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").

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)