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                                                                   Exhibit 10.42

                       Amendment to the Dime Bancorp, Inc.
                1997 Stock Incentive Plan for Outside Directors

                          Effective September 19, 1997


      1. The second textual sentence of Section 8(c) of the Plan is amended to
read as follows:

      "Notwithstanding the foregoing, each Non-Qualified Option shall become one
      hundred percent (100%) exercisable (A) in the event the Optionee
      terminates his or her status as an Outside Director by reason of (i)
      termination of service as an Outside Director upon or after the later of
      (1) the attainment of age sixty-five (65) or (2) the rendering of service
      as an Outside Director for at least five (5) full years (including, for
      this purpose, service rendered as an Outside Director prior to the
      Effective Date of the Plan, and service rendered as a member of the Board
      of Directors of Anchor Bancorp, Inc. or any of its subsidiaries, provided
      such member was not an employee of Anchor Bancorp, Inc. or any of its
      subsidiaries during such service period (herein, an "Anchor Outside
      Director"), (ii) death, or (iii) disability, or (B) upon the occurrence of
      (w) a Terminating Event (as defined in Section 13(a)), (x) a Change in
      Control (as defined in Section 13(b)), (y) the dissemination of a proxy
      statement soliciting proxies from stockholders of the Company, by someone
      other than the Company, seeking stockholder approval of a Terminating
      Event of the type described in clause (i) of Section 13(a), or (z) the
      publication or dissemination of an announcement of action intended to
      result in a Terminating Event of the type described in clause (ii) or
      (iii) of Section 13(a), provided the Optionee is in service as an Outside
      Director at the time of the occurrence of such event."

      2. The first, second and third textual sentences of Section 8(f) of the
Plan are amended to read as follows:

      "Except as provided below, if an Optionee's status as an Outside Director
      is terminated for any reason other than (i) termination of service as an
      Outside Director upon or after the later of (A) the attainment of age
      sixty-five (65) or (B) the rendering of service as an Outside Director for
      at least five (5) full years (including, for this purpose, service as an
      Anchor Non-Employee Director), (ii) death, (iii) disability, (iv) for
      cause, or (v) in connection with the occurrence of a Terminating Event (as
      defined in Section 13(a)) or a Change in Control (as defined in Section
      13(b)), the Non-Qualified Options that had been granted to such Optionee
      may be exercised only within twelve (12) months after such termination of
      his or her status as an Outside Director, but only to the extent the
      Non-Qualified Options were exercisable on the date of his or her
      termination, and in no event may such options be exercisable following the
      end of the applicable option term. Except as provided below, if an
      Optionee's status as an Outside Director is terminated by reason
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      of (i) termination of service as an Outside Director upon or after the
      later of (A) the attainment of age sixty-five (65) or (B) the rendering of
      service as an Outside Director for at least five (5) full years
      (including, for this purpose, service rendered as an Outside Director
      prior to the Effective Date of the Plan, and service rendered as Anchor
      Outside Director), (ii) death, or (iii) disability, the Non-Qualified
      Options that had been granted to such Optionee may be exercised only
      within thirty-six (36) months after such termination of his or her status
      as an Outside Director, but in no event may such options be exercisable
      following the end of the applicable option term. Notwithstanding the
      foregoing, if an Optionee's status as an Outside Director is terminated at
      any time within the two (2) - year period immediately following the
      occurrence of a Terminating Event (as defined in Section 13(a)) or a
      Change in Control (as defined in Section 13(b)) that occurred while the
      Optionee was an Outside Director, the vested Non-Qualified Options that
      had been granted to such Optionee may be exercised at any time during the
      remainder of the applicable option term."

      3. The third and fourth textual sentences of Section 9(c) of the Plan are
amended to read as follows:

      "Notwithstanding the foregoing, the restrictions applicable to shares of
      Restricted Stock purchased shall immediately lapse upon the earlier of (A)
      the holder's (i) death, (ii) disability, or (iii) termination of service
      as an Outside Director upon or after the later of (1) the attainment of
      age sixty-five (65) or (2) the rendering of service as an Outside Director
      for at least five (5) full years (including, for this purpose, service
      rendered as an Outside Director prior to the Effective Date of the Plan,
      and service rendered as an Anchor Outside Director), or (B) the occurrence
      of (w) a Terminating Event (as defined in Section 13(a)), (x) a Change in
      Control (as defined in Section 13(b)), (y) the dissemination of a proxy
      statement soliciting proxies from stockholders of the Company, by someone
      other than the Company, seeking stockholder approval of a Terminating
      Event of the type described in clause (i) of Section 13(a), (z) the
      publication or dissemination of an announcement of action intended to
      result in a Terminating Event of the type described in clause (ii) or
      (iii) of Section 13(a), provided the holder is in service as an Outside
      Director at the time of the occurrence of such event. In addition, if any
      of the events described in clause (B) of the preceding sentence occur
      while an Outside Director holds rights to purchase Restricted Stock, then,
      upon the exercise of such rights and the purchase of shares of Restricted
      Stock, the restrictions applicable to such shares shall immediately
      lapse."

      4. Section 13(b) of the Plan is amended to read as follows:

                  "(b) As used in this Plan, a "Change in Control" shall mean
      the occurrence of any of the following events: (i) any Person is or
      becomes the Beneficial Owner, directly or indirectly, of securities of the
      Company (not including in the securities beneficially owned by such Person
      any securities acquired directly from the Company or its Affiliates)


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      representing 35% or more of the combined voting power of the Company's
      then outstanding securities; (ii) the following individuals cease for any
      reason to constitute a majority of the number of directors then serving as
      directors of the Company: individuals who, on July 24, 1997, constitute
      the Board of Directors of the Company and any new director (other than a
      director whose initial assumption of office is in connection with the
      settlement of an actual or threatened election contest, including but not
      limited to a consent solicitation, relating to the election of directors
      of the Company) whose appointment or election by the Board of Directors of
      the Company or nomination for election by the Company's stockholders was
      approved or recommended by a vote of at least two-thirds (2/3) of the
      directors then still in office who either were directors on July 24, 1997
      or whose appointment, election or nomination for election was previously
      so approved or recommended; (iii) there is consummated a merger or
      consolidation of the Company or any direct or indirect subsidiary of the
      Company with any other corporation or entity, other than (A) a merger or
      consolidation which would result in the voting securities of the Company
      outstanding immediately prior to such merger or consolidation continuing
      to represent (either by remaining outstanding or by being converted into
      voting securities of the surviving entity or any Parent thereof), in
      combination with the ownership of any trustee or other fiduciary holding
      securities under an employee benefit plan of the Company or any subsidiary
      of the Company, at least 65% of the combined voting power of the
      securities of the Company, such surviving entity or any Parent thereof
      outstanding immediately after such merger or consolidation or (B) a merger
      or consolidation effected solely to implement a recapitalization of the
      Company or The Dime Savings Bank of New York, FSB (the "Bank") (or similar
      transaction) in which no Person is or becomes the Beneficial Owner,
      directly or indirectly, of securities of the Company or the Bank (not
      including in the securities beneficially owned by such Person any
      securities acquired directly from the Company or its Affiliates)
      representing 35% or more of the combined voting power of the Company's or
      the Bank's then outstanding securities; or (iv) the stockholders of the
      Company or the Bank approve a plan of complete liquidation or dissolution
      of the Company or the Bank, respectively, or there is consummated a sale
      or disposition by the Company or any of its subsidiaries of any assets
      which individually or as part of a series of related transactions
      constitute all or substantially all of the Company's consolidated assets
      (provided that, for these purposes, a sale of all or substantially all of
      the voting securities of the Bank or a Parent of the Bank shall be deemed
      to constitute a sale of substantially all of the Company's consolidated
      assets), other than any such sale or disposition to an entity at least 65%
      of the combined voting power of the voting securities of which are owned
      by stockholders of the Company in substantially the same proportions as
      their ownership of the voting securities of the Company immediately prior
      to such sale or disposition."

      5. Section 13 of the Plan is amended to add a new subsection (c) after
subsection (b) therein to read as follows:


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            "(c) As used in connection with the definition of Change in Control
      (as set forth in subsection (b) of this Section 13), "Affiliate" shall
      have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
      the Act; "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
      under the Act; "Parent" shall mean any entity that becomes the Beneficial
      Owner of at least 80% of the voting power of the outstanding voting
      securities of the Company or of an entity that survives any merger or
      consolidation of the Company or any direct or indirect subsidiary of the
      Company; and "Person" shall have the meaning given in Section 3(a)(9) of
      the Act, as modified and used in Sections 13(d) and 14(d) thereof, except
      that such term shall not include (i) the Company or any of its
      subsidiaries, (ii) a trustee or other fiduciary holding securities under
      an employee benefit plan of the Company or any of its Affiliates, (iii) an
      underwriter temporarily holding securities pursuant to an offering of such
      securities, or (iv) a corporation or entity owned, directly or indirectly,
      by the stockholders of the Company in substantially the same proportions
      as their ownership of stock of the Company."


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