) is attached. Your Option
will be deemed exercised on the date the Option Exercise Form is hand delivered
or, if mailed, postmarked.

                 The shares of Common Stock you will receive upon exercise of
your Option may consist of authorized but unissued shares or treasury shares of
the Company, as determined from time to time by the Company’s Board of
Directors.

5.             Satisfaction of Option Price

 

  (a)           Payment of Cash. Your Option may be exercised by payment of the
option price in cash (including check, bank draft, money order, or wire transfer
to the order of the Company).     (b)           Payment of Common Stock. You may
satisfy the option price by tendering shares of Common Stock you have owned for
at least six months. The fair market value of any shares of Common Stock so
tendered shall be the mean between the highest and lowest quoted selling price,
regular way, of the Common Stock on the Nasdaq National Market (or the principal
exchange upon which the Common Stock is listed) for the day before the date of
exercise or, if no such sale of Common Stock occurs on such date, the mean
between the highest and lowest quoted selling price on the nearest trading date
before such date. The certificate(s) evidencing shares tendered in payment of
the option price must be duly endorsed or accompanied by appropriate stock
powers. Only stock certificates issued solely in your name may be tendered to
exercise your Option. Fractional shares may not be tendered in satisfaction of
the option price; any portion of the option price which is in excess of the
aggregate fair market value of the number of whole shares tendered must be paid
in cash. If a certificate tendered in exercise of the Option evidences more
shares than are required pursuant to the immediately preceding sentence for
satisfaction of the portion of the option price being paid in Common Stock, an
appropriate replacement certificate will be issued to you for the number of
excess shares.     (c)           Cashless Exercise. If the Company has in effect
a cashless option exercise program at the time of your exercise (and such
program is available to executive officers and directors if you are an executive
officer or director at the time of such exercise) and you elect to exercise your
Option under such program, you must comply with the procedures for satisfying
the option price under such program as in effect at the time of such exercise.
Please contact the Senior Vice President/Human Resources with inquiries about
the cashless option exercise program.

 

6.             Termination of Employment

 

  (a)           General. The following special rules apply to your Option in the
event of your death, disability, retirement, or other termination of employment.
 

  (i)            Termination of Employment for Cause. If the Company or a
subsidiary terminates your employment for Cause, your Option will terminate on
the date of such termination of employment. For purposes of this Agreement,
“Cause” means (A) your willful failure to perform the duties of your employment,
(B) your intentional engagement in dishonest conduct in connection with the
performance of services or (C) your conviction of a felony.    
(ii)           Voluntary Termination of Employment. If you voluntarily terminate
your employment with the Company or a subsidiary other than upon Retirement (as
defined below), your Option will terminate 60 days after such termination of
employment. Following the termination of your employment, no additional portions
of your Option will become exercisable, and your Option will

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  be exercisable only with respect to the number of shares which you were
entitled to purchase on the date of the termination of your employment.    
(iii)          Termination Without Cause. If the Company or a subsidiary
terminates your employment without Cause, your Option will terminate six months
after such termination of employment. Following the termination of your
employment, no additional portions of your Option will become exercisable, and
your Option will be exercisable only with respect to the number of shares which
you were entitled to purchase on the date of the termination of your employment.
    (iv)          Death or Disability. If your employment terminates by reason
of death or Disability, your Option will become fully exercisable upon such
termination of employment and will terminate two years following such
termination. For these purposes, “Disability” means that you have been unable to
perform the essential functions of your employment due to disability or
incapacity for 270 consecutive days or such lesser period as may be determined
by the Board (upon recommendation of the Committee).    
(v)           Retirement. Upon your Retirement from the Company, your Option
will become immediately exercisable in full. If you do not serve as a director
of the Company, you may exercise your Option for a period of two years following
your Retirement, but not beyond the term of the Option. If you continue to serve
as a director of the Company following your Retirement, your Option will
terminate two years after the termination of your service as a director, but not
beyond the term of the Option. For purposes of this provision, “Retirement”
means termination of your employment with the Company or its subsidiaries at a
time when you are eligible to retire under a retirement program of the Company
or one of its subsidiaries or as otherwise determined by the Board upon
recommendation of the Committee.     (vi)          Acceleration and Adjustments
of Exercise Period. If permitted by the OTS, the Board (upon recommendation of
the Committee) may, in its discretion, exercised before or after your
termination of employment, declare all or any portion of your Option immediately
exercisable and/or permit all or any part of your Option to remain exercisable
for such period designated by it after the time when the Option would have
otherwise terminated as provided in the applicable portion of this paragraph
6(a), but not beyond the expiration date of your Option as set forth in
paragraph 2 above.  

  (b)           Board Determinations. The Board shall have absolute discretion
to determine the date and circumstances of termination of your employment, and
its determination shall be final, conclusive and binding upon you.

 

7.             Change of Control

 

  (a)           In general, a Change of Control will be deemed to have occurred
if:  

  (i)            any person or group becomes the owner of (or obtains the right
to acquire) 25% of the voting securities of the Company or Flushing Savings
Bank, FSB (the “Bank”);     (ii)           there is a change in the composition
of a majority of the Board of Directors of the Company or the Bank, which change
was not approved by a majority of such Board of Directors as previously
constituted;     (iii)          any entity acquires all or substantially all of
the assets of the Bank or the Company; or     (iv)          the Company’s or the
Bank’s shareholders approve a merger or consolidation with another company where
such shareholders would not own 50% or more of the surviving corporation.

 

This description of a Change of Control is only a summary, and the definition
contained in the Plan is controlling.

 

  (b)           Notwithstanding the provisions of paragraph 3, upon the
occurrence of a Change of Control, if you are an employee or a director of the
Company or its subsidiaries at such time, your Option and Limited SAR will
become immediately exercisable in full. Notwithstanding the provisions of
paragraph 6, your Option will terminate no sooner than one year after any
termination of employment following a Change of Control.

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8.             Limited Stock Appreciation Right

                Your Limited SAR may be exercised only during the 90-day period
following a Change of Control and only if you are an employee or a director of
the Company or its subsidiaries at the time of the Change of Control. During
such 90-day period, you will be entitled to exercise the Limited SAR in whole or
in part and receive a cash payment from the Company within 30 days of such
exercise in settlement of such exercise. For each share subject to your Option
as to which the Limited SAR is exercised, such payment shall equal an amount by
which (a) the greater of (i) the highest market price per share of Common Stock
during the 90-day period before such exercise or (ii) the highest price per
share paid by an acquiring person during the 90-day period before the Change of
Control (or the cash equivalent of such price, as determined by the Board)
exceeds (b) the o ption price. The exercise, in whole or in part, of the Limited
SAR will reduce the number of shares remaining subject to the Option by the
number of shares with respect to which the Limited SAR is exercised, and vice
versa.

 

                 You may exercise your Limited SAR by written notice to the
Company of the date of grant of the Limited SAR and the number of shares with
respect to which the Limited SAR is being exercised. Such notice should be
telecopied, hand delivered or mailed to the Company, Attention: Senior Vice
President/Human Resources. A copy of the form of notice to be used in exercising
your Limited SAR is attached. Your Limited SAR will be deemed exercised on the
date telecopied, hand delivered, or postmarked.

  9.             Federal Income Tax Consequences  

  (a)           General. The following description of the federal income tax
consequences of your Option and Limited SAR is based on currently applicable
provisions of the Code and related regulations, and is intended to be only a
general summary. The summary does not discuss state and local tax laws, which
may differ from the federal tax law, or federal estate, gift and employment tax
law. For these reasons, you are urged to consult your own tax advisor regarding
the application of the tax laws to your particular situation.    
(b)           Option and Limited SAR Grant. The grant of the Option and Limited
SAR will not cause you to be subject to federal income tax.    
(c)           Option and Limited SAR Exercise. You will recognize ordinary
income for federal income tax purposes on the date you exercise your Option or
Limited SAR. The amount of income you will recognize upon exercise of the Option
is equal to the difference between the option price and the fair market value of
the shares on the date of exercise.         Upon exercise of the Limited SAR,
you will recognize income in an amount equal to the amount of cash you receive
in settlement of such exercise (including amounts applied to satisfy applicable
withholding tax liability).     (d)           Sale of Option Shares. Your tax
basis in the shares acquired upon exercise of your Option will be equal to the
fair market value of the shares on the exercise date.         You will recognize
capital gain or loss on your sale or exchange of the Option shares to the extent
of any difference between the amount realized and your tax basis in the shares.
.     (e)           Exercise Using Common Stock. If you deliver shares of Common
Stock you have owned for at least six months to exercise your Option, the shares
you deliver are valued at their fair market value on the date of exercise. The
delivery of such shares will not result in taxable gain to you, even if the
shares have appreciated in value from the time you acquired them. Instead, a
portion of the shares you receive upon exercise (equal in number to the number
of shares you deliver) will have the same tax basis as, and will be deemed to
have been acquired on the date of acquisition of, the shares you deliver. You
will recognize ordinary income equal to the fair market value of the shares you
receive in excess of the number you deliver (less any cash delivered upon
exercise). These additional shares will have a tax basis equal to their fair
market value on the exercise date, and will be deemed to have been acquired on
that date.     (f)            Company Deductions. As a general rule, the Company
or one of its subsidiaries will be entitled to a deduction for federal income
tax purposes at the same time and in the same amount that you recognize ordinary
income, to the extent that such income is considered reasonable compensation
under the Code. However, Section 162(m) of the Code limits to $1 million the
annual tax deduction that the Company and its subsidiaries can take with respect
to the compensation of each of certain executive officers unless the
compensation is performance based or certain other exceptions apply. Income
recognized with respect to the exercise of stock options and Limited SARs
granted under the Plan is expected to qualify as

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performance based. Furthermore, the Company will not be entitled to a deduction
with respect to payments that constitute “excess parachute payments” pursuant to
Section 280G of the Code and that do not qualify as reasonable compensation
pursuant to that section. Such payments will also subject the recipients to a
20% excise tax.
   
(g)           ERISA. The Plan is not qualified under Section 401(a) of the Code
and is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974.

 

10.          Income Tax Withholding

                 You must make arrangements satisfactory to the Company to
satisfy any applicable federal, state, or local withholding tax liability. If
you exercise your Option by payment of cash or Common Stock, you can satisfy
your withholding obligation either by making a cash payment to the Company of
the required amount or by having the Company retain from the Common Stock
otherwise deliverable to you upon exercise of your Option shares of Common Stock
having a value equal to the amount of your withholding obligation. If you
exercise your Option under the cashless option exercise program, if available,
any required withholding taxes will be retained by the Company from the proceeds
of the sale of your shares. The applicable taxes also will be withheld from the
cash payable to you in settlement of the exercise of the Limited SAR. If you
fail to satisfy your withholding obligation in a time and manner satisfactory to
the Company, the Company shall have the right to withhold the required amount
from your salary or other amounts payable to you.

                 Any election to have shares withheld must be made on or before
the date you exercise your Option. A copy of the withholding election form is
attached. The election form does not apply to exercises under the cashless
option exercise program.

                 The amount of withholding tax retained by the Company or paid
by you to the Company will be paid to the appropriate federal, state and local
tax authorities in satisfaction of the withholding obligations under the tax
laws. The total amount of income you recognize by reason of exercise of the
Option or Limited SAR will be reported on your Form W-2 in the year in which you
recognize income with respect to the exercise. Whether you owe additional tax
will depend on your overall taxable income for the applicable year and the total
tax remitted for that year through withholding or by estimated payments.

11.          Administration of the Plan

                 The Plan is administered by the Board of Directors of the
Company. The Board has authority to interpret the Plan, to adopt rules for
administering the Plan, to decide all questions of fact arising under the Plan,
and generally to make all other determinations necessary or advisable for
administration of the Plan. Grants of awards under the Plan will be made by the
Board only upon recommendation of the Compensation Committee of the Board. The
Board can reduce, but cannot increase, an award from the level recommended by
the Committee. Members of the Committee, which consists of at least two
directors, are appointed annually by the Board and may be removed by the Board.
All decisions and acts of the Board are final and binding on all affected Plan
participants.

12.          Non-transferability of Option and limited Stock Appreciation Right

                 The Option and Limited SAR granted to you by this letter may be
exercised only by you, and may not be assigned, pledged, or otherwise
transferred by you, with the exception that in the event of your death the
Option and Limited SAR may be exercised (at any time prior to its expiration or
termination as provided in paragraph 2 and 6) by the executor or administrator
of your estate or by a person who acquired the right to exercise your Option and
Limited SAR by bequest or inheritance or by reason of your death.

13.          Adjustment In Certain Events

                 In the event of specified changes in the Company’s capital
structure, the Board is required to make appropriate adjustment in the number
and kind of shares authorized by the Plan, and the number, option price and kind
of shares covered by outstanding awards. This letter will continue to apply to
your award as so adjusted.

14.          Amendment

                 The Board (upon recommendation of the Committee) may from time
to time amend the terms of this grant in accordance with the terms of the Plan
in effect at the time of such amendment, but no amendment which is unfavorable
to you can be made without your written consent (except for (i) amendments or
updates to this letter that describe changes in the law that apply to your
Option, and (ii) any changes that may be required by the OTS). The Plan and your
Option are expressly subject to any terms and conditions that may be required by
the OTS.

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                 The Plan is of unlimited duration, but may be amended,
terminated or discontinued by the Board of Directors at any time. However, no
amendment, termination or discontinuance of the Plan (other than an amendment or
termination that may be required by the OTS) will unfavorably affect any options
previously granted to you.

15.          Section 16(b) Considerations

                 If you are deemed to be an officer of the Company for purposes
of Section 16(b) (“Section 16(b)”) of the Securities Exchange Act of 1934 (the
“Exchange Act”), you will be required to return to the Company any “profit” you
realize from the “purchase” and “sale”, or “sale” and “purchase”, of Common
Stock within any six month period. Under current law the grant of an option and
the receipt of shares upon exercise of an option under the Plan are not
“purchases” for purposes of Section 16(b).

                 If you exercise your Option using previously acquired Common
Stock, the delivery of shares in satisfaction of the option price will not be
deemed to be a “sale A sale of shares on the open market after exercise or
pursuant to a broker-assisted cashless option exercise program will be a “sale”
under Section 16(b). However, a sale of shares to the Company which has been
authorized in advance by the Board of Directors will not be a “sale”.

                 The receipt of cash upon exercise of a Limited SAR will not be
a “sale”.

                 The withholding of shares to satisfy your tax liability in
connection with an option exercise (as described in paragraph 10) will not be a
“sale”.

                 Reporting requirements apply with respect to the above
transactions. In most cases, such reports must be received by the Securities and
Exchange Commission (the “SEC”) by the second business day after the date of the
transaction. Beginning June 30, 2003, all such reports must be filed
electronically. If you are subject to Section 16(b), you should consult the
Company’s Senior Vice President/Human Resources with respect to these
provisions.

16.          Restrictions on Resale

                 There are no restrictions imposed by the Plan on the resale of
Common Stock acquired under the Plan. However, the Company’s insider trading
policy imposes certain restrictions on transactions in securities of the
Company. In addition, under the provisions of the Securities Act of 1933 (the
“Securities Act”) and the rules and regulations of the SEC, resales of stock
acquired under the Plan by certain officers and directors of the Company who may
be deemed to be “affiliates” of the Company must be made pursuant to an
appropriate effective registration statement filed with the SEC, pursuant to the
provisions of Rule 144 issued under the Securities Act, or pursuant to another
exemption from registration provided in the Securities Act. At the present time,
the Company does not have a currently effective registration statement pursuant
to which such resales may be made by affiliates. There are no restrictions
imposed by the SEC on the resale of stock acquired under the Plan by persons who
are not affiliates of the Company.

17.          Effect on Other Benefits

                 Income recognized by you as a result of exercise of the Option
or the Limited SAR will not be included in the formula for calculating benefits
under the Company’s other benefit plans.

18.          Stockholder Rights Plan

                 On September 17, 1996, the Company adopted a Stockholder Rights
Plan pursuant to which it declared a dividend of one Right (a “Right”) for each
outstanding share of Common Stock. The Rights Plan provides that the Company
will issue one Right together with each share of Common Stock issued by it in
the future. Each Right entitles the holder to purchase from the Company a
fraction of a share of the Company’s Series A Junior Participating Preferred
Stock.

                 The Rights are not exercisable at the present time. At the
present time the Rights are represented by certificates for the Common Stock and
can only be transferred together with the Common Stock. However, if certain
events occur, the rights will become exercisable and at that time will be able
to be transferred separately from the Common Stock.

                 If you exercise your Option, you will receive one Right with
respect to each share of Common Stock purchased. The exercise price of your
Option is not affected by the Rights. You cannot exercise your Option with
respect to the shares of Common Stock without the Rights, and vice versa. If the
Rights become exercisable, you will receive more detailed information about how
they affect your awards under the Plan.

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19.          Regulatory Compliance

                 Under the Plan, the Company is not required to deliver Common
Stock upon exercise of your Option if such delivery would violate any applicable
law or regulation. If required by any federal or state securities law or
regulation, the Company may impose restrictions on your ability to transfer
shares received under the Plan.

20.          Company and Plan Documents

                 You may obtain a copy of the Company’s most recent Annual
Report to Stockholders and all other communications distributed by the Company
to its shareholders, without charge, by written or oral request to the Senior
Vice President/Human Resources, Flushing Financial Corporation, 1979 Marcus
Avenue, Suite E140, Lake Success, New York 11042 (telephone (718) 961-5400).

                 The following documents filed by the Company with the SEC under
the Exchange Act are incorporated herein by reference:

 

 
(1)           The Company’s most recent Annual Report on Form 10-K;
   
(2)           All other reports filed by the Company under Section 13(a) or
15(d) of the Exchange Act after the end of the period covered by its most recent
Annual Report on Form 10-K; and
   
(3)           The description of the Common Stock and the Rights contained in
the registration statements therefor under Section 12 of the Exchange Act,
including any amendments filed for the purpose of updating such descriptions.

 

                 All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this letter and prior
to the filing of a post-effective amendment which indicates that all securities
offered under the Plan have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such documents.

                 You may obtain a copy of any or all of the documents referred
to above, as well as any documents constituting part of a prospectus covering
shares offered to you under the Plan, without charge, by written or oral request
to the Senior Vice President/Human Resources, Flushing Financial Corporation,
1979 Marcus Avenue, Suite E140, Lake Success, New York 11042 (telephone (718)
961-5400).

21.          Experts

                 The consolidated financial statements of the Company appearing
in the Company’s Annual Report on Form 10-K for the year ended DATE have been
audited by NAME OF AUDITING FRIM, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of a firm of independent accountants, pertaining to such financial
statements (to the extent covered by consents filed with the SEC) given upon the
authority of such firm as experts in accounting and auditing.

*             *             *             *             *

                 If you have any questions regarding your Option or would like
to obtain additional information about the Plan or its administration, please
contact the Company’s Senior Vice President/Human Resources, Flushing Financial
Corporation, 1979 Marcus Avenue, Suite E140, Lake Success, New York 11042
(telephone (718) 961-5400). This letter contains the formal terms and conditions
of your award and accordingly should be retained in your files for future
reference.

 

  Very truly yours, Anna M. Piacentini Senior Vice President and Corporate
Secretary

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