exhibit10-4.htm


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

     

    This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into
as of___________, 2008, by and between Dime Community Bancshares, Inc., a
savings and loan holding company organized and operating under the laws of the
State of Delaware and having an office at 209 Havemeyer Street, Brooklyn, New
York 11211 (“Company”) and Vincent F. Palagiano ("Mr. Palagiano").

     

    W I T N E
S S E T H :

     

    WHEREAS,
Mr. Palagiano and the Company are parties to an Employment Agreement made and
entered into as of June 26, 1996 (the “Initial Effective Date”) pursuant to
which Mr. Palagiano serves the Company in the capacity of Chairman of the Board
and Chief Executive Officer of the Company and its wholly owned subsidiary, The
Dime Savings Bank of Williamsburgh ( “Bank “); and

     

    WHEREAS,
such Agreement was amended as of January 1, 2003 (the “Prior Agreement”);
and

     

    WHEREAS,
the parties desire to amend and restate the Prior Agreement for the purpose,
among others, of compliance with the applicable requirements of Section 409A of
the Internal  Revenue Code of 1986 (“the Code”); and

     

    WHEREAS,
the Company desires to assure for itself the continued availability of Mr.
Palagiano’s services and the ability of Mr. Palagiano to perform such services
with a minimum of personal distraction in the event of a pending or threatened
Change in Control (as hereinafter defined); and

     

    WHEREAS,
Mr. Palagiano is willing to continue to serve the Company on the terms and
conditions hereinafter set forth;

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
obligations hereinafter set forth, the Company and Mr. Palagiano hereby agree as
follows:

     

    1.           Representations
and Warranties of the Parties.

     

    (a)           The
Company hereby represents and warrants to Mr. Palagiano that:

     

    (i)           it
has all requisite power and authority to execute, enter into and deliver this
Agreement and to perform each and every one of its obligations hereunder;
and

     

    (ii)           the
execution, delivery and performance of this Agreement have been duly authorized
by all requisite corporate action on the part of the Company; and

     

    (iii)           neither
the execution or delivery of this Agreement, nor the performance of or
compliance with any of the terms and conditions hereof, is prevented or in any
way limited by (A) any agreement or instrument to which the Company is a party
or by which it is bound, or (B) any provision of law, including, without
limitation, any statute, rule or regulation or any order of any court or
administrative agency, applicable to the Company or its business.

     

    (b)           Mr.
Palagiano hereby represents and warrants to the Company that:

     

    (i)           he
has all requisite power and authority to execute, enter into and deliver this
Agreement and to perform each and every one of his obligations hereunder;
and

     

    (ii)           neither
the execution or delivery of this Agreement, nor the performance of or
compliance with any of the terms and conditions hereof, is prevented or in any
way limited by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) any provision of law, including, without limitation,
any statute, rule or regulation or any order of any court or administrative
agency, applicable to him.

     

    2.           Employment.

     

    The
Company hereby continues the employment of Mr. Palagiano, and Mr. Palagiano
hereby accepts such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.

     

    3.           Employment
Period.

     

    (a)           The
terms and conditions of this Agreement shall be and remain in effect during the
period of employment established under this section 3 (“Employment
Period”).  The Employment Period shall be for an initial term of three
years beginning on the Initial Effective Date and ending on the third
anniversary date of the Initial Effective Date, plus such extensions, if any, as
are provided pursuant to section 3(b).

     

    (b)           Except
as provided in section 3(c), beginning on the Initial Effective Date, the
Employment Period shall automatically be extended for one (1) additional day
each day, unless either the Company or Mr. Palagiano elects not to extend the
Agreement further by giving written notice to the other party, in which case the
Employment Period shall end on the third anniversary of the date on which such
written notice is given.  Upon termination of Mr. Palagiano’s
employment with the Company for any reason whatsoever, any daily extensions
provided pursuant to this section 3(b), if not therefore discontinued, shall
automatically cease.

     

    (c)           If,
prior to the date on which the Employment Period would end pursuant to section
3(a) or (b) of this Agreement, a Change in Control (as defined in section 13 of
this Agreement) occurs, then the Employment Period shall be extended through and
including the second anniversary of the earliest date after the effective date
of such Change in Control on which either the Company or Mr. Palagiano elects,
by written notice pursuant to section 3(d) of this Agreement to the non-electing
party, to discontinue the Employment Period; provided, however, that this
section shall not apply in the event that, prior to the Change in Control (as
defined in section 13 of this Agreement), Mr. Palagiano has provided written
notice to the Company of his intent to discontinue the Employment
Period.

     

    (d)           The
Company or Mr. Palagiano may, at any time by written notice given to the other,
elect to discontinue the daily extension of the Employment
Period.  Any such notice given by the Company shall be accompanied by
a certified copy of a resolution, adopted by the affirmative vote of a majority
of the entire membership of the Board at a meeting of the Board duly called and
held, authorizing the giving of such notice.

     

    (e)           Notwithstanding
anything herein contained to the contrary:  (i) Mr. Palagiano’s
employment with the Company may be terminated during the Employment Period, in
accordance with the terms and conditions of this Agreement; and (ii) nothing in
this Agreement shall mandate or prohibit a continuation of Mr. Palagiano’s
employment following the expiration of the Employment Period upon such terms and
conditions as the Company and Mr. Palagiano may mutually agree
upon.

     

    (f)           For
all purposes of this Agreement, any reference to the “Remaining Unexpired
Employment Period” as of any specified date shall mean (i) prior to the
occurrence of a Change in Control (as hereinafter defined) the period commencing
on the date specified and ending on the later of the third anniversary of the
Initial Effective Date, the third anniversary of any earlier date on which
either the Company or Mr. Palagiano has elected to discontinue the daily
extensions of the Employment Period, or the third anniversary of Mr. Palagiano’s
termination of employment for any reason; and (ii) following a Change in Control
(as hereinafter defined) a period commencing on the date specified and ending on
the later of the second anniversary of the effective date of the Change in
Control, the second anniversary of any earlier date following the occurrence of
the Change in Control on which either Mr. Palagiano or the Company has elected
to discontinue the daily extensions of the Employment Period, or the second
anniversary of Mr. Palagiano’s termination of employment for any reason
whatsoever.

     

    4.           Duties.

     

    During
the Employment Period, Mr. Palagiano shall:

     

    (a)           except
to the extent allowed under section 7 of this Agreement, devote his full
business time and attention to the business and affairs of the Company and use
his best efforts to advance the Company’s interests;

     

    (b)           serve
as Chairman of the Board and Chief Executive Officer if duly appointed and/or
elected to serve in such position; and

     

    (c)           have
such functions, duties and responsibilities not inconsistent with his title and
office as may be assigned to him by or under the authority of the Board of
Directors of the Company (“Board”), in accordance with organization Certificate,
By-laws, Applicable Laws, Statutes and Regulations, custom and practice of the
Company as in effect on the date first above written. Mr. Palagiano shall have
such authority as is necessary or appropriate to carry out his assigned duties.
Mr. Palagiano shall report to and be subject to direction and supervision by the
Board.

     

    (d)           none
of the functions, duties and responsibilities to be performed by Mr. Palagiano
pursuant to this Agreement shall be deemed to include those functions, duties
and responsibilities performed by Mr. Palagiano in his capacity as director of
the Company.

     

    5.           Compensation
-- Salary and Bonus.

    In
consideration for services rendered by Mr. Palagiano under this Agreement, the
Company shall pay to Mr. Palagiano a salary at an annual rate equal
to:

     

    (a)           during
the period beginning on January 1, 2009 and ending on December 31, 2009, no less
than $________;

     

    (b)           during
each calendar year that begins after December 31, 2009, such amount as the Board
may, in its discretion, determine, but in no event less than the rate in effect
on December 31, 2009; or

     

    (c)           for
each calendar year that begins on or after a Change in Control, the product of
Mr. Palagiano’s annual rate of salary in effect immediately prior to such
calendar year, multiplied by the greatest of:

     

    (i)           1.06;

     

    (ii)           the
quotient of (A) the U.S. City Average All Items Consumer Price Index for All
Urban Consumers (or, if such index shall cease to be published, such other
measure of general consumer price levels as the Board may, in good faith,
prescribe) for October of the immediately preceding calendar year, divided by
(B) the U.S. City Average All Items Consumer Price Index for All Urban Consumers
(or, if such index shall cease to be published, such other measure of general
consumer price levels as the Board may, in good faith, prescribe) for October of
the second preceding calendar year; and

     

    (iii)           the
quotient of (A) the average annual rate of salary, determined as of the first
day of such calendar year, of the officers of the Company (other than Mr.
Palagiano) who are assistant vice presidents or more senior officers, divided by
(B) the average annual rate of salary, determined as of the first day of the
immediately preceding calendar year, of the officers of the Company (other than
Mr. Palagiano) who are assistant vice presidents or more senior
officers;

     

    The
salary payable under this section 5 shall be paid in approximately equal
installments in accordance with the Company’s customary payroll
practices.  Nothing in this section 5 shall be construed as
prohibiting the payment to Mr. Palagiano of a salary in excess of that
prescribed under this section 5 or of additional cash or non-cash compensation
in a form other than salary, to the extent that such payment is duly authorized
by or under the authority of the Board. No portion of the compensation paid to
Mr. Palagiano pursuant to this Agreement shall be deemed to be compensation
received by Mr. Palagiano in his capacity as director of the
Company.

     

    6.           Employee
Benefit Plans and Programs; Other Compensation.

     

    Except as
otherwise provided in this Agreement, Mr. Palagiano shall be treated as an
employee of the Company and be entitled to participate in and receive benefits
under the Company’s Retirement Plan, Incentive Savings Plan, group life and
health (including medical and major medical) and disability insurance plans, and
such other employee benefit plans and programs, including but not limited to any
long-term or short-term incentive compensation plans or programs (whether or not
employee benefit plans or programs), as the Company may maintain from time to
time, in accordance with the terms and conditions of such employee benefit plans
and programs and compensation plans and programs and with the Company’s
customary practices.  Following a Change in Control, all such benefits
to Mr. Palagiano shall be continued on terms and conditions substantially
identical to, and in no event less favorable than, those in effect prior to the
Change in Control.

     

    7.           Board
Memberships and Personal Activities.

     

    (a)           Mr.
Palagiano may serve as a member of the board of directors of such business,
community and charitable organizations as he may disclose to the Board from time
to time, and he may engage in personal business and investment activities for
his own account; provided, however, that such service and personal business and
investment activities shall not materially interfere with the performance of his
duties under this Agreement.

     

    (b)           Mr.
Palagiano may also serve as an officer or director of the Bank on such terms and
conditions as the Company and the Bank may mutually agree upon, and such service
shall not be deemed to materially interfere with Mr. Palagiano’s performance of
his duties hereunder or otherwise result in a material breach of this
Agreement.  If Mr. Palagiano is discharged or suspended, or is subject
to any regulatory prohibition or restriction with respect to participation in
the affairs of the Bank, he shall (subject to the Company’s powers of
termination hereunder) continue to perform services for the Company in
accordance with this Agreement but shall not directly or indirectly provide
services to or participate in the affairs of the Bank in a manner inconsistent
with the terms of such discharge or suspension or any applicable regulatory
order.

     

    8.           Working
Facilities and Expenses.

     

    Mr.
Palagiano’s principal place of employment shall be at the Company’s executive
offices at the address first above written, or at such other location in the New
York metropolitan area as determined by the Board.  The Company shall
provide Mr. Palagiano, at his principal place of employment, with a private
office, stenographic services and other support services and facilities suitable
to his position with the Company and necessary or appropriate in connection with
the performance of his assigned duties under this Agreement.  The
Company shall provide Mr. Palagiano with an automobile suitable to his position
with the Company in accordance with its prior practices, and such automobile
shall be used by Mr. Palagiano in carrying out his duties under this Agreement,
including commuting between his residence and his principal place of
employment.  The Company shall (i) reimburse Mr. Palagiano for the
cost of maintenance and servicing such automobile and, for instance, gasoline
and oil for such automobile; (ii) reimburse Mr. Palagiano for his ordinary and
necessary business expenses, incurred in the performance of his duties under
this Agreement (including but not limited to travel and entertainment expenses);
and (iii) reimburse Mr. Palagiano for fees for memberships in such clubs and
organizations as Mr. Palagiano and the Company and such other expenses as Mr.
Palagiano and the Company shall mutually agree are necessary and appropriate for
business purposes, upon presentation to the Company of an itemized account of
such expenses in such form as the Company may reasonably require, each such
reimbursement payment to be made promptly following receipt of the itemized
account and in any event not later than the last day of the year following the
year in which the expense was incurred.  Mr. Palagiano shall be
entitled to no less than four (4) weeks of paid vacation during each year in the
Employment Period.  Mr. Palagiano shall be responsible for the payment
of any taxes on account of his personal use of the automobile provided by the
Company and on account of any other benefit provided herein.

     

    9.           Termination
Giving Rise to Severance Benefits.

    (a)           In
the event that Mr. Palagiano’s employment with the Company shall terminate
during the Employment Period other than on account of:

     

    (i)           a
Termination for Cause (within the meaning of section 12(a) of this
Agreement);

     

    (ii)           a
voluntary resignation by Mr. Palagiano other than a Resignation for Good Reason
(within the meaning of section 12(b) of this Agreement);

     

    (iii)           a
termination on account of Mr. Palagiano’s death; or

     

    (iv)           a
termination after both of the following conditions exist: (A) Mr. Palagiano has
been absent from the full-time service of the Company on account of his
Disability (as defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Palagiano shall have failed to return to work in
the full-time service of the Company within thirty (30) days after written
notice requesting such return is given to Mr. Palagiano by the
Company;

     

    then the
Company shall provide to Mr. Palagiano the benefits and pay to Mr. Palagiano the
amounts provided under section 9(b) of this Agreement.

     

    (b)           In
the event that Mr. Palagiano’s employment with the Company shall terminate under
circumstances described in section 9(a) of this Agreement, the following
benefits and amounts shall be paid or provided to Mr. Palagiano (or, in the
event of his death, to his estate), in accordance with section 30, on his
termination of employment:

     

    (i)           his
earned but unpaid salary as of the date of the termination of his employment
with the Company, payable when due but in no event later than thirty (30) days
following his termination of employment with the Company;

     

    (ii)           (A)
the benefits, if any, to which Mr. Palagiano and his family and dependents are
entitled as a former employee, or family or dependents of a former employee,
under the employee benefit plans and programs and compensation plans and
programs maintained for the benefit of the Company’s officers and employees, in
accordance with the terms of such plans and programs in effect on the date of
his termination of employment, or if his termination of employment occurs after
a Change in Control, on the date of his termination of employment or on the date
of such Change in Control, whichever results in more favorable benefits as
determined by Mr. Palagiano, where credit is given for three additional years of
service and age in determining eligibility and benefits for any plan and program
where age and service are relevant factors, and (B) payment for all unused
vacation days and floating holidays in the year in which his employment is
terminated, at his highest annual rate of salary for such year;

     

    (iii)           continued
group life, health (including hospitalization, medical and major medical,
dental, accident and long-term disability insurance benefits), in addition to
that provided pursuant to section 9(b)(ii) of this Agreement and after taking
into account the coverage provided by any subsequent employer, if and to the
extent necessary to provide Mr. Palagiano and his family and dependents for a
period of three years following termination of employment, coverage identical to
and in any event no less favorable than the coverage to which they would have
been entitled under such plans (as in effect on the date of his termination of
employment, or, if his termination of employment occurs after a Change in
Control, on the date of his termination of employment or during the one-year
period ending on the date of such Change in Control, whichever results in more
favorable benefits as determined by Mr. Palagiano) if he had continued working
for the Company during the Remaining Unexpired Employment Period at the highest
annual rate of compensation (assuming, if a Change in Control has occurred, that
the annual increases under section 5(c) would apply) under the
Agreement;

     

    (iv)           a
lump sum payment in an amount equal to the present value of the salary and the
bonus that Mr. Palagiano would have earned if he had worked for the Company
during the Remaining Unexpired Employment Period at the highest annual rate of
salary (assuming, if a Change in Control has occurred, that the annual increases
under section 5(c) would apply) and the highest bonus as a percentage of the
rate of salary provided for under this Agreement, where such present value is to
be determined using a discount rate of six percent (6%) per annum, compounded,
in the case of salary, with the frequency corresponding to the Company’s regular
payroll periods with respect to its officers, and, in the case of bonus,
annually;

     

    (v)           a
lump sum payment in an amount equal to the excess, if any, of: (A) the present
value of the benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Company (including any
“excess benefit plan” within the meaning of section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), or other special
or supplemental plan) as in effect on the date of his termination, if he had
worked for the Company during the Remaining Unexpired Employment Period at the
highest annual rate of compensation (assuming, if a Change in Control has
occurred, that the annual increases under section 5(c) would apply) under the
Agreement and been fully vested in such plan or plans and had continued working
for the Company during the Remaining Unexpired Employment Period, such benefits
to be determined as of the date of termination of employment by adding to the
service actually recognized under such plans an additional period equal to the
Remaining Unexpired Employment Period and by adding to the compensation
recognized under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and (vii), over (B) the
present value of the benefits to which he is actually entitled under any such
plans maintained by, or covering employees of, the Company as of the date of his
termination where  such present values are to be determined using a
discount rate of six percent (6%) per annum, compounded monthly, and the
mortality tables prescribed under section 72 of the Internal Revenue Code of
1986 (“Code”); provided, however, that if payments are made under this section
9(b)(v) as a result of this section deeming otherwise unvested amounts under
such defined benefit plans to be vested, the payments, if any, attributable to
such deemed vesting shall be paid in the same form, and paid at the same time,
and in the same manner, as benefits under the corresponding non-qualified
plan;

     

    (vi)           a
lump sum payment in an amount equal to the excess, if any, of (A) the present
value of the benefits attributable to the Company’s contribution to which he
would be entitled under any defined contribution plans maintained by, or
covering employees of, the Company (including any “excess benefit plan” within
the meaning of section 3(36) of ERISA, or other special or supplemental plan) as
in effect on the date of his termination, if he had worked for the Company
during the Remaining Unexpired Employment Period at the highest annual rate of
compensation (assuming, if a Change in Control has occurred, that the annual
increases under section 5(c) would apply) under the Agreement, and made the
maximum amount of employee contributions, if any, required or permitted under
such plan or plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining Unexpired Employment
Period which is prior to Mr. Palagiano’s termination of employment with the
Company, and been fully vested in such plan or plans, over (B) the present value
of the benefits attributable to the Company’s contributions to which he is
actually entitled under such plans as of the date of his termination of
employment with the Company, where such present values are to be determined
using a discount rate of six percent (6%) per annum, compounded with the
frequency corresponding to the Company’s regular payroll periods with respect to
its officers; provided, however, that if payments are made under this section
9(b)(vi) as a result of this section deeming otherwise unvested amounts under
such defined contribution plans to be vested, the payments, if any, attributable
to such deemed vesting shall be paid in the same form, and paid at the same
time, and in the same manner, as benefits under the corresponding non-qualified
plan;

     

    (vii)           the
payments that would have been made to Mr. Palagiano under any incentive
compensation plan maintained by, or covering employees of, the Company (other
than bonus payments to which section 9(b)(iv) of this Agreement is applicable)
if he had continued working for the Company during the Remaining Unexpired
Employment Period and had earned an incentive award in each calendar year that
ends during the Remaining Unexpired Employment Period in an amount equal to the
product of (A) the maximum percentage rate of compensation at which an award was
ever available to Mr. Palagiano under such incentive compensation plan,
multiplied by (B) the compensation that would have been paid to Mr. Palagiano
during each calendar year at the highest annual rate of compensation (assuming,
if a Change in Control has occurred, that the annual increases under section
5(c) would apply) under the Agreement, such payments to be made at the same time
and in the same manner as payments are made to other officers of the Company
pursuant to the terms of such incentive compensation plan; provided, however,
that payments under this section 9(b)(vii) shall not be made to Mr. Palagiano
for any year on account of which no payments are made to any of the Company’s
officers under any such incentive compensation plan; and

     

    (viii)                      the
benefits to which Mr. Palagiano is entitled under the Company’s Supplemental
Executive Retirement Plan (or other excess benefits plan with the meaning of
section 3(36) of ERISA or other special or supplemental plan) shall be paid to
him in a lump sum, where such lump sum is computed using the mortality tables
under the Company’s tax-qualified pension plan and a discount rate of 6% per
annum.  If the amount may be increased by a subsequent Change in
Control, any additional payment shall be made at the time and in the form
provided under the relevant plan, or, if no such time or form is provided, upon
the first of the following events to occur on or after the date of such Change
in Control: a change in control event (within the meaning of Treasury Regulation
section 1.409A-3(i)(5)) with respect to Mr. Palagiano, Mr. Palagiano’s
separation from service (within the meaning of section 1.409A-1(h)), Mr.
Palagiano’s death or Mr. Palagiano’s disability (within the meaning of Treasury
Regulation section 1.409A-3(i)(4)).  From the date of such Change of
Control until the date of payment, any additional payment so deferred shall be
held in trust for Mr. Palagiano, the terms of which trust shall be those set
forth in section 30.

     

    (c)           Mr.
Palagiano shall not be required to mitigate the amount of any payment provided
for in this section 9 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this section 9 be reduced by
any compensation earned by Mr. Palagiano as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by Mr. Palagiano to the Company, or otherwise except as specifically
provided in section 9(b) (iii) of this Agreement or except as provided in
section 28 to avoid duplication of payments.  The Company and Mr.
Palagiano hereby stipulate that the damages which may be incurred by Mr.
Palagiano as a consequence of any such termination of employment are not capable
of accurate measurement as of the date first above written and that the benefits
and payments provided for in this Agreement constitute a reasonable estimate
under the circumstances of all damages sustained as a consequence of any such
termination of employment, other than damages arising under or out of any stock
option, restricted stock or other non-qualified stock acquisition or investment
plan or program, it being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or program in respect
of any termination of employment.

     

    10.           Termination
Without Severance Benefits.

     

    In the
event that Mr. Palagiano’s employment with the Company shall terminate during
the Employment Period on account of:

     

    (a)           Termination
for Cause (within the meaning of section 12(a) of this Agreement);

     

    (b)           voluntary
resignation by Mr. Palagiano other than a Resignation for Good Reason (within
the meaning of section 12(b) of this Agreement); or

     

    (c)           Mr.
Palagiano’s death;

     

    then the
Company shall have no further obligations under this Agreement, other than the
payment to Mr. Palagiano (or, in the event of his death, to his estate) of his
earned but unpaid salary as of the date of the termination of his employment,
and the provision of such other benefits, if any, to which he is entitled as a
former employee under the Company’s employee benefit plans and programs and
compensation plans and programs and payment for all unused vacation days and
floating holidays in the year in which his employment is terminated, at his
highest annual salary for such year.

     

    11.           Death
and Disability.

     

    (a)           Death.  If
Mr. Palagiano’s employment is terminated by reason of Mr. Palagiano’s death
during the Employment Period, this Agreement shall terminate without further
obligations to Mr. Palagiano’s legal representatives under this Agreement, other
than for payment of amounts and provision of benefits under sections 9(b) (i)
and (ii); provided, however, that if Mr. Palagiano dies while in the employment
of the Company, his designated beneficiary(ies) shall receive a death benefit,
payable through life insurance or otherwise, which is the equivalent on a net
after-tax basis of the death benefit payable under a term life insurance policy,
with a stated death benefit of three times Mr. Palagiano’s then Annual Base
Salary.

     

    (b)           Disability.  If
Mr. Palagiano’s employment is terminated by reason of Mr. Palagiano’s Disability
as defined in section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Palagiano, other than for payment
of amounts and provision of benefits under section 9(b) (i) and (ii); provided,
however, that in the event of Mr. Palagiano’s Disability while in the employment
of the Company, the Company will pay to him, in accordance with section 30, a
lump sum amount equal to three times his then annual base salary.

     

    (c)           For
purposes of this Agreement, “Disability” shall be defined in accordance with the
terms of the Company’s long term disability policy.

     

    (d)           Payments
under this section 11 shall be made upon Mr. Palagiano’s death or termination
due to Disability.

     

    12.           Definition
of Termination for Cause and Resignation for Good Reason.

     

    (a)           Mr.
Palagiano’s termination of employment with the Company shall be deemed a
“Termination for Cause” if such termination occurs upon:

     

    (i)           Mr.
Palagiano’s willful and continued failure to substantially perform his duties
with the Company (other than any failure resulting from incapacity due to
physical or mental illness or any actual or anticipated failure following notice
by Mr. Palagiano of an intended Resignation for Good Reason) after a written
demand for substantial performance is delivered to him by the Board, which
demand specifically identifies the manner in which the Board believes Mr.
Palagiano has not substantially performed his duties, and the failure to cure
such breach within sixty (60) days following written notice thereof from the
Company; or

     

    (ii)           the
intentional and willful engaging in dishonest conduct in connection with his
performance of services for the Company resulting in his conviction of or plea
of guilty or nolo
contendere to a felony, fraud, personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses), or final cease-and-desist order.

     

    No act,
or failure to act, on Mr. Palagiano’s part shall be deemed willful unless done,
or omitted to be done, not in good faith and without reasonable belief that such
action or omission was in the best interest of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board or based upon the written advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by Mr. Palagiano in
good faith and in the best interests of the Company.  Notwithstanding
the foregoing, no termination of Mr. Palagiano’s employment shall be a
Termination for Cause unless there shall have been delivered to Mr. Palagiano a
copy of a resolution duly adopted by the affirmative vote of a majority of the
Board of Directors (or, following a Change in Control, an affirmative vote of
three-quarters of the Board of Directors) at a meeting of the Board called and
held for such purpose (after reasonable notice to Mr. Palagiano and an
opportunity for Mr. Palagiano, together with his counsel, to be heard before the
Board) finding that in good faith opinion of the Board circumstances described
in section 12(a) (i) or (ii) exist and specifying the particulars thereof in
detail.

     

    (b)           Mr.
Palagiano’s termination of employment with the Company shall be deemed a
Resignation for Good Reason if such termination occurs following any one or more
of the following events:

     

    (i)           (A)
the assignment to Mr. Palagiano of any duties inconsistent with Mr. Palagiano’s
status as Chairman of the Board and Chief Executive Officer of the Company or
(B) a substantial adverse alteration in the nature or status of Mr. Palagiano’s
responsibilities from those in effect immediately prior to the
alteration;

     

    (ii)           a
reduction by the Company in Mr. Palagiano’s annual base salary as in effect on
the date first above written or as the same may be increased from time to time,
unless such reduction was mandated at the initiation of any regulatory authority
having jurisdiction over the Company;

     

    (iii)           the
relocation of the Company’s principal executive offices to a location outside
the New York metropolitan area or the Company’s requiring Mr. Palagiano to be
based anywhere other than the Company’s principal executive offices except for
required travel on the Company’s business to an extent substantially consistent
with Mr. Palagiano’s business travel obligations at the date first above
written;

     

    (iv)           the
failure by the Company, without Mr. Palagiano’s consent, to pay to Mr.
Palagiano, within seven (7) days of the date when due, (A) any portion of his
compensation, or (B) any portion of an installment of deferred compensation
under any deferred compensation program of the Company;

     

    (v)           the
failure by the Company to continue in effect any compensation plan in which Mr.
Palagiano participates on or after January 1, 2003 which is material to his
total compensation, including but not limited to the Retirement Plan and the
Company’s Incentive Savings Plan or any substitute plans unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue his
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of his participation relative to other participants, unless such
failure is the result of action mandated at the initiation of any regulatory
authority having jurisdiction over the Company;

     

    (vi)           the
failure by the Company to continue to provide Mr. Palagiano with benefits
substantially similar to those enjoyed by Mr. Palagiano as of January 1, 2003
under the Retirement Plan and the Company’s Incentive Savings Plan or under any
of the Company’s life, health (including hospitalization, medical and major
medical), dental, accident, and long-term disability insurance benefits, in
which Mr. Palagiano is participating, or the taking of any action by the Company
which would directly or indirectly materially reduce any of such benefits or
deprive Mr. Palagiano of the number of paid vacation days to which he is
entitled, on the basis of years of service with the Company, rank or otherwise,
in accordance with the Company’s normal vacation policy, unless such failure is
the result of action mandated at the initiation of any regulatory authority
having jurisdiction over the Company;

     

    (vii)           the
failure of the Company to obtain a satisfactory agreement from any successor to
assume and agree to perform this Agreement, as contemplated in section 15(a) of
this Agreement;

     

    (viii)                      any
purported termination of employment by the Company which is not effected
pursuant the provisions of section 12(a) regarding Termination for Cause or on
account of Disability;

     

    (ix)           a
material breach of this Agreement by the Company, which the Company fails to
cure within thirty (30) days following written notice thereof from Mr.
Palagiano;

     

    (x)           a
requirement that Mr. Palagiano report to any person or group other than the
Board.

     

    13.           Definition
of Change in Control; Payment in the Event of a Change in Control.

     

    (a)           For
purposes of this Agreement, a Change in Control of the Company shall
mean:

     

    (i)           the
occurrence of any event 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) Mr. Palagiano, or any group otherwise
constituting a person in which Mr. Palagiano is a member, 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

     

    (ii)           the
occurrence of any event upon which the individuals who on the Initial Effective
Date are members of the Board, together with individuals (other than any
individual designated by a person who has entered into an agreement with the
Company to effect a transaction described in section 13(a) or 13(c) of this
Agreement) 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 Board then in office who were either members of the
Board on  the Initial Effective Date 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

     

    (iii)           (A)           the
consummation of 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:

     

    (1)           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 then outstanding in substantially the same
proportions as their ownership of voting securities of the Company before such
merger or consolidation; and

     

    (2)           the
entity which results from such merger or consolidation expressly agrees in
writing to assume and perform the Company’s obligations under this Agreement;
or

     

    (B)           the
shareholders of the Company approve either 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

     

    (iv)           any
event which would be described in section 13(a)(i), (ii) or (iii) if the term
“Bank” were substituted for the term “Company” therein. Such event shall be
deemed to be a Change in Control under the relevant provision of section
13(a)(i), (ii) or (iii).

     

    It is
understood and agreed that more than one Change in Control may occur at the same
or different times during the Employment Period and that the provisions of this
Agreement shall apply with equal force and effect with respect to each such
Change in Control.

     

    (b)           Upon
the occurrence during the Employment Period of a Change in Control, the Company
shall pay the following sums into a trust for the benefit of Mr.
Palagiano:

     

    (i)           a
lump sum amount equal to the aggregate amount that would be payable to Mr.
Palagiano under sections 9(b)(i), (iv), (v), (vi), (vii) and (viii) of this
Agreement computed as if Mr. Palagiano had terminated employment in a
Resignation for Good Reason on the date of the Change in Control but as if no
Change in Control had occurred; plus

     

    (ii)           a
lump sum amount equal to the present value of the excess of:

     

    (A)           a
single life annuity, payable commencing immediately, in an amount equal to
26-2/3% of the aggregate base salary and annual bonus for the period of
thirty-six consecutive calendar months of employment during the final 120 months
of employment that yields the highest aggregate figure; over

     

    (B)           the
aggregate single life annuity benefits, payable commencing immediately under any
qualified and non-qualified defined benefit plans of the Company or the
Bank.

     

    where
base salary shall be determined without regard to pre-tax or after-tax
deductions for benefits under sections 401(k), 401(m), 125 or 132(f) of the Code
or otherwise and value shall be determined using the mortality table prescribed
under section 72 of the Code and a discount rate of 6% per annum compounded
annually.

     

    Such
payments shall be paid to the trust whether or not Mr. Palagiano's employment
has terminated. The entire amount in the trust shall be paid to Mr. Palagiano on
the first day of the seventh month following his separation from service within
the meaning of section 409A of the Code.  The terms of the trust shall
be those set forth in section 30.  The Company may require, as a
condition of its obligation to make such payments, that Mr. Palagiano execute
and deliver to the Company a release, in such form and manner as the Company may
reasonably require, relieving the Bank of any obligation it might then have,
whether pursuant to an employment contract or otherwise, to pay severance
benefits to Mr. Palagiano in connection with a subsequent termination of
employment.  Such a release shall not relieve the Bank of any
obligation that it may have to provide for Mr. Palagiano and his family and
dependents the accrued post-termination benefits to which they are entitled
under any compensation or benefit plan or program of the Bank.

     

    14.           No Effect on Employee Benefit Plans
or Programs.

     

    Except as
expressly provided in this Agreement, the termination of Mr. Palagiano’s
employment during the Employment Period or thereafter, whether by the Company or
by Mr. Palagiano, shall have no effect on the rights and obligations of the
parties hereto under the Company’s or the Bank’s Retirement Plan and the
Company’s Incentive Savings Plan, group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
plans or such other employee benefit plans or programs, or compensation plans or
programs (whether or not employee benefit plans or programs) and, following the
conversion of the Company to stock form, any stock option and appreciation
rights plan, employee stock ownership plan and restricted stock plan, as may be
maintained by, or cover employees of, the Company from time to
time.

     

    15.           Successors
and Assigns.

     

    (a)           The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.  Failure
of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be deemed to constitute a material
breach of the Company’s obligations under this Agreement.

     

    (b)           This
Agreement will inure to the benefit of and be binding upon Mr. Palagiano, his
legal representatives and testate or intestate distributees, and the Company,
their respective successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the respective assets and business of the
Company may be sold or otherwise transferred.

     

    16.           Notices.

     

    Any
communication required or permitted to be given under this Agreement, including
any notice, direction, designation, consent, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as it is
delivered personally, or five (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:

     

    If to Mr.
Palagiano:

     

    [Home
address.]

     

    If to the
Company:

     

    Dime
Community Bancshares, Inc.

     

    209
Havemeyer Street

     

    Brooklyn,
New York 11211

     

    Attention:
Corporate Secretary

     

    with a
copy to:

     

    Thacher
Proffitt & Wood LLP

     

    Two World
Financial Center

     

    New York,
New York 10281

     

    Attention:
W. Edward Bright, Esq.

     

    17.           Indemnification
and Attorneys’ Fees.

     

    The
Company shall pay to or on behalf of Mr. Palagiano all reasonable costs,
including legal fees, incurred by him in connection with or arising out of his
consultation with legal counsel or in connection with or arising out of any
action, suit or proceeding in which he may be involved, as a result of his
efforts, in good faith, to defend or enforce the terms of this Agreement;
provided, however, that this section 17 shall not obligate the Company to pay
costs and legal fees on behalf of Mr. Palagiano under this Agreement in excess
of $50,000.  Any payment or reimbursement to effect such
indemnification shall be made no later than the last day of the calendar year
following the calendar year in which Mr. Palagiano incurs the expense or, if
later, within sixty (60) days after the settlement or resolution that gives rise
to Mr. Palagiano’s right to reimbursement; provided, however, that Mr. Palagiano
shall have submitted to the Company documentation supporting such expenses at
such time and in such manner as the Company may reasonably require.

     

    18.           Excise Tax
Indemnification.

     

    (a)           If
Mr. Palagiano’s employment terminates under circumstances entitling him (or in
the event of his death, his estate) to the Additional Termination Entitlements,
the Company shall pay to Mr. Palagiano (or in the event of his death, his
estate) an additional amount intended to indemnify him against the financial
effects of the excise tax imposed on excess parachute payments under section
280G of the Code (the “Tax Indemnity Payment”).  The Tax Indemnity
Payment shall be determined under the following formula:

     

    X      =        E x
P                                 

     

    1-[(FI x (1-SLI)) + SLI + E +
M]

     

    where

     

    
      	
               
      

            	
              E

            	
              =

            	
              the
      percentage rate at which an excise tax is assessed under section 4999 of
      the Code;

            


    

     

    
      	
               
      

            	
              P

            	
              =

            	
              the
      amount with respect to which such excise tax is assessed, determined
      without regard to this section 16;

            


    

     

    
      	
               
      

            	
              FI

            	
              =

            	
              the
      highest marginal rate of income tax applicable to Mr. Palagiano under the
      Code for the taxable year in
question;

            


    

     

    
      	
               
      

            	
              SLI

            	
              =

            	
              the
      sum of the highest marginal rates of income tax applicable to Mr.
      Palagiano under all applicable state and local laws for the taxable year
      in question; and

            


    

     

    
      	
               
      

            	
              M

            	
              =

            	
              the
      highest marginal rate of Medicare tax applicable to Mr. Palagiano under
      the Code for the taxable year in
question.

            


    

     

    Such
computation shall be made at the expense of the Company by a member of the firm
of Thacher Proffitt & Wood, or by an attorney or a firm of independent
certified public accountants selected by Mr. Palagiano and reasonably
satisfactory to the Company (the “Tax Advisor”) and shall be based on the
following assumptions: (i) that a change in ownership, a change in effective
ownership or control, or a change in ownership of a substantial portion of
assets, of the Bank or the Company has occurred within the meaning of section
280G of the Code (a “280G Change of Control”); (ii) that all direct or indirect
payments made to or benefits conferred upon Mr. Palagiano on account of his
termination of employment are “parachute payments” within the meaning of section
280G of the Code; and (iii) that no portion of such payments is reasonable
compensation for services rendered prior to Mr. Palagiano’s termination of
employment.

     

    (b)           With
respect to any payment that is presumed to be a parachute payment for purposes
of section 280G of the Code, the Tax Indemnity Payment shall be made to Mr.
Palagiano on the earlier of the date the Company, the Bank or any direct or
indirect subsidiary or affiliate of the Company or the Bank is required to
withhold such tax or the date the tax is required to be paid by Mr. Palagiano,
unless, prior to such date, the Company delivers to Mr. Palagiano the written
opinion, in form and substance reasonably satisfactory to Mr. Palagiano, of the
Tax Advisor or of an attorney or firm of independent certified public
accountants selected by the Company and reasonably satisfactory to Mr.
Palagiano, to the effect that Mr. Palagiano has a reasonable basis on which to
conclude that (i) no 280G Change in Control has occurred, or (ii) all or part of
the payment or benefit in question is not a parachute payment for purposes of
section 280G of the Code, or (iii) all or a part of such payment or benefit
constitutes reasonable compensation for services rendered prior to the 280G
Change of Control, or (iv) for some other reason which shall be set forth in
detail in such letter, no excise tax is due under section 4999 of the Code with
respect to such payment or benefit (the “Opinion Letter”). If the Company
delivers an Opinion Letter, the Tax Advisor shall recompute, and the Company
shall make, the Tax Indemnity Payment in reliance on the information contained
in the Opinion Letter.

     

    (c)           In
the event that Mr. Palagiano’s liability for the excise tax under section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount with respect to which the Tax Indemnity Payment is made, Mr.
Palagiano or the Company, as the case may be, shall pay to the other party at
the time that the amount of such excise tax is finally determined, an
appropriate amount, plus interest, such that the payment made under section
18(b), when increased by the amount of the payment made to Mr. Palagiano under
this section 18(c), or when reduced by the amount of the payment made to the
Company under this section 18(c), equals the amount that should have properly
been paid to Mr. Palagiano under section 18(a).  The interest paid to
the Company under this section 18(c) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code.  The payment made to Mr.
Palagiano shall include such amount of interest as is necessary to satisfy any
interest assessment made by the Internal Revenue Service and an additional
amount equal to any monetary penalties assessed by the Internal Revenue Service
on account of an underpayment of the excise tax.  To confirm that the
proper amount, if any, was paid to Mr. Palagiano under this section 18, Mr.
Palagiano shall furnish to the Company a copy of each tax return which reflects
a liability for an excise tax, at least 20 days before the date on which such
return is required to be filed with the Internal Revenue Service. Nothing in
this Agreement shall give the Company any right to control or otherwise
participate in any action, suit or proceeding to which Mr. Palagiano is a party
as a result of positions taken on his federal income tax return with respect to
his liability for excise taxes under section 4999 of the Code.  Any
payment pursuant to this section 18(c) shall in any case be made no later than
the last day of the calendar year following the calendar year in which any
additional taxes for which the Tax Indemnity Payment is to be made are remitted
to the Internal Revenue Service.

     

    19.           Severability.

     

    A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision
hereof.

     

    20.           Waiver.

     

    Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant, or
condition.  A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against who its
enforcement is sought.  Any waiver or relinquishment of such right or
power at any one or more times shall not be deemed a waiver or relinquishment of
such right or power at any other time or times.

     

    21.           Counterparts.

     

    This
Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original, and all of which shall constitute one and the same
Agreement.

     

    22.           Governing
Law.

     

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

     

    23.           Headings
and Construction.

     

    The
headings of sections in this Agreement are for convenience of reference only and
are not intended to qualify the meaning of any section.  Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.

     

    24.           Entire
Agreement; Modifications.

     

    This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supersedes in its entirety any and all prior agreements,
understandings or representations relating to the subject matter hereof,
including the Employment Agreement dated June 26, 1996 between the Bank and Mr.
Palagiano, as amended.  No modifications of this Agreement shall be
valid unless made in writing and signed by the parties hereto; provided,
however, that this Agreement shall be subject to amendment in the future in such
manner as the Company shall reasonably deem necessary or appropriate to effect
compliance with Section 409A of the Code and the regulations thereunder, and to
avoid the imposition of penalties and additional taxes under Section 409A of the
Code, it being the express intent of the parties that any such amendment shall
not diminish the economic benefit of the Agreement to Mr. Palagiano on a present
value basis.

     

    25.           Arbitration
Clause.

     

    Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three
arbitrators in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect.  Judgment may be entered on
the arbitrator’s award in any court having jurisdiction; the expense of such
arbitration shall be borne by the Company.

     

    26.           Provisions
of Law.

     

    Notwithstanding
anything herein contained to the contrary, any payments to Mr. Palagiano by the
Company, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1828(k), and any regulations promulgated
thereunder.

     

    27.           Guarantee.

     

    The
Company hereby agrees to guarantee the payment by the Bank of any benefits and
compensation to which Mr. Palagiano is or may be entitled to under the terms and
conditions of the employment agreement dated as of  the _______ day of
_______, 2008 between the Bank and Mr. Palagiano, a copy of which is attached
hereto as Exhibit A.

     

    28.           Non-duplication.

     

    In the
event that Mr. Palagiano shall perform services for the Bank or any other direct
or indirect subsidiary of the Company, any compensation or benefits provided to
Mr. Palagiano by such other employer shall be applied to offset the obligations
of the Company hereunder, it being intended that this Agreement set forth the
aggregate compensation and benefits payable to Mr. Palagiano for all services to
the Company and all of its direct or indirect subsidiaries.

     

    29.           Waiver
of Prior Rights.

     

    Mr.
Palagiano hereby permanently and irrevocably waives any right that he now has or
may have had to collect termination benefits under the Amended and Restated
Employment Agreement between the Company and Mr. Palagiano made and entered into
as of June 26, 1996, as amended, or the Amended and Restated Employment
Agreement between the Bank and Mr. Palagiano made and entered into as of June
26, 1996, as amended, by virtue of any act, omission, fact, event or
circumstance whatsoever, whether or not known to Mr. Palagiano, that occurred or
was in existence on December 31, 2002, including but not limited to the
cessation of benefit accruals under the qualified and non-qualified defined
benefit plans of the Company and the Bank and the renegotiation of the
outstanding securities acquisition loan under the Company's Employee Stock
Ownership Plan.  The Bank shall be a third party beneficiary of this
Agreement with full powers to enforce the waiver contained herein for its
benefit.

     

    30.           Compliance
with Section 409A of the Code.

     

    Mr.
Palagiano and the Company acknowledge that each of the payments and benefits
promised to Mr. Palagiano under this Agreement must either comply with the
requirements of Section 409A of the Code ("Section 409A") and the regulations
thereunder or qualify for an exception from compliance.  To that end,
Mr. Palagiano and the Company agree that:

     

    (a)           the
expense reimbursements described in Section 8 and legal fee reimbursements
described in Section 17 are intended to satisfy the requirements for a
"reimbursement plan" described in Treasury Regulation section
1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such
requirements;

     

    (b)           the
payment described in Section 9(b)(i) is intended to be excepted from compliance
with Section 409A pursuant to Treasury Regulation section 1.409A-1(b)(3) as
payment made pursuant to the Company’s customary payment timing
arrangement;

     

    (c)           the
benefits and payments described in Section 9(b)(ii) are expected to comply with
or be excepted from compliance with Section 409A on their own
terms;

     

    (d)           the
welfare benefits provided in kind under section 9(b)(iii) are intended to be
excepted from compliance with Section 409A as welfare benefits pursuant to
Treasury Regulation Section 1.409A-1(a)(5) and/or as benefits not includible in
gross income; and

     

    (e) the
Tax Indemnity Payment provided under section 18 is intended to satisfy the
requirements for a “tax gross-up payment” described in Treasury Regulation
section 1.409A-3(i)(1)(v).

     

    In the
case of a payment that is not excepted from compliance with Section 409A, and
that is not otherwise designated to be paid immediately upon a permissible
payment event within the meaning of Treasury Regulation Section 1.409A-3(a), the
payment shall not be made prior to, and shall, if necessary, be deferred (with
interest at the annual rate of 6%, compounded monthly from the date of Mr.
Palagiano’s termination of employment to the date of actual payment) to and paid
on the later of the date sixty (60) days after Mr. Palagiano’s earliest
separation from service (within the meaning of Treasury Regulation Section
1.409A-1(h)) and, if Mr. Palagiano is a specified employee (within the meaning
of Treasury Regulation Section 1.409A-1(i)) on the date of his separation from
service, the first day of the seventh month following Mr. Palagiano’s separation
from service.  Each amount payable under this plan that is required to
be deferred beyond Mr. Palagiano’s separation from service, shall be deposited
on the date on which, but for such deferral, the Company would have paid such
amount to Mr. Palagiano, in a grantor trust which meets the requirements of
Revenue Procedure 92-65 (as amended or superseded from time to time), the
trustee of which shall be a financial institution selected by the Company with
the approval of Mr. Palagiano (which approval shall not be unreasonably withheld
or delayed), pursuant to a trust agreement the terms of which are approved by
Mr. Palagiano (which approval shall not be unreasonably withheld or delayed)
(the “Rabbi Trust”), and payments made shall include earnings on the investments
made with the assets of the Rabbi Trust, which investments shall consist of
short-term investment grade fixed income securities or units of interest in
mutual funds or other pooled investment vehicles designed to invest primarily in
such securities.  Furthermore, this Agreement shall be construed and
administered in such manner as shall be necessary to effect compliance with
Section  409A.

     

    


     

    31.           Compliance
with the Emergency Economic Stabilization Act of 2008.

     

    In the
event the Company issues any debt or equity to the United States Treasury
("UST") pursuant to the Capital Purchase Program (the "CPP") implemented under
the Emergency Economic Stabilization Act of 2008 ("EESA"), the following
provisions shall take precedence over any contrary provisions of this Agreement
or any other compensation or benefit plan, program, agreement or arrangement in
which Mr. Palagiano participates:

     

    (a)           Mr.
Palagiano shall repay to the Company any bonus or incentive compensation paid to
Mr. Palagiano while (i) Mr. Palagiano is a senior executive officer (within the
meaning of 31 C.F.R. Part 30) ("Senior Executive Officer") and (ii) the UST
holds any debt or equity interest in the Company acquired under the CPP (such
period, the "CPP Compliance Period"), if and to the extent that such bonus or
incentive compensation was paid on the basis of a statement of earnings, gains,
or other criteria (each, a "Performance Criterion," and in the aggregate,
"Performance Criteria") that are later proven to be materially
inaccurate.  A Performance Criterion shall be proven to be materially
inaccurate if so determined by a court of competent jurisdiction or in the
written opinion of an independent attorney or firm of certified public
accountants selected by the Company and approved by Mr. Palagiano (which
approval shall not be unreasonably withheld or delayed), which determination
shall both state the accurate Performance Criterion and that the difference
between the accurate Performance Criterion and the Performance Criterion on
which the payment was based is material (a "Determination").  Upon
receipt of a Determination, the Company may supply to Mr. Palagiano a copy of
the Determination, a computation of the bonus or other incentive compensation
that would have been payable on the basis of the accurate Performance Criterion
set forth in the Determination (the "Determination Amount") and a written demand
for repayment of the amount (if any) by which the bonus or incentive
compensation actually paid exceeded the Determination Amount.

     

    (b)           (i)           If
Mr. Palagiano's employment terminates in an “applicable severance from
employment” (within the meaning of 31 C.F.R. Part 30) while (A) Mr. Palagiano is
a Senior Executive Officer, and (B) the UST holds a debt or equity interest in
the Company issued under the CPP, then payments to Mr. Palagiano that are
contingent on such applicable severance from employment and designated to be
paid during the CPP Compliance Period shall be limited, if necessary, to the
maximum amount which may be paid without causing any amount paid to be an
"excess parachute payment" within the meaning of section 280G(b)(1) of the Code,
as modified by section 280G(e) of the Code, referred to as a "golden parachute
payment" under 31 C.F.R. Part 30 (the "Maximum Payment Amount").  Any
reduction in payments required to achieve such limit shall be applied to all
payments otherwise due hereunder in the reverse chronological order of their
payment dates, and where multiple payments are due on the same date, the
reduction shall be apportioned ratably among the affected
payments.  The required reduction (if any) shall be determined in
writing by an independent attorney or firm of certified public accountants
selected by the Company and approved by Mr. Palagiano (which approval shall not
be unreasonably withheld or delayed).

     

    (ii)           To
the extent not prohibited by law, the aggregate amount by which payments
designated to be paid during the CPP Compliance Period are reduced pursuant to
section 31(b)(i) (the "Unpaid Amount") shall be delayed to and shall be paid on
the first business day following the last day of the CPP Compliance
Period.  Pending payment, the Unpaid Amount shall be deposited in a
Rabbi Trust.  Payment of the Unpaid Amount shall include any
investment earnings on the assets of the Rabbi Trust attributable to the Unpaid
Amount.

     

    This
section 31 shall be operated, administered and construed to comply with section
111(b) of EESA as implemented by guidance or regulation thereunder that has been
issued and is in effect as of the closing date of the agreement, if any, by and
between the UST and the Company, under which the UST acquires equity or debt
securities of the Company under the CPP (such date, if any, the "Closing Date,"
and such implementation, the "Relevant Implementation").  If after the
Closing Date the clawback requirement of section 31(a) shall not be required by
the Relevant Implementation of section 111(b) of EESA, such requirement shall
have no further effect.  If after the Closing Date the limitation on
golden parachute payments under section 31(b)(i) shall not be required by the
Relevant Implementation of section 111(b) of EESA, such limitation shall have no
further effect and any Unpaid Amount delayed under section 31(b)(ii) shall be
paid on the earliest date on which the Company reasonably anticipates that such
amount may be paid without violating such limitation.

     

    IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed and Mr.
Palagiano has hereto set his hand, all as of the day and year first above
written.

             

     

     ___________________________________________


     

    VINCENT F. PALAGIANO

     

    
      	
              ATTEST

            	
              DIME
      COMMUNITY BANCSHARES, INC.

            


    

     

    By:                              By:                         

    Assistant
Secretary                                                                           for
the Board of Directors

     

    [Seal]