UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed
by
the Registrant x
Filed by a
Party other than the Registrant o
Check
the
appropriate box:
o
Preliminary
Proxy
Statement
o Confidential,
for Use of the
Commission Only (as permitted by Rule 14a-16(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
DIME
COMMUNITY BANCSHARES, INC.
(Name
of
Registrant as Specified In Its Charter)
_______________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No
fee required.
o
Fee
computed on
table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each
class of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state
how it was determined):
4)
Proposed maximum aggregate value of transaction:
5) Total fee paid:
o
Fee
paid
previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by Exchange
Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify
the previous filing by registration statement number, or the Form or
Schedule
and the date of its filing.
1) Amount Previously Paid:
April
10,
2007
Dear
Shareholder:
You
are
cordially invited to attend the Annual Meeting of Shareholders (the "Annual
Meeting") of Dime Community Bancshares, Inc. (the "Company"), which will be
held
on May 17, 2007 at 10:00 a.m. Eastern Time, at Giando on the Water, 400 Kent
Avenue, Brooklyn, New York 11211.
The
attached Notice of the Annual Meeting of Shareholders and Proxy Statement
describe the business to be transacted at the Annual Meeting. The Directors
and
several officers of the Company, as well as a representative of Deloitte &
Touche LLP, the accounting firm appointed by the Audit Committee of the Board
of
Directors to be the Company's independent auditors for the year ending December
31, 2007, will be present at the Annual Meeting.
The
Company's Board of Directors has determined that an affirmative vote on each
matter to be considered at the Annual Meeting is in the best interests of the
Company and its shareholders and unanimously recommends a vote "FOR" each of
these matters.
Please
complete, sign and return the enclosed proxy card promptly, whether or not
you
plan to attend the Annual Meeting. Your
vote is important regardless of the number of shares you own. Voting by proxy
will not prevent you from voting in person at the Annual Meeting, but will
assure that your vote is counted if you are unable to attend.
If
you are a shareholder whose shares are not registered in your own name, you
will
need additional documentation from your record holder to attend and vote
personally at the Annual Meeting. Examples
of such documentation include a broker's statement, letter or other document
confirming your ownership of the Company's shares.
On
behalf
of our Board of Directors and employees, we thank you for your continued support
and hope to see you at the Annual Meeting.
Sincerely
yours,
Vincent
F. Palagiano
Chairman
of the Board
and
Chief Executive Officer
Dime
Community Bancshares, Inc.
209
Havemeyer Street
Brooklyn,
New York 11211
(718)
782-6200
NOTICE
OF THE ANNUAL MEETING OF SHAREHOLDERS
To
Be Held on May 17, 2007
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Shareholders of Dime Community
Bancshares, Inc. (the "Annual Meeting") will be held at Giando on the Water,
400
Kent Avenue, Brooklyn, New York 11211, on Thursday, May 17, 2007 at 10:00 a.m.
Eastern Time, to consider and vote upon the following:
| 1. |
Election
of four Directors for terms of three years
each;
|
| 2. |
Ratification
of the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the year ending December 31, 2007;
and
|
| 3. |
Transaction
of such other business as may properly come before the Annual Meeting
or
any adjournment or postponement thereof. As of the date hereof, management
is not aware of any other such
business.
|
The
Board
of Directors has fixed March 30, 2007 as the record date for the Annual Meeting
and any adjournment or postponement thereof. Only shareholders of record at
the
close of business on that date will be entitled to notice of, and to vote at,
the Annual Meeting and any adjournment or postponement thereof. A list of such
shareholders will be available for inspection by any shareholder for any lawful
purpose germane to the Annual Meeting at the Company's corporate headquarters
at
209 Havemeyer Street, Brooklyn, NY 11211 at any time during regular business
hours for 10 days prior to the Annual Meeting.
By
Order
of the Board of Directors
Lance
J.
Bennett
Secretary
Brooklyn,
New York
April
10,
2007
|
YOU
ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. THE
BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND DATE THE ENCLOSED
PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. RETURNING THE
PROXY
CARD WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE
ANNUAL
MEETING.
|
DIME
COMMUNITY BANCSHARES, INC.
PROXY
STATEMENT FOR THE
ANNUAL
MEETING OF SHAREHOLDERS
To
Be Held on May 17, 2007
GENERAL
INFORMATION
General
This
Proxy Statement and accompanying proxy card are being furnished to the
shareholders of Dime Community Bancshares, Inc. (the "Company") in connection
with the solicitation of proxies by the Company's Board of Directors from
holders of the shares of the Company's issued and outstanding common stock,
par
value $0.01 per share (the "Common Stock"), for use at the Annual Meeting of
Shareholders to be held on May 17, 2007 (the "Annual Meeting") at Giando on
the
Water, 400 Kent Avenue, Brooklyn, New York, at 10:00 a.m. Eastern Time, and
at
any adjournment or postponement thereof. The Company is a Delaware corporation
and operates as a unitary savings and loan holding company for The Dime Savings
Bank of Williamsburgh (the "Bank"). This Proxy Statement, together with the
enclosed proxy card, is first being mailed to shareholders on or about April
10,
2007.
Record
Date
The
Company's Board of Directors has fixed the close of business on March 30, 2007
as the record date for the determination of shareholders entitled to notice
of,
and to vote at, the Annual Meeting (the "Record Date"). Accordingly, only
holders of record of shares of Common Stock at the close of business on March
30, 2007 will be entitled to vote at the Annual Meeting. There were 36,070,420
shares of Common Stock outstanding on the Record Date. The presence, in person
or by proxy, of the holders of at least a majority of the total number of shares
of Common Stock entitled to vote at the Annual Meeting is necessary to
constitute a quorum.
Voting
Rights
Each
holder of Common Stock on the Record Date will be entitled to one vote at the
Annual Meeting for each share of record held (other than Excess Shares as
defined below). As provided in the Company's Certificate of Incorporation,
record holders (other than any compensation plan maintained by the Company
and
certain affiliates) of Common Stock who beneficially own in excess of 10% of
the
issued and outstanding shares of Common Stock (such shares in excess of 10%
referred to herein as "Excess Shares") shall be entitled to cast only
one-hundredth of one vote per share for each Excess Share. A person or entity
is
deemed to beneficially own shares owned by an affiliate or associate as well
as
by persons acting in concert with such person or entity. The Company's
Certificate of Incorporation authorizes a majority of the Board of Directors
to
interpret the provisions of the Certificate of Incorporation governing Excess
Shares, and to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to ascertain compliance with the Excess
Shares provisions of the Certificate of Incorporation, including, without
limitation, (i) the number of shares of Common Stock beneficially owned by
any
person or purported owner, (ii) whether a person or purported owner is an
affiliate or associate of, or is acting in concert with, any other person or
purported owner, and (iii) whether a person or purported owner has an agreement
or understanding with any person or purported owner as to the voting or
disposition of any shares of Common Stock.
You
may
vote your shares by marking and signing the enclosed Proxy Card and returning
it
in the enclosed postage-paid envelope, by telephone or internet by following
the
instructions stated on the Proxy Card or by attending the Annual Meeting and
voting in person. All properly executed proxies received by the Company on
or
before the close of voting on May 17, 2007 will be voted in accordance with
the
instructions indicated thereon. If
no instructions are given, executed proxies will be voted FOR election of each
of the four nominees for Director, FOR the ratification and appointment of
Deloitte & Touche LLP as independent auditors for the year ending December
31, 2007, and FOR each other proposal identified in the Notice of the Annual
Meeting of Shareholders.
Management
is not aware of any matters other than those set forth in the Notice of the
Annual Meeting of Shareholders that may be brought before the Annual Meeting.
If
any other matters properly come before the Annual Meeting, the persons named
in
the accompanying proxy will vote the shares represented by all properly executed
proxies on such
1
matters
in such manner as shall be determined by a majority of the Company's Board
of
Directors.
If
you are a shareholder whose shares are not registered in your own name, you
will
need appropriate documentation from your shareholder of record to vote
personally at the Annual Meeting.
Examples
of such documentation would include a broker's statement, letter or other
document that will confirm your ownership of the Common Stock.
Vote
Required
Directors
are elected by a plurality of the votes cast in person or by proxy at the Annual
Meeting. The holders of Common Stock may not vote their shares cumulatively
for
the election of Directors. Proposal 2 requires the affirmative vote of the
holders of a majority of the number of votes eligible to be cast by the holders
of Common Stock represented, in person or by proxy, and entitled to vote at
the
Annual Meeting.
Shares
as
to which the "ABSTAIN" box has been selected on the Proxy Card with respect
to
Proposal 2 will be counted as present and entitled to vote and will have the
effect of a vote against that proposal. In contrast, shares underlying broker
non-votes will not be counted as present and entitled to vote and will have
no
effect on the vote on Proposal 2.
With
respect to the election of the four nominees for Director, shares as to which
the "WITHHOLD AUTHORITY" box has been selected for either all or some of the
nominees will be counted as being present for the matter but not as voting
"for"
the election of the respective nominees. Therefore, the proxy represented by
these shares will have the same effect as voting against the respective
nominees. In contrast, shares underlying broker non-votes will not be counted
as
present and entitled to vote and will have no effect on the vote on Proposal
1.
Revocability
of Proxies
A
proxy
may be revoked at any time before it is voted by filing a written revocation
of
the proxy with the Company's Secretary at 209 Havemeyer Street, Brooklyn, New
York 11211 or by submitting a duly executed proxy bearing a later date. A proxy
also may be revoked by attending and voting at the Annual Meeting, only if
a
written revocation is filed with the Secretary prior to the voting of such
proxy.
Solicitation
of Proxies
The
Company will bear the costs of soliciting proxies from its shareholders. In
addition to the use of mail, proxies may be solicited by officers, Directors
or
employees of the Company or the Bank by telephone or other forms of
communication. The Company will also request persons, firms and corporations
holding shares in their names or in the names of their nominees, which are
beneficially owned by others, to send proxy materials to, and obtain proxies
from, such beneficial owners, and will reimburse such holders for reasonable
expenses incurred in connection therewith. In addition, the Company has retained
American Stock Transfer and Trust Company to assist in the solicitation of
proxies. The cost of such solicitation, which will be comprised of reimbursement
for reasonable out-of-pocket expense, will be paid by the Company.
Director
Attendance at Annual Meetings
The
Company considers Board attendance at shareholder meetings a priority. It is
the
policy of the Company that Directors exercise their best efforts to attend
every
meeting. All thirteen individuals who were members of the Board at the time
attended the annual meeting held in 2006.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal
Shareholders of the Company
The
following table sets forth, as of March 30, 2007, certain information as to
persons known to the Company to be the beneficial owner of in excess of 5%
of
the shares of Common Stock. Management knows of no person, except as listed
below, who beneficially owned more than 5% of the Common Stock as of March
30,
2007. Except as otherwise indicated, the information provided in the table
was
obtained from filings with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Addresses provided are those listed in the filings as the address of
the
person authorized to receive notices and communications. For purposes of the
table below and the table set forth under "Security Ownership of Management,"
in
accordance with Rule 13d-3 under the Exchange Act, a person is deemed to be
the
beneficial owner
2
of
any
shares of Common Stock (1) over which he or she has or shares, directly or
indirectly, voting or investment power, and (2) of which he or she has the
right
to acquire beneficial ownership at any time within 60 days after March 30,
2007.
As used herein, "voting power" includes the power to vote, or direct the voting
of, Common Stock and "investment power" includes the power to dispose, or direct
the disposition, of such shares. Unless otherwise noted, each beneficial owner
has sole voting and sole investment power over the shares beneficially
owned.
|
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of
Class
|
|||
|
Common
Stock
|
The
Employee Stock Ownership Plan Trust of Dime Community Bancshares,
Inc. and
Certain Affiliates
452 Fifth Avenue
New
York, NY 10018
|
3,468,055(1)
|
9.6%
|
|||
|
Common
Stock
|
Compensation
Committee of Dime Community Bancshares, Inc. (includes
the 3,468,055 ESOP
shares reflected above)
209 Havemeyer Street
Brooklyn, NY 11211
|
4,378,310(2)
|
12.1%
|
|||
|
Common
Stock
|
Mac-Per-Wolf
Company
310 S. Michigan Avenue - Suite 2600
Chicago, IL 60604
|
2,049,245(3)
|
5.7%
|
______________________
|
(1)
|
The
Employee Stock Ownership Plan of Dime Community Bancshares, Inc.
and
Certain Affiliates (the "ESOP") filed a Schedule 13G with the SEC
on
January 26, 2007. The ESOP is administered by the Compensation Committee
of the Company's Board of Directors (the "Compensation Committee").
The
ESOP's assets are held in a trust (the "ESOP Trust") for which RS
Group
Trust Company serves as trustee (the "ESOP Trustee"). The ESOP Trust
purchased these shares with funds borrowed from the Company and placed
them in a suspense account for release and allocation to participants’
accounts in annual installments. As of March 30, 2007, 1,980,624
shares
held by the ESOP Trust have been allocated. The terms of the ESOP
provide
that, subject to the ESOP Trustee's fiduciary responsibilities under
the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the
ESOP Trustee will vote, tender or exchange shares of Common Stock
held in
the ESOP Trust in accordance with instructions received from the
participants. The ESOP Trustee will vote allocated shares as to which
no
instructions are received and any shares that have not been allocated
to
participants' accounts in the same proportion as allocated shares
with
respect to which the ESOP Trustee receives instructions are voted,
subject
to fiduciary duties of the ESOP Trustee. The ESOP Trustee will tender
or
exchange any shares in the suspense account or that otherwise have
not
been allocated to participants' accounts in the same proportion as
allocated shares with respect to which the ESOP Trustee receives
instructions are tendered or exchanged, subject to fiduciary duties
of the
ESOP Trustee. With respect to allocated shares as to which no instructions
are received, the ESOP Trustee will be deemed to have received
instructions not to tender or exchange such shares. Each member of
the
Compensation Committee disclaims beneficial ownership of such shares.
See
footnote 2 for a discussion of the voting and investment powers of
the
Compensation Committee.
|
|
(2)
|
The
Compensation Committee filed a
Schedule 13G with the SEC on January 26, 2007.
The Compensation Committee serves certain administrative functions
for the
ESOP, the Recognition and Retention Plan for Outside Directors, Officers
and Employees of Dime Community Bancshares, Inc. (the "RRP"), and
The Dime
Savings Bank of Williamsburgh 401(k) Plan [the "401(k) Plan"]. In
addition, the Compensation Committee serves as trustee for 65,855
restricted stock awards granted to certain officers of the Company
or Bank
under the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan
("2004
Stock Incentive Plan"). The Compensation Committee has the authority
to
direct the trustee of the RRP with respect to the exercise of voting
rights, but has assigned voting and tender rights over allocated
shares to
participating officers. Shares indicated in the table as beneficially
owned by the Compensation Committee include all shares indicated
in the
table as beneficially owned by the ESOP Trust. The Compensation Committee
has the authority to direct the ESOP Trustee with respect to the
investment of the ESOP's assets (including the acquisition or disposition
of both allocated and unallocated shares) in the absence of a tender
offer, but has no voting power with respect to any shares. With respect
to
the ESOP, ERISA, in limited circumstances, may confer upon the ESOP
Trustee the power and duty to control the voting and tendering of
Common
Stock allocated to the accounts of participating employees and
beneficiaries who fail to exercise their voting and/or tender rights.
Each
member of the Compensation Committee disclaims beneficial ownership
of
such shares.
|
|
(3)
|
The
reporting person, Mac-Per-Wolf Company, filed a Schedule 13G with
the SEC
on February 16, 2007 on behalf of its subsidiary, Perkins, Wolf,
McDonnell
and Company, LLC ("Perkins"), an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940. Perkins serves
as a
sub-advisor for small cap value mutual funds of Janus Capital Management,
LLC ("Janus"). The Schedule 13-G represented 1,817,000 shares of
Common
Stock for which Mac-Per-Wolf Company exercises shared voting and
dispositive power (shares managed for Janus funds) and 232,245 shares
of
Common Stock for which it exercises sole voting and dispositive powers
(shares held outside of managed Janus funds).
|
Security
Ownership of Management
The
following table sets forth information with respect to the shares of Common
Stock beneficially owned by each of the Company's Directors and the Named
Executive Officers identified in the Summary Compensation Table included
elsewhere herein, and all of the Company's Directors and executive officers
as a
group as of the Record Date. Except as
3
otherwise
indicated, each person and each group shown in the table has sole voting and
investment power with respect to the shares of Common Stock indicated.
|
Title
of Class
|
Name
of
Beneficial
Owner
|
Position
(1)
|
Amount
and
Nature
of
Beneficial
Ownership
(2)(3)(4)
|
Percent
of
Common
Stock
Outstanding
|
Vested
Stock Options Included in Beneficial Ownership
Total
|
Other
Non-Beneficial Ownership (5)
|
||||||
|
Common
|
Vincent
F. Palagiano
|
Director,
Chairman of the Board
and Chief Executive
Officer
|
1,468,400
|
(6)
|
4.1%
|
710,830
|
316,323
|
|||||
|
Common
|
Michael
P. Devine
|
Director,
President and Chief
Operating Officer
|
828,593
|
(7)
|
2.3
|
418,287
|
214,265
|
|||||
|
Common
|
Kenneth
J. Mahon
|
Director,
Executive Vice
President
and Chief Financial
Officer
|
501,245
|
(8)
|
1.4
|
227,212
|
117,026
|
|||||
|
Common
|
Anthony
Bergamo
|
Director
|
142,493
|
(9)
|
*
|
31,370
|
-
|
|||||
|
Common
|
George
L. Clark, Jr.
|
Director
|
252,858
|
(10)
|
*
|
31,370
|
-
|
|||||
|
Common
|
Steven
D. Cohn
|
Director
|
94,631
|
(11)
|
*
|
24,980
|
-
|
|||||
|
Common
|
Patrick
E. Curtin
|
Director
|
100,883
|
(12)
|
*
|
31,370
|
-
|
|||||
|
Common
|
Fred
P. Fehrenbach
|
Director
|
111,448
|
(13)
|
*
|
31,370
|
-
|
|||||
|
Common
|
John
J. Flynn
|
Director
|
44,259
|
(14)
|
*
|
17,480
|
-
|
|||||
|
Common
|
Joseph
J. Perry
|
Director
|
5,500
|
*
|
-
|
-
|
||||||
|
Common
|
Donald
E. Walsh
|
Director
|
1,000
|
*
|
-
|
-
|
||||||
|
Common
|
Omer
S.J. Williams
|
Director
|
5,000
|
*
|
-
|
-
|
||||||
|
Common
|
Christopher
D. Maher
|
Executive
Vice President and
Director of Retail Banking
|
21,642
|
*
|
-
|
-
|
||||||
|
Common
|
Timothy
B. King
|
Senior
Vice President and Chief
Investment Officer
|
220,200
|
(15)
|
*
|
75,069
|
40,107
|
|||||
|
Common
|
Joseph
H. Farrell
|
Director
|
186,540
|
(16)
|
31,370
|
-
|
||||||
|
Common
|
Stanley
Meisels
|
Director
|
119,378
|
(16)
|
31,370
|
-
|
||||||
|
Common
|
Louis
V. Varone
|
Director
|
148,290
|
(16)
|
31,370
|
-
|
||||||
|
All
Directors and executive officers as a group (18 persons)
|
6,664,241
|
18.5%
|
1,720,812
|
729,097
|
||||||||
________________________
*
Less
than one percent
|
(1)
|
Titles
are for positions with the Company and the Bank except for Mr. Maher,
whose title is with the Bank only.
|
|
(2)
|
See
"Security Ownership of Certain Beneficial Owners and Management -
Principal Shareholders of the Company" for a definition of "beneficial
ownership."
|
|
(3)
|
The
figures shown include ESOP shares held in trust that have been allocated
to individual accounts as follows: Mr. Palagiano, 52,983 shares;
Mr. Devine, 52,983 shares; Mr. Mahon, 52,983 shares; Mr. Maher 1,223
shares and Mr. King, 49,818 shares, and all Directors and executive
officers as a group, 256,219 shares. Such persons have voting power
(subject to the legal duties of the ESOP Trustee) but no investment
power,
except in limited circumstances, as to such shares. The figures shown
for
Messrs. Palagiano,
Devine, Mahon, and King
do
not include any portion of the 1,484,937 ESOP shares held in trust
that
have not been allocated to any individual's account and as to which
Messrs. Palagiano, Devine, Mahon and King may be deemed to share
voting
power with other ESOP participants. The figure shown for all Directors
and
executive officers as a group includes 1,484,937 shares as to which
the
members of the Compensation Committee (consisting of Messrs. Fehrenbach,
Flynn and Perry) may be deemed to have sole investment power, except
in
limited circumstances, thereby causing each such Compensation Committee
member to be deemed a beneficial owner of such shares. Each member
of the
Compensation Committee disclaims beneficial ownership of such shares
and,
accordingly, such shares are not attributed to the members of the
Compensation Committee individually. In addition, the figure shown
for all
Directors and executive officers as a group includes 732,364 shares
held
in trust ("BMP Trust") for the benefit of Messrs. Palagiano, Devine,
Mahon
and King and other officers under the Benefit Maintenance Plan of
Dime
Community Bancshares, Inc. (the "BMP"). The BMP Trust, as directed
by the
Company, exercises voting and investment power over these shares
(See
"Compensation of Executive Officers - Benefits -
ESOP").
|
|
(4)
|
The
figures shown include shares held pursuant to the 401(k) Plan that
were
allocated as of the Record Date to individual accounts as follows:
Mr. Palagiano, 84,771 shares; Mr. Mahon, 91,048 shares; Mr. Maher 167
shares and all Directors and executive officers as a group, 223,273
shares. Such persons have sole voting power and sole investment power
as
to such shares [See "Compensation of Executive Officers - Benefits
-
401(k) Plan"].
|
|
(5)
|
Other
non-beneficial ownership amounts represent shares that are held in
trust
for the benefit of the respective Named Executive Officers under
the BMP.
Messrs. Palagiano, Devine, Mahon and King have neither voting nor
investment power with respect to these shares. However, since the
Company
maintains full voting and dispositive powers over these shares, they
are
included in the total beneficial ownership amount for the full Directors
and executive officers group (see footnote 3
above).
|
4
|
(6)
|
Includes
609,171 shares as to which Mr. Palagiano may be deemed to share voting
and
investment power.
|
|
(7)
|
Includes
350,549 shares as to which Mr. Devine may be deemed to share voting
and
investment power.
|
|
(8)
|
Includes
126,276 shares as to which Mr. Mahon may be deemed to share voting
and
investment power.
|
|
(9)
|
Includes
110,763 shares as to which Mr. Bergamo may be deemed to share voting
and
investment power.
|
|
(10)
|
Includes
84,375 shares as to which Mr. Clark may be deemed to share voting
and
investment power.
|
|
(11)
|
Includes
68,651 shares as to which Mr. Cohn may be deemed to share voting
and
investment power.
|
|
(12)
|
Includes
69,153 shares as to which Mr. Curtin may be deemed to share voting
and
investment power.
|
|
(13)
|
Includes
225 shares as to which Mr. Fehrenbach may be deemed to share voting
and
investment power.
|
|
(14)
|
Includes
26,779 shares as to which Mr. Flynn may be deemed to share voting
and
investment power.
|
|
(15)
|
Includes
83,861 shares as to which Mr. King may be deemed to share voting
and
investment power.
|
|
(16)
|
Messrs.
Farrell, Meisels and Varone retired from the Board of Directors effective
May 18, 2006.
|
______________________________________
PROPOSAL
1
ELECTION
OF DIRECTORS
______________________________________
General
The
Company's Certificate of Incorporation and Bylaws provide for the election
of
Directors by the shareholders. For this purpose, the Company's Board of
Directors is divided into three classes, each class to be as nearly equal in
number as possible. The terms of office of the members of one class expire,
and
a successor class is to be elected, at each annual meeting of shareholders.
The
Company currently has twelve Directors.
Patrick
E. Curtin, an incumbent Director whose term expires at the Annual Meeting,
has
been nominated by the Board of Directors to be re-elected at the Annual Meeting
for a term expiring at the annual meeting to be held in 2010, or when his
successor is otherwise duly elected and qualified. In addition, two
newly-elected Directors, Donald E. Walsh and Omer S.J. Williams, have been
nominated by the Board of Directors to be elected at the Annual Meeting for
a
term expiring at the annual meeting to be held in 2010, or when their successors
are otherwise duly elected and qualified. Further, in order to achieve equality
among the three classes of Directors, Vincent F. Palagiano, an incumbent
Director whose current term expires at the annual meeting to be held in 2008,
has been nominated by the Board of Directors to be elected at the Annual Meeting
to fill a vacant board seat for a three-year term expiring at the annual meeting
to be held in 2010, or when his successor is otherwise duly elected and
qualified. Upon election at the Annual Meeting to the class of Directors with
a
term of office expiring in 2010, Mr. Palagiano will simultaneously resign his
current board seat with a term expiring in 2008, thereby creating a vacancy
in
that class of Directors. If Mr. Palagiano is not elected to the class of
Directors with a term of office expiring in 2010, he will retain his current
board seat, and serve until the annual meeting to be held in 2008, or when
his
successor is otherwise duly elected and qualified.
Each
nominee has consented to being named in this Proxy Statement and to serve,
if
elected. In the event that any nominee for election as a Director at the Annual
Meeting is unable or declines to serve, which the Board of Directors has no
reason to expect, the persons named in the Proxy Card will vote with respect
to
a substitute nominee designated by the present Board of Directors, unless the
shareholder has elected to "withhold authority" with respect to all nominees.
Information
as to Nominees and Continuing Directors
In
March
2007, the Board determined that all of its current Directors with the exception
of Messrs. Palagiano, Devine, Mahon and Curtin were independent pursuant to
its
Policy Regarding Director Independence (the “Director Independence Policy”) and
the National Association of Securities Dealers, Inc. ("NASD") Rule 4200. In
March 2006, the Board
5
determined
that all of its Directors with the exception of Messrs. Palagiano, Devine,
Mahon, Curtin and Farrell were independent pursuant to the Director Independence
Policy and NASD Rule 4200. Messrs. Palagiano, Devine and Mahon were not
independent because they were officers of the Company. Messrs. Curtin and
Farrell were deemed not independent because they were members of a law firm
that
provides various legal services to the Company or its subsidiaries. See
"Transactions with Certain Related Persons." Mr. Williams is a partner at
Thacher Profitt & Wood LLP ("Thacher"), which provides general corporate
legal services to the Company and its subsidiaries. The Company or Bank paid
$84,714 in fees to Thacher in 2006. The Board considered this relationship
in
examining Mr. Williams' independence and determined that it would not interfere
with his exercise of independent judgment in satisfying the responsibilities
of
a Director or otherwise violate law or the Director Independence Policy. The
Director Independence Policy is available on the Company's website at
www.dimedirect.com
by
clicking Investor Relations and then Corporate Governance within the Investor
Relations menu.
The
Nominating Committee is responsible for identifying, evaluating and recommending
nominees for election by the Company’s shareholders. The Nominating Committee is
authorized to retain search firm(s) to assist in the identification of
candidates. The Nominating Committee is not limited to a specific process in
identifying candidates and will consider potential nominees from various
sources, including recommendations from shareholders as well as Directors and
officers of the Company. Individuals recommended by shareholders are evaluated
in a manner identical to other potential nominees.
The
Nominating Committee has adopted general criteria for nomination to the Board,
which establish the minimum qualifications and experience that the Board will
examine in determining candidates for election. Pursuant to the general
criteria, Directors should possess personal and professional ethics, integrity
and values; be committed to representing the long-term interests of the
Company’s shareholders and other constituencies; possess the ability to (a)
exercise sound business judgment, (b) work with others as an effective group,
and (c) commit adequate time to their responsibilities; be independent as
defined in applicable law, the Director Independence Policy and its Code of
Business Ethics and be able to impartially represent the interests of the
Company’s shareholders and other constituencies; possess experience and
expertise relevant to the business of the Company; and possess such other
knowledge, experience or skills as required or which may be useful considering
the composition of the Board, the operating requirements of the Company and
the
long-term interests of the shareholders.
The
following table sets forth certain information with respect to each nominee
for
election as a Director and each Director whose term does not expire at the
Annual Meeting ("Continuing Director"). There are no arrangements or
understandings between the Company and any Director or nominee pursuant to
which
such person was selected as a Director or nominee. For information with respect
to security ownership by Directors, see "Security Ownership of Certain
Beneficial Owners and Management - Security Ownership of
Management."
|
Nominees
|
Age(1)
|
Director
Since(2)
|
Term
Expires
|
Position(s)
Held with the Company and the Bank
|
||||
|
Vincent
F. Palagiano
|
66
|
1978
|
2008
|
Director,
Chairman of the Board and Chief Executive Officer
|
||||
|
Patrick
E. Curtin
|
61
|
1986
|
2007
|
Director
|
||||
|
Donald
E. Walsh
|
62
|
2006(3)
|
2007
|
Director
|
||||
|
Omer
S. J. Williams
|
66
|
2006(3)
|
2007
|
Director
|
||||
|
Continuing
Directors
|
||||||||
|
Michael
P. Devine
|
60
|
1980
|
2009
|
Director,
President and Chief Operating Officer
|
||||
|
Kenneth
J. Mahon
|
56
|
2003
|
2008
|
Director,
Executive Vice President and Chief Financial Officer
|
||||
|
Anthony
Bergamo
|
60
|
1986
|
2009
|
Director
|
||||
|
George
L. Clark, Jr.
|
66
|
1980
|
2008
|
Director
|
||||
|
Steven
D. Cohn
|
58
|
1994
|
2008
|
Director
|
||||
|
Fred
P. Fehrenbach
|
70
|
1987
|
2009
|
Director
|
||||
|
John
J. Flynn
|
70
|
1994
|
2008
|
Director
|
||||
|
Joseph
J. Perry
|
40
|
2005
|
2009
|
Director
|
(1)
As of
March 30, 2007.
(2)
Includes service as a Director or Trustee with the Bank prior to the Company's
incorporation on December 12, 1995.
(3)
Mr.
Walsh and Mr. Williams were elected to serve as Directors of both the Company
and Bank on July 26, 2006.
The
principal occupation and business experience of each nominee for election as
a
Director and each Continuing Director are set forth below.
6
Nominees
for Election as Director
Vincent
F. Palagiano has
served as the Chairman of the Board and Chief Executive Officer of the Company
since its formation in 1995 and of the Bank since 1989. He has served as a
Trustee or Director of the Bank since 1978. In addition, Mr. Palagiano has
served on the Boards of Directors of the Institutional Investors Capital
Appreciation Fund since 1996, the Boy Scouts of America, Brooklyn Division,
since 1999, and The Community Banker's Association of New York from 2001 to
2005. Mr. Palagiano joined the Bank in 1970 as an appraiser and has also served
as President of both the Company and the Bank, and as Executive Vice President,
Chief Operating Officer and Chief Lending Officer of the Bank. Prior to 1970,
Mr. Palagiano served in the real estate and mortgage departments at other
financial institutions and title companies.
Patrick
E. Curtin has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1986. Mr. Curtin is a senior partner in the law
firm of Conway Farrell Curtin & Kelly, P.C. ("Conway Farrell") in New York,
New York.
Donald
E. Walsh has
served as a Director of both the Company and Bank since July 2006, as a Director
of the Bank's wholly owned subsidiary, Havemeyer Equities, Inc., from November
2005 through June 2006. Mr. Walsh retired in 2005 as one of three partners
in
the Office of the Vice Chairman of Audit and Advisory Services of KPMG LLP
("KPMG"), an auditing and advisory services firm. Mr. Walsh was a
Partner-in-Charge of the Audit Quality Office of KPMG from 2002 through 2005,
where he developed and executed the national implementation of new initiatives
in the areas of resource management, client satisfaction and service pricing.
Prior to this responsibility, Mr. Walsh served as Chief Operating Partner of
the
Northeast Risk and Advisory Services practice of KPMG, where he managed the
combination of the Information Risk Management and Advisory Services practices.
From 1998 through 2001, Mr. Walsh served as the first leader of the Northeast
Audit Advisory Services practice of KPMG.
Omer
S.J. Williams
has
served as a Director of both the Company and Bank since July 2006. Mr. Williams
is a partner at Thacher, where he has served as both the Chairman of the firm's
Executive Committee and the Managing Partner of the firm. Mr. Williams has
more
than 40 years of experience in corporate and financial institution law,
including securities and mortgage finance issues.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
NOMINEES FOR ELECTION AS DIRECTORS.
Continuing
Directors
Michael
P. Devine
has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1980. Mr. Devine has served as President of both
the Company and Bank since January 1, 1997 and as Chief Operating Officer of
the
Company since its inception in 1995 and of the Bank since 1989. Prior to Mr.
Devine’s appointment as President, he served as Executive Vice President and
Secretary of both the Company and the Bank. Mr. Devine joined the Bank in 1971
and has served as the Internal Auditor, Comptroller and Investment Officer.
Prior to 1971, Mr. Devine served as a Senior Accountant with the firm of Peat
Marwick Mitchell & Co. Since August 2001, Mr. Devine has served on the Board
of Directors of Retirement Systems Group, Inc.
Kenneth
J. Mahon was
elected to serve as a Director of the Company effective January 1, 2002, and
has
served as a Director of the Bank since 1998. Mr. Mahon has served as the
Executive Vice President of both the Company and the Bank since 1997, and the
Chief Financial Officer of both the Company and the Bank since 1996. Prior
to
serving as the Executive Vice President and Chief Financial Officer, Mr. Mahon
served as the Bank's Comptroller and Senior Vice President. Mr. Mahon is a
member of the Financial Managers Society, the National Investor Relations
Institute and the National Association of Corporate Directors, and serves on
the
Neighborhood Advisory Board of Brooklyn Legal Services Corporation A. Prior
to
joining the Bank in 1980, Mr. Mahon served in the financial areas of several
New
York City metropolitan area savings banks.
Anthony
Bergamo has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1986. Mr. Bergamo is a licensed attorney in New
York and New Jersey and currently serves as Vice Chairman of MB Real Estate
headquartered in Manhattan, New York. Mr. Bergamo also is the chief executive
officer of Niagara Falls Redevelopment LLC and Chairman of the Federal Law
Enforcement Foundation. In 2002, Mr. Bergamo was appointed as a director of
Lonestar Steakhouse and Saloon, Inc., a publicly traded company.
7
George
L. Clark, Jr. has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1980. Mr. Clark is President of George L. Clark
Inc. (Realtors), a New York State licensed real estate firm. Mr. Clark was
a
director of the Federal National Mortgage Association between 1986 and 1992,
and
a former Chairman of the New York State Republican Committee. Mr. Clark has
been
a licensed real estate broker for 46 years.
Steven
D. Cohn has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1994. Mr. Cohn is the managing partner in the
law
firm of Goldberg and Cohn LLP, in Brooklyn Heights, New York.
Fred
P. Fehrenbach
has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since 1987. Mr. Fehrenbach is President of Consolidated
Brokerage Corp., a retail insurance brokerage business located in Great Neck,
New York. Mr. Fehrenbach has been with Consolidated Brokerage Corp. since 1975.
Mr. Fehrenbach is also the President of Shell Realty Corp., a real estate
holding company.
Joseph
J. Perry
has
served as a Director of both the Company and Bank since September 2005, and
as a
Director of the Bank's wholly-owned subsidiary, Havemeyer Equities, Inc., from
January 2004 through August 2005. He is currently a partner at Marcum &
Kliegman LLP, a public accounting and consulting firm headquartered in Melville,
New York, where he has served as the partner-in-charge of the Long Island Tax
Department since July 2004. Prior to joining Marcum & Kliegman LLP, Mr.
Perry was a tax partner at one of the leading "Big 5" accounting firms and
provided services to several financial services companies throughout the New
York metropolitan area. Mr. Perry is a member of the American Institute of
Certified Public Accountants and the New York State Society of Public
Accountants. He has additionally served as a member of the advisory board to
Suffolk Community College.
John
J. Flynn has
served as a Director of the Company since its formation in 1995 and as a Trustee
or Director of the Bank since October 1994, and before that from February 1983
to February 1993. From February 1993 through August 1994, Mr. Flynn was
Executive Vice President of Flushing Savings Bank, FSB in Flushing, New York.
Since September 1994, Mr. Flynn has been a self-employed real estate mortgage
broker and consultant.
Meetings
and Committees of the Company's Board of Directors
The
Board
of Directors meets on a monthly basis and may have additional special meetings
upon the request of the Chairman of the Board, President or at least 60% (but
not less than five) of the Directors then in office. The Company's Board of
Directors met twelve times during the year ended December 31, 2006. No incumbent
Directors during 2006 attended fewer than 75% of the aggregate of: (1) the
total
number of Board meetings conducted during the period for which he was a
Director, and (ii) the total number of meetings conducted by committees of
the
Board on which he served during the periods that he served.
The
Company's Board of Directors has established the following
committees:
The
Executive Committee consists
of Messrs. Palagiano (Chairman), Devine, Bergamo, Clark, Cohn and Fehrenbach.
The purpose of the Executive Committee is to exercise all the powers of the
Board in the management of the business and affairs of the Company in the
intervals between the meetings of the Board. The Executive Committee meets
at
the call of the Chairman, President or a majority of the members of the
Executive Committee. The Executive Committee conducted no meetings during
the year ended December 31, 2006.
The
Compensation Committee consists
of Messrs. Fehrenbach (Chairman), Flynn and Perry. Mr. Varone was a member
of
the Compensation Committee until his retirement from the Board effective May
18,
2006. The Compensation Committee establishes the compensation of the Chief
Executive Officer, approves the compensation of executive management, oversees
administration of the process for determining the compensation and benefits
of
officers and employees of the Bank, recommends Director compensation to the
Board and assists the Board in its oversight of the human resources activities
of the Company and its subsidiaries. The Compensation Committee's charter
requires that it meet annually and as requested by the Chairman of the Board
of
Directors. The Compensation Committee met four times during
the year ended December 31, 2006.
The
Nominating Committee consists
of Messrs. Flynn (Chairman), Fehrenbach, and Bergamo, each of whom is
independent as defined in Rule 4350(d) ["Rule 4350(d)"] of the NASD listing
standards. In 2006, the functions of the Nominating Committee were performed
by
the Nominating and Governance Committee. The Nominating Committee recommends
to
the Board nominees for all Directorships and committee memberships, and
establishes criteria for the selection of new Directors to serve on the Board.
The Nominating and Governance Committee met three times during 2006. In
addition, the Nominating Committee met on March 15, 2007 to, among other
matters, select the nominees for election as Directors at the Annual Meeting.
In
accordance with the Company's Bylaws, provided the Nominating Committee makes
such nominations, no nominations for election as Director except those made
8
by
the
Nominating Committee shall be voted upon at the Annual Meeting unless properly
made by a shareholder in accordance with the procedures set forth under "2007
Annual Shareholder Meeting Proposals" in the proxy statement for the annual
meeting held in May 2006. The Nominating Committee operates pursuant to a
charter. A current copy of the Nominating Committee charter is available on
the
Company's website, at www.dimedirect.com, by clicking Investor Relations and
then Corporate Governance within the Investor Relations menu.
The
Governance Committee consists
of Messrs. Williams (Chairman), Cohn and Perry. The Governance Committee
develops and recommends to the Board corporate governance principles applicable
to the Company, and otherwise assumes a leadership role in the corporate
governance of the Company. In 2006, the functions of the Governance Committee
were performed by the Nominating and Governance Committee. The Nominating and
Governance Committee met three times during 2006.
The
Audit Committee consists
of Messrs. Bergamo (Chairman), Clark, Cohn, Perry and Walsh, each of whom is
independent as defined in Rule 4350(d). Mr. Walsh was not a member of the Audit
Committee in 2006. Mr. Meisels was a member of the Audit Committee until his
retirement from the Board effective May 18, 2006. Mr. Meisels was independent
as
defined in Rule 4350(d). The Audit Committee is appointed by the Board of
Directors of the Company to assist the Board in (1) monitoring the integrity
of
the financial statements of the Company, (2) monitoring Company compliance
with
legal and regulatory requirements and internal controls, (3) monitoring the
independence and performance of the Company’s internal and independent auditors,
and (4) maintaining an open means of communication among the independent
auditor, senior management, the internal auditors, and the Board. The Audit
Committee operates pursuant to a written charter. A
current
copy of the charter may be viewed on the Company's website at www.dimedirect.com.
The
Audit
Committee charter requires that it meet at least four times annually or more
frequently as circumstances dictate. The Audit Committee met eight times
during
the year ended December 31, 2006.
Report
of Audit Committee
The
following Report of the Company's Audit Committee is provided in accordance
with
the rules and regulations of the SEC.
Under
rules promulgated by the SEC, the Company is required to provide certain
information regarding the activities of its Audit Committee. In fulfillment
of
this requirement, the Audit Committee, at the discretion of the Board, has
prepared the following report for inclusion in the Proxy Statement:
1. The
Audit
Committee has reviewed and discussed the audited consolidated financial
statements of the Company as of and for the year ended December 31, 2006 with
management;
2. The
Audit
Committee has discussed with the independent auditors the matters required
to be
discussed by the Statement on Auditing Standards No. 61, as amended (AICPA
Professional Standards. Vol. 1, AU Section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T;
3. The
Audit
Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No.
1
(Independence Standards Board No. 1, Independence Discussions with Audit
Committees), as adopted by the Public Company Accounting Oversight Board in
Rule
3600T, and has discussed with the independent accountant the independent
accountant's independence; and
4. Based
on
the review and discussions referred to in paragraphs 1 through 3 above, the
Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual Report
on
Form 10-K for the year ended December 31, 2006 for filing with the Securities
and Exchange Commission.
AUDIT
COMMITTEE OF DIME COMMUNITY BANCSHARES, INC.
Anthony
Bergamo, Chairman
George
L.
Clark, Jr., Member
Steven
D.
Cohn, Member
Joseph
J.
Perry, Member
Donald
E.
Walsh, Member
The
Board
of Directors has determined that Messrs. Bergamo, Perry and Walsh qualify as
Audit Committee financial experts as defined in Item 407(d)(5) of SEC Regulation
S-K.
9
Directors'
Compensation
Fee
Arrangements.
During
the year ended December 31, 2006, each of the Company's non-officer Directors
(each an "Outside Director") received a retainer of $30,000 and a fee of $1,000
for each of the Company's or the Bank's Board meetings attended. The meeting
attendance fee was $1,000 for the Audit Committee and $700 for all other
committees. The Chairman of the Audit Committee additionally receives an annual
retainer of $5,000. If both of the Company's and the Bank's Boards of Directors
or corresponding committees met on the same day, such Directors received only
one fee for the Board meetings and only one fee for the committee meetings.
Directors'
Retirement Plan.
The
Company has adopted the Retirement Plan for Board Members of Dime Community
Bancshares, Inc. (the "Directors' Retirement Plan"), which provides benefits
to
each eligible Outside Director commencing on termination of Board service at
or
after age 65. An eligible Outside Director retiring at or after age 65 will
be
paid an annual retirement benefit equal to the amount of the aggregate
compensation for services as a Director (excluding stock compensation) paid
to
him or her for the twelve-month period immediately prior to termination of
Board
service, multiplied by a fraction, the numerator of which is the number of
years
of service, up to a maximum of 10, as an Outside Director (including service
as
a Director or trustee of the Bank or any predecessor) and the denominator of
which is 10. An individual who terminates Board service after having served
as
an Outside Director for 10 years may elect to begin collecting benefits under
the Directors' Retirement Plan at or after attainment of age 55, however, the
annual retirement benefits will be reduced pursuant to an early retirement
reduction formula to reflect the commencement of benefit payments prior to
age
65. An Outside Director may elect to have benefits distributed in any one of
the
following forms: (i) a single life annuity; (ii) a 50% or 100% joint and
survivor annuity; or (iii) a single life annuity with a 5, 10, or 15 year
guaranteed term. In the event that an Outside Director dies prior to the
commencement of benefit payments under the Directors' Retirement Plan, a 50%
survivor annuity will automatically be paid to his or her surviving spouse,
unless the decedent has elected otherwise. This plan has been frozen effective
March 31, 2005.
1996
Stock Option Plan and RRP. The
Dime
Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors,
Officers and Employees (the "1996 Stock Option Plan") and the RRP were adopted
by the Company's Board of Directors and subsequently approved by its
shareholders at its annual meeting held in 1996. On December 26, 1996, the
effective date of the 1996 Stock Option Plan, each of the Company's Outside
Directors was granted non-qualified stock options to purchase 133,902 shares
of
Common Stock. These options vested in equal 20% installments on December 26,
1997, 1998, 1999, 2000 and 2001. Similarly on December 26, 1996, the effective
date of the RRP, restricted stock awards were granted to each Outside Director
with respect to 53,560 shares of Common Stock. These awards vested in equal
20%
installments on February 1, 1998, 1999, 2000, 2001 and 2002, with, pursuant
to
the provisions of the RRP, accelerated vesting provided upon the death of
Outside Director James M. Fox in May 1997.
2001
Stock Option Plan.
The Dime
Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors,
Officers and Employees (the "2001 Stock Option Plan") was adopted by the
Company's Board of Directors and subsequently approved by its shareholders
at
its annual meeting held in 2001. On November 21, 2001, the effective date of
the
2001 Stock Option Plan, each of the Company's Outside Directors was granted
non-qualified stock options to purchase 6,750 shares of Common Stock. All of
these options vested on November 21, 2002. On February 1, 2003, each of the
Company's Outside Directors was additionally granted non-qualified stock options
to purchase 7,500 shares of Common Stock. All of these options vested on
February 1, 2004. On January 27, 2004, each of the Company's Outside Directors
was additionally granted non-qualified stock options to purchase 9,000 shares
of
Common Stock. All of these options vested on January 27, 2005.
2004
Stock Incentive Plan.
The
2004 Stock Incentive Plan for Outside Directors, Officers and Employees (the
"2004 Stock Plan"), was adopted by the Company's Board of Directors and
subsequently approved by its shareholders at its annual meeting held in 2004.
On
January 31, 2005, under the 2004 Stock Plan, a grant of 8,480 non-qualified
stock options with an exercise price of $16.45 per share was made to each
Outside Director of the Company, for a total grant of 76,320 options. All of
these options expire on January 31, 2015. On December 30, 2005, vesting was
accelerated for all unvested options of this grant.
There
have been no grants of stock options or restricted stock since January 31,
2005.
10
The
following table sets forth information regarding compensation earned by each
Outside Director
during
the year ended December 31, 2006:
|
Name
|
Fees
Earned or Paid in Cash (1)
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings(2)
|
All
Other Compensation(3)
|
Total
|
|||||
|
Anthony
Bergamo
|
$58,400
|
—
|
$25,317
|
—
|
$83,717
|
|||||
|
George
L. Clark, Jr.
|
50,100
|
—
|
12,793
|
—
|
62,893
|
|||||
|
Steven
D. Cohn
|
50,400
|
—
|
17,158
|
—
|
67,558
|
|||||
|
Patrick
E. Curtin
|
52,600
|
—
|
31,905
|
—
|
84,505
|
|||||
|
Joseph
H. Farrell(4)
|
23,000
|
—
|
—
|
$19,731
|
42,731
|
|||||
|
Fred
P. Fehrenbach
|
48,200
|
—
|
—
|
—
|
48,200
|
|||||
|
John
J. Flynn
|
48,200
|
—
|
—
|
—
|
48,200
|
|||||
|
Stanley
Meisels(4)
|
23,800
|
—
|
—
|
16,696
|
40,496
|
|||||
|
Joseph
J. Perry
|
50,500
|
—
|
—
|
700
|
51,200
|
|||||
|
Donald
E. Walsh
|
23,600
|
—
|
—
|
—
|
23,600
|
|||||
|
Omer
S. J. Williams
|
22,600
|
—
|
—
|
—
|
22,600
|
|||||
|
Louis
V. Varone(4)
|
24,200
|
—
|
—
|
20,105
|
44,305
|
(1)
Includes retainer payments, meeting fees, and committee and/or chairmanship
fees
earned during the fiscal year, whether such fees were paid currently or
deferred. For Mr. Walsh, amount includes $2,000 of fees earned as a Director
of
Havemeyer Equities Corporation from January 2006 through June 2006. For Mr.
Varone, amount includes $2,000 of fees earned as a Director of Havemeyer
Equities Corporation from July 2006 through December 2006.
(2)
Includes for each individual the increase (if any) for the fiscal year in the
present value of the individual's accrued benefit (whether or not vested) under
each tax-qualified and non-qualified actuarial or defined benefit plan
calculated by comparing the present value of each individual's accrued benefit
under each such plan in accordance with Statement of Financial Accounting
Standards 87 "Employers’
Accounting for Pensions"
("SFAS
87") as of the plan's measurement date in such fiscal year to the present value
of the individual's accrued benefit as of the plan's measurement date in the
prior fiscal year. The following individuals experienced year-to-year declines
in the actuarial value of their accrued benefits under defined benefit or
actuarial plans that are not reflected in the reported figures: Mr. Farrell
$9,284; Mr. Fehrenbach $8,115; Mr. Flynn $8,175; Mr. Meisels $9,396 and Mr.
Varone $9,230.
(3)
For Messrs. Farrell, Meisels and Varone, amount represents retirement benefits
paid under the Directors' Retirement Plan subsequent to their retirement from
the Board effective .May 18, 2006. For Mr. Perry, amount represents a
consulting fee paid to Mr. Perry from the Board of Directors of Havemeyer
Equities Corporation, a subsidiary of the Bank.
(4)
Pursuant to the Company's Bylaws, Messrs. Farrell, Meisels and Varone retired
effective May 18, 2006 as a result of reaching mandatory retirement age.
Executive
Officers
The
following individuals are executive officers of the Company or Bank, holding
the
offices set forth opposite their names:
|
Name
|
Position
Held
|
|
|
Vincent
F. Palagiano
|
Chairman
of the Board and Chief Executive Officer
|
|
|
Michael
P. Devine
|
President
and Chief Operating Officer
|
|
|
Kenneth
J. Mahon
|
Executive
Vice President and Chief Financial Officer
|
|
|
Christopher
D. Maher
|
Executive
Vice President and Director of Retail Banking (Bank
Only)
|
|
|
Timothy
B. King
|
Senior
Vice President and Chief Investment Officer
|
|
|
Michael
Pucella
|
Senior
Vice President and Chief Accounting
Officer
|
The
executive officers are elected annually and hold office until their respective
successors have been elected and qualified, or until death, resignation or
removal by the Board of Directors. The Company has entered into Employment
Agreements with certain of its executive officers which set forth the terms
of
their employment. See "Compensation of Executive Officers - Employment
Agreements and - Employee Retention Agreements."
11
Biographical
information of the executive officers who are not Directors of the Company
or
Bank is set forth below.
Christopher
D. Maher,
age
40, joined
the Bank as Executive Vice President in charge of retail banking in November
2005. Prior to joining the Bank, Mr. Maher was a Senior Vice President at BISYS
Information Services, L.P., a unit of the BISYS Group, Inc., a diversified
financial services firm. Mr. Maher's banking experience includes work for
several New York City metropolitan area banks, including Dime Savings Bank
of
New York, Chemical Bank, and Chatham Savings. Mr. Maher was a Senior Vice
President in the Retail Banking division of Dime Savings Bank of New York,
where
he served from 1989 through 2000. Mr. Maher is a former Director of the IFX
Forum, a financial services technology standards organization and has served
as
a Trustee for Helen Keller Services for the Blind since 1998.
Timothy
B. King, age
48,
has over 24 years of banking experience, and has been with the Bank since 1983.
Mr. King was promoted to Treasurer of the Bank in 1989, Vice President of the
Bank in 1993, Treasurer of the Company at its inception in 1995, First Vice
President of both the Company and Bank in 1997, and Senior Vice President of
both the Company and the Bank in 1999. In 2002, Mr. King was named the Chief
Investment Officer of both the Company and Bank, as he oversees the securities
investment and lending functions of the Bank.
Michael
Pucella,
age 53,
was promoted to Comptroller of the Bank in 1989 and of the Company at its
inception in 1995, Vice President of both the Company and Bank in 1996, First
Vice President of both the Company and Bank in 1997 and Senior Vice President
of
both the Company and the Bank in 1999. He currently serves as the Chief
Accounting Officer of both the Company and Bank, and is responsible for
financial reporting, budgeting, corporate planning and tax administration.
Mr.
Pucella has been with the Bank since 1981, and has over 32 years of banking
experience.
COMPENSATION
OF NAMED EXECUTIVE OFFICERS
Processes
and Procedures for Consideration and Determination of Executive and Director
Compensation
The
Compensation Committee assists the Board of Directors in discharging its
responsibilities regarding the Company’s compensation and benefit plans and
practices. All authority granted to the Compensation Committee is established
in
its charter, a copy of which may be viewed on the Company's website at
www.dimedirect.com.
The
Compensation Committee meets as necessary. It meets in executive session with
its advisors and with invited management present. It considers the expectations
of the Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer with respect to their own compensation, their recommendations with
respect to the compensation of more junior executive officers and their
recommendations with respect to Director compensation, as well as empirical
data
and the recommendations of advisors. Executive officer compensation matters
are
also presented for discussion at meetings of the full Board of Directors.
The
Compensation Committee may delegate such of its responsibilities and duties
as
it deems appropriate to (i) subcommittees comprised of one or more Compensation
Committee members, or (ii) officers of the Company or the Bank.
Use
of Outside Advisors and Survey Data.
In
early 2006, the Compensation Committee selected and engaged Mercer Human
Resource Consulting, a nationally recognized compensation consulting firm,
to
assist in performing its duties, including but not limited to, conducting a
competitive review of executive officer compensation levels and practices.
The
Compensation Committee communicates directly with, and receives written reports
directly from, its consultant. The Compensation Committee determines the
compensation of its consultant and meets with the consultant both in executive
session and with invited executive officers present. The Compensation Committee
relies on consultants for survey data, assistance in understanding market
practices and trends, and recommended compensation strategies. The Compensation
Committee relies on the Company’s legal counsel for advice as to its obligations
under applicable corporate, securities, tax and employment laws, for assistance
in interpreting its obligations under compensation plans and agreements, and
for
drafting plans and agreements to document business decisions, however, the
Compensation Committee has the right to select other legal counsel.
12
Compensation
Discussion and Analysis
Introduction
Set
forth
below are (i) a description of the Company's decision making process for
compensating the principal executive officer, principal financial officer,
and
three most highly compensated executive officers (other than the principal
executive and principal financial officers) of the Company or Bank (each a
"Named Executive Officer" and collectively the "Named Executive Officers")
(ii)
a discussion of the background and objectives of the Company's compensation
programs for Named Executive Officers, and (iii) a description of the material
elements of the compensation of each of the Named Executive
Officers.
The
descriptions of compensation plans, programs and individual arrangements
referred to in the Compensation Discussion and Analysis that are governed by
written documents are qualified in their entirety by reference to the full
text
of their governing documents. Other than broad-based plans applicable to
substantially all salaried employees, these documents have been filed as
exhibits to the Company's Annual Report on Form 10-K for the year ended December
31, 2006 and are incorporated herein by this reference.
1. Objectives.
The
goal
of the executive compensation program is to enable the Company to attract,
develop and retain strong executive officers capable of maximizing the Company’s
performance for the benefit of its shareholders. The Company's compensation
philosophy is to provide competitive compensation opportunities that are
strongly aligned with its financial performance and the generation of value
for
shareholders through stock price appreciation. In 2006, the Company continued
to
experience an adverse interest rate environment that negatively affected
profitability. As a result, the Company's focus was on retaining and motivating
key executives while aggressively controlling expense, including executive
compensation.
2. Key
Elements of the Compensation Package.
In
General. The
Company's 2006 compensation program for Named Executive Officers consisted
of
three key elements:
| · |
base
salary to provide a reasonable level of recurring income;
|
| · |
annual
incentives to motivate the Named Executive Officers to achieve short-term
operating objectives; and
|
| · |
long-term
incentives in the form of stock options and/or restricted stock,
designed
to retain talented employees and provide an incentive to maximize
shareholder return in the longer term.
|
The
Company additionally provides certain retirement plans, termination benefits,
fringe benefits and perquisites, in some instances for a large group of
employees and in others limited to one or more executives.
Base
Salary. Executive
base salary levels are generally reviewed on an annual basis and adjusted as
appropriate. The Company desires to compensate executives fairly while being
sensitive to increasing fixed costs in light of the performance of the Common
Stock.
For
2006,
the Compensation Committee considered the prevailing market conditions and
determined, with the input and support of the officers involved, not to increase
the base salary for the top two officers of the Company - the Chief Executive
Officer and the President. At December 31, 2006, their base salary had not
been
increased in three years.
Mr.
Maher
was hired in October of 2005, and was not considered for a salary increase
in
2006 due to his brief tenure in office.
13
The Company’s two other Named Executive Officers had their base salary levels increased by between 5.9% and 8.8% effective January 1, 2006. In 2006, base salary increases for the Named Executive Officers were as follows:
|
Name
|
%
Increase
|
Dollar
Increase
|
Resulting
Annual Base Salary Rate
|
|||
|
Vincent
F. Palagiano
|
-
|
-
|
$640,000
|
|||
|
Michael
P. Devine
|
-
|
-
|
505,000
|
|||
|
Kenneth
J. Mahon
|
5.9%
|
$20,000
|
362,000
|
|||
|
Timothy
B. King
|
8.8
|
20,000
|
248,000
|
|||
|
Christopher
D. Maher
|
-
|
-
|
300,000
|
These
decisions resulted from a competitive base salary review produced by the
Compensation Committee's independent consultant that evaluated corporate and
individual performance during 2005 within the context of the Company’s ongoing
efforts to control fixed costs. Following these decisions, the base salary
of
each of the Named Executive Officers was at or slightly below the median for
the
Company's peer group. These targeted salary increases were designed to reward
effort in a challenging operating environment and assist in the retention of
executives directly responsible for key operating units.
Annual
Incentives.
Annual
incentive opportunities are provided to the Named Executive Officers to link
the
achievement of annual goals with executive compensation. Continuing a practice
initiated in 2004, a bonus pool in an amount based on the Company's net income
is distributed at the discretion of the Compensation Committee. The Compensation
Committee determines each Named Executive Officer's bonus (if any) based on
a
retrospective review of a variety of corporate performance factors and each
Named Executive Officer's contributions to the Company in light of the operating
environment existing during the year. In contrast to a strict formula-based
bonus program, this approach better enables the Company to manage the potential
profit dilution of the bonus program and reward executives for conduct
responsive to the Company's needs.
The
Compensation Committee approved awards totaling $495,000 to the Company’s Named
Executive Officers for the year ended 2006, based on assessment of management's
success in operating the Company in a period characterized by the continued
movement away from historical low interest rates and heightened competition
in
the Bank’s multifamily lending and deposit operations.
For
2006,
the Named Executive Officers’ bonuses were as follows: Mr. Palagiano, $140,000;
Mr. Devine, $115,000; Mr. Mahon, $100,000; Mr. Maher, $75,000 and Mr. King,
$65,000. In the case of Mr. Palagiano, this was a minor increase from the prior
year’s bonus of $139,000. Mr. Devine, Mr. Mahon and Mr. King received a small
increase in bonus from the prior year, $4,000 in Mr. Devine’s case and $5,000
for both Mr. Mahon and Mr. King. The Company expects that these bonus amounts,
and the resultant total cash compensation paid to each of the Named Executive
Officers, may be below the median for its peer group for 2006. This reflects
constraints on the size of the bonus pool related to the Company’s profitability
for 2006, rather than concerns with the individual performance of the Named
Executive Officers.
Long-term
Incentives.
The
Compensation Committee believes that grants of long-term incentive in the form
of stock options and/or restricted stock are the most effective way, where
appropriate, of aligning executive rewards with the creation of value for
shareholders through stock appreciation.
Messrs.
King and Maher each received a restricted stock award of 10,000 shares, in
the
case of Mr. Maher on January 3, 2006 and in the case of Mr. King, on March
16,
2006. The value for each award was $146,100 for Mr. Maher and $144,600 for
Mr.
King on the date of grant. Both grants occurred under the 2004 Stock Incentive
Plan and vest over five years. Such awards considered the consulting firm’s
recommendation, Company and individual performance, as well as competitive
market conditions. In consideration of the Company’s performance for the year
ended December 31, 2005, the Compensation Committee decided that no awards
of
restricted stock or stock options be granted to Messrs. Palagiano, Devine and
Mahon. After consultation with executive management, the Compensation Committee
reached this decision principally to allow reallocation of funds and related
expenses to fund new initiatives and offset operating overhead growth. The
Company does intend to make selective equity awards in the future as part of
its
ongoing competitive executive compensation program.
Other
Elements of the Executive Compensation Package.
The
Company's compensation program for Named Executive Officers consisted of the
following additional elements:
Retirement
Plan —
While
the Bank maintains the Retirement Plan of The Dime Savings Bank of Williamsburgh
(the "Retirement Plan"), a non-contributory, tax-qualified defined
14
benefit
pension plan for eligible employees, all participant benefits under the
Retirement Plan were frozen in March of 2000, and no benefits have been accrued
under the Retirement Plan since that date.
401(k)
Plan — The Bank maintains the 401(k) Plan, which is a tax-qualified defined
contribution plan permitting salaried employees with at least one year of
service to make pre-tax salary deferrals under Section 401(k) of The Internal
Revenue Code of 1986 (the "Code"). Each participant receives a fully vested
contribution of 3% of "covered compensation" (defined as total W-2 compensation
including amounts deducted from W-2 compensation for pre-tax benefits such
as
health insurance premiums and contributions to the 401(k) Plan) up to applicable
IRS limits. The 3% contribution is required through 2006 and is discretionary
in
years after 2006.
ESOP
—
The Company has established, and the Bank has adopted, the ESOP and related
trust for the benefit of eligible employees. All of the Company's and the Bank's
salaried employees are eligible to become participants in the ESOP after one
year of employment.
BMP
—
The
Bank maintains a BMP, which provides eligible employees with benefits that
would
be due under the Retirement Plan, ESOP and 401(k) Plan, if such benefits were
not limited under the Code. Effective January 1, 2005, the BMP benefit accruals
associated with the 401(k) Plan and ESOP were terminated, therefore, no BMP
benefits were provided to the Named Executive Officers for the year ended
December 31, 2006 with respect to the 401(k) Plan and ESOP. Effective April
1,
2000, Retirement Plan benefit accruals were terminated, thus eliminating related
benefit accruals under the BMP. However, the present value of such benefits
continues to increase as the Named Executive Officers approach normal retirement
age. These increases in present value are reported in the Summary Compensation
Table under the column Change in Pension Value and Nonqualified Deferred
Compensation Earnings.
RRP —
The
Company adopted the RRP, which was approved by shareholders at their 1996 annual
meeting. No additional shares were allocated by the RRP during the year ended
December 31, 2006. The RRP terminated in December 2006.
1996
Stock Option Plan — The Company adopted the 1996 Stock Option Plan, which was
approved by the Company's shareholders at their 1996 annual meeting and which
terminated in 2006.
2001
Stock Option Plan — The Company's Board of Directors adopted the 2001 Stock
Option Plan, which was approved by the Company's shareholders at their 2001
annual meeting. Under the 2001 Stock Option Plan, up to 253,125 stock options
are eligible for grant to the Company's outside Directors and up to 1,771,875
stock options are eligible for grant to officers and employees of the Company
or
its subsidiaries. Grants of stock options were all vested on December 30,
2005.
2004
Stock Incentive Plan — The Company's Board of Directors has adopted the 2004
Stock Incentive Plan, which was approved by the Company's shareholders at their
2004 annual meeting. The 2004 Stock Incentive Plan permits the Company to grant
up to a total of 1,496,300 restricted stock awards, incentive or non-qualified
stock options or stock appreciation rights to outside Directors, officers and
other employees of the Company or its subsidiaries. Of the total shares eligible
for grant under the 2004 Stock Incentive Plan, only up to 374,075 shares may
be
granted as restricted stock awards. The full amount of 1,496,300 shares may
be
issued either fully as stock options or stock appreciation rights, or a
combination thereof. Grants of stock options were vested on December 30,
2005.
Perquisites
— Executive officers are provided with modest perquisites, including use of a
company car and professional financial planning and tax preparation services.
The Company provides these benefits in kind, but the Compensation Committee
considers the cost of these items in establishing the other elements of
compensation. The Company provides these benefits because they are usual and
customary in the industry.
Potential
Payments Upon Termination and Change of Control.
The
Company believes it is in its best interests to provide severance benefits
to
the Named Executive Officers in the event of their termination of employment
under certain circumstances. Specifically, Messrs. Palagiano, Mahon and Devine
are entitled to severance benefits upon their termination of employment by
the
Company without cause, their resignation for good reason or the occurrence
of a
change of control during their employment period and Messrs. King and Maher
(as
well as the other executive officers) are entitled to severance benefits upon
their termination of employment by the Company without cause or their
resignation for good reason, in each case, within certain periods following
or
preceding a change of control. The Company and Bank have determined that these
types of protections are required in order to retain talented and qualified
executive officers. It has been determined that a more comprehensive employment
agreement with change of control triggers is necessary to retain the senior
executive officers (Messrs. Palagiano, Devine and
15
Mahon).
Mr. King and Mr. Maher have been provided with change of control agreements
which have no effect until a change of control occurs. Mr. King’s agreement
provides for larger payments in recognition of his longtime service with the
Bank and to provide him a potential future reward for remaining in the Bank's
employ even though the value of his total compensation package has been
adversely affected by cutbacks in the Company’s retirement benefit and cash
incentive programs.
Employment
Agreements and Change in Control Agreements.
Consistent with the practices of other financial institutions of similar size
and business mix in the greater New York metropolitan area, the Company and
Bank
have entered into employment or change of control severance agreements with
each
of their executive officers. The Company considers these arrangements important
retention devices. They also provide a measure of financial security for
executive officers so that, when faced with the prospect of a negotiated or
unsolicited merger opportunity, they can focus on the business of the Company
with reduced personal distractions. The Company periodically reviews the terms
of these agreements against the publicly disclosed terms and conditions of
contracts in place at other institutions and compares their projected costs
to
those disclosed for similar contracts in the merger proxy statements in recent
financial institution mergers. The Company conducted such a review in
2006.
Employment
Agreements for Messrs. Palagiano, Mahon and Devine
The
Company and the Bank are parties to employment agreements ("Employment
Agreements") with each of Messrs. Palagiano, Devine and Mahon ("Senior
Executives"). These Employment Agreements establish the respective duties and
compensation of the Senior Executives and are intended to ensure that both
the
Company and the Bank will be able to maintain a stable and competent management
base. The continued success of the Company and Bank depends to a significant
degree on the skills and competence of the Senior Executives.
The
Employment Agreements provide for three-year terms (the "Employment Period").
The Bank's Employment Agreements provide that, prior to the first anniversary
date and continuing each anniversary date thereafter, the Bank’s Board of
Directors may agree, after conducting a performance evaluation of the Senior
Executive, to extend his Employment Agreement for an additional year, so that
the remaining term shall be three years. Each of the Bank's Employment
Agreements has been extended to a December 31, 2009 expiration date. The
Company's Employment Agreements provide for automatic daily extensions unless
written notice of non-renewal is provided by the Board of Directors or the
Senior Executive, in which event the Employment Agreement shall end on the
third
anniversary of such notice.
The
Employment Agreements provide for termination by the Bank or the Company at
any
time for cause as defined in the Employment Agreements. In the event that either
the Company or the Bank chooses to terminate the Senior Executive's employment
other than for cause, or the Senior Executive resigns from the Bank or the
Company for "good reason" as defined in the Employment Agreements, the Senior
Executive or, in the event of death, his beneficiary, would be entitled to
a
lump sum cash payment in an amount equal to the remaining base salary and bonus
payments due to the Senior Executive and the additional contributions or
benefits that would have been earned under any employee benefit plans during
the
remaining term of the Employment Agreement and payments that would have been
made under any incentive compensation plan during the remaining term of the
Employment Agreement. The Senior Executive would also have the right to receive
a lump sum cash payment of benefits to which the Senior Executive would have
been entitled under the BMP. Both the Bank and the Company would also continue
the Senior Executive's life, health and disability insurance coverage for the
remaining term of the Employment Agreement. For purposes of the Employment
Agreements, "good reason" generally means (i) assignment of duties inconsistent
with the Senior Executive's status or a substantial adverse alteration in the
nature or status of responsibilities or a requirement to report to a different
position, (ii) reduction in annual base salary (unless mandated at the
initiation of applicable regulatory authority), (iii) failure to pay
compensation or deferred compensation within seven days of when due unless
inadvertent, immaterial or cured after notice, (iv) failure to continue in
effect compensation plans material to total compensation (or substitute plans)
with respect to the Senior Executive, (v) failure to continue to provide certain
benefits or materially maintain benefits (unless mandated at the initiation
of
applicable regulatory authority), (vi) failure of the Bank to obtain
satisfactory agreement from a successor to assume and agree to perform the
Employment Agreements, (vii) any purported termination by the Bank not for
cause
or disability, (viii) any or no reason during the period of sixty (60) days
beginning on the first anniversary of the effective date of a change of control,
as defined in the Employment Agreement, (ix) a change in the majority of the
Board, unless approved by a vote of at least two-thirds of the members of the
Board at the time the Employment Agreements were entered into or members elected
or nominated by such members, (x) a relocation of the Senior Executive's
principal place of employment outside of the New York metropolitan area or
(xi)
a material breach of the Employment Agreements, unless cured within 30 days.
In
general, for purposes of the Employment Agreements, a "change of control" will
be deemed to occur when a person or group of persons acting in concert acquires
beneficial ownership of 25% or more of any class of equity security, such as
the
Common Stock, or in connection with mergers or consolidations of assets or
a
contested election of Directors
16
which
results in a change of control of the majority of the Company's or Bank's Board
of Directors or liquidation or sale of substantially all the assets of the
Company or the Bank. In the event of a change in control of the Company or
Bank,
the Company's Employment Agreements provide that (1) the term of employment
will
be converted to a fixed two year period beginning on the date of the change
in
control, and (2) if the Senior Executive signs a release of any further rights
under his Employment Agreement with the Bank, an immediate lump sum payment
will
be paid (whether or not employment has terminated) equal to the present value
of
three years salary, bonus and fringe benefits plus an additional lump sum equal
to the present value x minus y, where x is a specified target pension for each
Senior Executive and y is the actual pension benefits due to the Senior
Executive under the Bank's and the Company's qualified and nonqualified defined
benefit pension plans. The target pension is 26-2/3% of highest aggregate salary
and bonus for Mr. Palagiano; 25% of highest aggregate salary and bonus for
Mr.
Devine; and 16-2/3% of highest aggregate salary and bonus for Mr. Mahon. Highest
aggregate salary and bonus for this purpose is the highest salary and bonus
for
the three consecutive years during the final 10 years of employment for which
the aggregate is the highest.
Payments
to the Senior Executives under the Bank's Employment Agreements are guaranteed
by the Company in the event that payments or benefits are not paid by the Bank.
The Company will make all payments under its own Employment Agreements. To
the
extent that payments under the Company's Employment Agreements and the Bank's
Employment Agreements are duplicative, payments due under the Company's
Employment Agreements would be offset by amounts actually paid by the Bank.
Senior Executives would be entitled to reimbursement of certain costs incurred
in interpreting or enforcing the Employment Agreements up to $50,000 for each
Senior Executive.
Cash
and
benefits paid to a Senior Executive under the Employment Agreements together
with payments under other benefit plans following a change of control of the
Bank or the Company may constitute an “excess parachute” payment under Section
280G of the Code, resulting in the imposition of a 20% excise tax on the
recipient and the denial of the deduction for such excess amounts to the Company
and the Bank. The Company's Employment Agreements include a provision
indemnifying each Senior Executive on an after-tax basis for any "excess
parachute" excise taxes.
Employee
Retention Agreements for Messrs. King and Maher
The
Bank
has, jointly with the Company, entered into Employee Retention Agreements
("Retention Agreements") with Messrs. King and Maher (each a "Contract Employee"
or together "Contract Employees"). The purpose of the Retention Agreements
is to
secure the Contract Employees' continued availability and attention to the
Bank's affairs, relieved of distractions arising from the possibility of a
change of control, as defined in the Retention Agreements. The Retention
Agreements do not impose an obligation on the Bank to continue the Contract
Employees' employment, but provide for a period of assured compensation (the
"Assurance Period") following a change of control. The Retention Agreement
for
Mr. King contains Assurance Periods of five years; for Mr. Maher it is three
years. The applicable Assurance Periods will be automatically extended on a
daily basis under the Retention Agreements until written notice of non-extension
is provided by the Bank or the Contract Employee.
If,
during the Assurance Period, or prior to commencement of the Assurance Period
but within three months of and in connection with a change of control (as
defined in the Retention Agreements), a Contract Employee is discharged without
“cause” (as defined in the Retention Agreements) or voluntarily resigns within
ninety days following: (i) a failure to appoint or elect the Contract Employee
to the same position in which he was serving; (ii) a material failure, after
notice, to vest in the Contract Employee his responsibilities on the day before
the Assurance Period commenced (or the functions, duties and responsibilities
of
a more senior officer to which he may be appointed); (iii) a failure of the
Bank
to cure a material breach of the Retention Agreement after notice; (iv) a
reduction in compensation or a material reduction in benefits; or (v) relocation
of the Contract Employee's principal place of employment which results in
certain adverse commuting increases, the Contract Employee (or, in the event
of
his death, his estate) would be entitled to, subject to certain restrictions,
(a) continued group life, health, accident and long-term disability insurance
benefits for the unexpired Assurance Period, (b) a lump sum cash payment equal
to the remaining base salary (present value) and bonus payments the Contract
Employee would have earned during the unexpired Assurance Period, and (c) any
additional contributions and benefits that the Contract Employee would have
earned under the Bank's or the Company's employee benefit plans during the
unexpired Assurance Period.
The
cash
and benefits paid under the Retention Agreements for Messrs. King and Maher,
together with payments under other benefit plans following a “change of
control,” may constitute an “excess parachute” payment under Section 280G of the
Code, resulting in the imposition of a 20% excise tax on the recipient and
the
denial of the deduction for such excess amounts to the Company and the Bank
under Section 4999 of the Code. The Retention Agreements include a provision
whereby the Company pays Messrs. King and Maher the net amount of their
termination benefits after any tax imposed under Section 4999 of the Code or
the
maximum amount which may be paid without giving rise to any tax under Section
4999, whichever is greater.
17
Payments
to Messrs. King and Maher under their respective Retention Agreements are
guaranteed by the Company to the extent that the required payments are not
made
by the Bank.
3. Material
Policies and Procedures
Benchmarking
and Survey Data. The
Compensation Committee utilizes legal counsel and a nationally recognized
compensation consulting firm to assist it in performing its duties. The
Committee relies on legal counsel to advise it on its obligations under
applicable corporate, securities and employment laws, to assist it in
interpreting the Company's obligations under compensation plans and agreements,
and to draft plans and agreements to document business decisions. The consulting
firm regularly analyzes the Company’s executive pay levels, by each of the three
key elements cited and in total, and the Company’s performance. A group of 14
comparably sized and similarly located public banks and thrifts (the “Comparison
Group”) are used for comparison for purposes of both pay level and corporate
performance. The companies included in this group may change slightly from
year
to year as a result of merger activity within the industry or other relevant
factors. For 2006, the Comparison Group consisted of Hudson City Bancorp, New
York Community Bancorp, Astoria Financial, Valley National Bancorp, First
Niagara Financial Group Inc., New Alliance Bancshares Inc., Provident Financial
Services Inc., Investors Bancorp Inc., Signature Bank, Sun Bancorp Inc.,
Flushing Financial Corp, Pennfed Financial Services, OceanFirst Financial
Corporation, and Sterling Bancorp. The Compensation Committee uses this analysis
to assist it in understanding market practices and trends and to develop and
evaluate the effectiveness of recommended performance-linked compensation
strategies. Generally, the Compensation Committee endorses a median pay level
approach, with actual pay commensurate with relative performance. To that end,
the flexibility provided by the bonus program permits the Committee to take
market conditions into account each year.
Impact
of Accounting and Tax Treatment.
Section
162(m) —
Section
162(m) of the Code imposes a $1,000,000 annual limit, per executive officer,
on
the Company’s federal tax deduction for certain types of compensation paid to
the Named Executive Officers. It has been the Compensation Committee’s practice
to structure the compensation and benefit programs offered to the Named
Executive Officers with a view to maximizing the tax deductibility of amounts
paid. However, in structuring compensation programs and making compensation
decisions, the Compensation Committee considers a variety of factors, including
the Company’s tax position, the materiality of the payments and tax deductions
involved, and the need for flexibility to address unforeseen circumstances.
After considering these factors, the Compensation Committee may decide to
authorize payments all or part of which would be nondeductible for federal
tax
purposes. It is not anticipated that any discretionary bonuses awarded for
2006
will be made nondeductible by this limit. Payments made on account of a change
of control under the agreements described above would likely include
non-deductible payments.
Sections
4999 and 280G — Section 4999 of the Code imposes a 20% excise tax on certain
“excess parachute payments” made to “disqualified individuals.” Under section
280G of the Code, such excess parachute payments are also nondeductible to
the
Company. If payments that are contingent on a change of control to a
disqualified individual (which includes the Named Executive Officers) exceed
three times the individual’s “base amount,” they constitute “excess parachute
payments” to the extent they exceed one time the individual’s base amount.
Pursuant
to the Employment Agreements and Retention Agreements, the Company or Bank
will
reimburse the Named Executive Officers for the amount of the excise tax, if
any,
and make an additional gross-up payment so that, after payment of the excise
tax
and all income and excise taxes imposed on the reimbursement and gross-up
payments, the Named Executive Officer would retain approximately the same net
after-tax amounts under the Employment Agreement or Retention Agreement that
he
would have retained if there was no excise tax. Neither the Bank nor the Company
is permitted to claim a federal income tax deduction for the portion of the
change of control payment that constitutes an excess parachute payment, the
excise tax reimbursement payment or the gross-up payment.
Accounting
Considerations. The
Compensation Committee is informed of the financial statement implications
of
the elements of the Named Executive Officer compensation program. However,
the
probable contribution of a compensation element to the objectives of the
Company's Named Executive Officer compensation program and its projected
economic cost, which may or may not be reflected on the Company's financial
statements, are the primary drivers of Named Executive Officer compensation
decisions.
18
Stock Ownership Policy.
The
Board
of the Company believes it is in the best interests of its shareholders, and
promotes the Company’s commitment to sound corporate governance, that every
Director, executive officer, and other designated senior officers of the Company
or its subsidiaries possess a meaningful personal financial interest in the
Company. In the opinion of the Board, such an investment commits the individual
to the future of the Company and aligns his/her interests with those of the
Company's shareholders. The Company's Minimum Stock Ownership Guidelines for
Senior Officers and Directors are annexed as Appendix A to this Proxy
Statement.
Compensation
Committee Report
The
following Report of the Company's Compensation Committee is provided in
accordance with the rules and regulations of the SEC.
Under
the
rules promulgated by the SEC, the Company is required to provide certain data
and information regarding the activities of its Compensation Committee. In
fulfillment of this requirement, the Compensation Committee, at the discretion
of the Board, has prepared the following report for inclusion in the Proxy
Statement.
1. The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management; and
2. Based
on
the review and discussions referred to in paragraph 1 above, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the Company's Proxy Statement on Schedule 14A for
the 2007 Annual Meeting of Shareholders.
COMPENSATION
COMMITTEE OF
DIME
COMMUNITY BANCSHARES, INC.
Fred
P.
Fehrenbach, (Chairman)
John
J.
Flynn, Member
Joseph
J.
Perry, Member
Compensation
Committee Interlocks and Insider Participation
Messrs.
Fehrenbach, Flynn and Perry have served as members of the Compensation Committee
since January 1, 2006. Mr. Varone served as a member of the Compensation
Committee prior to his retirement on May 18, 2006. There are no interlocks,
as
defined under the rules and regulations of the SEC, between the Company and
the
members of the Compensation Committee and corporations with respect to which
they are affiliated, or otherwise.
19
COMPENSATION
Executive
Compensation
The
following table provides information about the compensation paid for services
rendered in all capacities during 2006 by the Named Executive Officers.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Positions
|
Year
|
Salary
(1)
|
Bonus(1)
|
Stock
Awards
(2)
|
Option
Awards
(3)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
(4)
|
All
Other
Compensation
(5)
|
Total
|
|
Vincent
F. Palagiano, Chairman of the
Board and Chief Executive Officer
|
2006
|
$640,000
|
$140,000
|
—
|
—
|
—
|
$66,051
|
$846,051
|
|
Michael
P. Devine, President and
Chief Operating Officer
|
2006
|
$505,000
|
$115,000
|
—
|
—
|
—
|
$33,087
|
$653,087
|
|
Kenneth
J. Mahon, Executive Vice
President and Chief Financial Officer
|
2006
|
$362,000
|
$100,000
|
—
|
—
|
—
|
$29,761
|
$491,761
|
|
Christopher
D. Maher, Executive Vice
President and Director of Retail Banking
|
2006
|
$300,000
|
$75,000
|
$29,220
|
—
|
—
|
$18,760
|
$422,980
|
|
Timothy
B. King, Senior Vice
President and Chief Investment Officer
|
2006
|
$248,000
|
$65,000
|
$22,927
|
—
|
—
|
$24,450
|
$360,377
|
(1)
The figures shown for salary and bonus represent amounts earned for the fiscal
year, whether or not actually paid during such year, and include amounts
deferred pursuant to non-incentive deferred compensation plans and amounts
of
salary or bonus earned but deferred on a voluntary basis in exchange for awards
of restricted stock, stock options or other forms of non-cash compensation.
(2)
Represents the compensation cost recognized for the fiscal year in connection
with restricted stock of the Company granted to the Named Executive Officer,
regardless of the year of grant and calculated in accordance with Statement
of
Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment",
("SFAS 123R") for financial statement purposes. For more information concerning
the assumptions used for these calculations, please refer to the discussion
under the caption “Nature of Operations and Summary of Significant Accounting
Policies” in the notes to the audited financial statements included in the 2006
Annual Report on Form 10-K. This amount does not reflect the value of dividends
paid on unvested restricted stock, which is included in the Summary Compensation
Table under the caption "All Other Compensation."
(3)
During the year ended December 31, 2006, there were no grants of stock
options to the Named Executive Officers or any compensation expense recognized
under SFAS 123R related to stock options granted previously to the Named
Executive Officers.
(4)
Includes for each Named Executive Officer (a) the increase (if any) for the
fiscal year in the present value of the individual's accrued benefit (whether
not vested) under the Retirement Plan and BMP calculated by comparing the
present value of each individual's accrued benefit under each such plan in
accordance with SFAS 87 as of the plan's measurement date in such fiscal year
to
the present value of the individual's accrued benefit as of the plan's
measurement date in the prior fiscal year, plus (b) the amount of interest
accrued on defined contribution deferred compensation balances at a rate in
excess of 120% of the applicable federal long-term rate under section 1274(d)
of
the Code. The following individuals experienced year-to-year declines in the
actuarial value of their accrued benefits under defined benefit or actuarial
plans that are not reflected in the reported figures: Mr. Palagiano $220,115;
Mr. Devine $5,676; Mr. Mahon $35,562 and Mr. King $14,217.
(5)
No
amounts were earned for services rendered during the fiscal year under a
non-equity incentive plan. The
Named
Executive Officers participate in certain group life, health, disability
insurance and medical reimbursement plans, not disclosed in the Summary
Compensation Table, that are generally available to salaried employees and
do
not discriminate in scope, terms and operation. The figure shown for each Named
Executive Officer includes the following items exceeding $10,000 in value:
|
Name
|
Life
Insurance Premiums
|
Automobile
|
401(k)
Plan
Company
Cash Contribution
|
ESOP
Allocation
(a)
|
Total
|
||||||
|
Vincent
F. Palagiano
|
$29,683
|
12,698
|
$6,600
|
$17,070
|
$66,051
|
||||||
|
Michael
P. Devine
|
9,417
|
-
|
6,600
|
$17,070
|
33,087
|
||||||
|
Kenneth
J. Mahon
|
6,091
|
-
|
6,600
|
$17,070
|
29,761
|
||||||
|
Christopher
D. Maher
|
1,322
|
-
|
-
|
$17,438
|
18,760
|
||||||
|
Timothy
B. King
|
780
|
-
|
6,600
|
$17,070
|
24,450
|
20
(a)
The
amount reported for ESOP allocation was determined based upon the average price
of the Common Stock during 2006 of $14.25 per share (See Note 15 to the audited
consolidated financial statements in the Company's 2006 Annual Report on Form
10-K, which discusses the manner in which ESOP expense is
recognized).
The
Company or Bank provides certain non-cash perquisites and personal benefits
to
each Named Executive Officer that do not exceed $10,000 in the aggregate for
any
individual, and are not included in the reported figures.
Compensation
Plans
Retirement
Plan.
The Bank
maintains the Retirement Plan, a non-contributory, tax-qualified defined benefit
pension plan for eligible employees. All salaried employees at least age 21
who
have completed a minimum of one year of service are eligible to participate
in
the Retirement Plan. The Retirement Plan provides for a benefit for each
participant, including the Named Executive Officers, equal to 2% of the
participant's average annual earnings multiplied by the participant's years
(and
any fraction thereof) of eligible employment (up to a maximum of 30 years).
Such
benefit is not reduced by a Social Security offset. A participant is fully
vested in his or her benefit under the Retirement Plan after five years of
service. The Retirement Plan is funded by the Bank on an actuarial basis and
all
assets are held in trust by the Retirement Plan trustee. Effective March 31,
2000, all participant benefits under the Retirement Plan were frozen, and no
benefits have been accrued under the Retirement Plan since that
date.
401(k)
Plan. The
Bank
maintains the 401(k) Plan, which is a tax-qualified defined contribution plan
permitting salaried employees with at least one year of service to make pre-tax
salary deferrals under Section 401(k) of the Code.
Under
a
401(k) Plan amendment effective July 1, 2000, the 401(k) Plan annually receives
the proceeds from a 100% vested cash contribution to all participants in the
ESOP in the amount of 3% of “covered compensation” [defined as total W-2
compensation including amounts deducted from W-2 compensation for pre-tax
benefits such as health insurance premiums and contributions to the 401(k)
Plan]
up to applicable IRS limits. This contribution is allocated to eligible
participants, regardless of their participant contribution level.
The
401(k) Plan permits participating employees to elect to invest all or any part
of their 401(k) Plan account balances in Common Stock. Common Stock held by
the
401(k) Plan may be newly issued shares or outstanding shares purchased on the
open market or in privately negotiated transactions. All Common Stock held
by
the 401(k) Plan is held by an independent trustee and allocated to the accounts
of individual participants. Participants control the exercise of voting and
tender rights relating to Common Stock held in their accounts.
ESOP.
The
Company has established, and the Bank has adopted, the ESOP and related trust
for the benefit of eligible employees. All of the salaried employees of the
Company and its subsidiaries are eligible to become participants in the ESOP.
As
of the Record Date, the ESOP held 3,465,561 shares of Common Stock, all of
which
were purchased during the Company's initial public offering. Of this total,
1,980,624 shares were allocated to individual participant accounts, while
1,484,937 remained unallocated. In order to fund the ESOP's purchase of such
Common Stock, the ESOP borrowed the aggregate purchase price from the Company.
Effective July 1, 2000, the loan maturity period was extended by approximately
20 years from June 2006 to June 2026, and continues to bear interest at the
rate
of 8% per annum. The loan calls for level annual payments of principal and
interest designed to amortize the loan over its term, except that payments
in
any year may be deferred, in whole or in part, in prescribed circumstances.
Prepayments are also permitted.
Shares
purchased by the ESOP were pledged as collateral for the loan from the Company
and are held in a suspense account until released for allocation among
participants in the ESOP as the loan is repaid. The pledged shares will be
released annually from the suspense account in an amount proportional to the
repayment of the ESOP loan for each plan year. The released shares will be
allocated among the accounts of participants on the basis of the participant's
compensation for the calendar year preceding allocation. Benefits generally
become vested at the rate of 25% per year after two years with 100% vesting
after five years of service. Participants become immediately vested upon
termination of employment due to death, retirement at age 65, permanent
disability or the occurrence of a "change of control," as defined by the ESOP.
Forfeitures will be utilized to reduce the contribution required by the Bank.
Vested benefits may be paid in a single sum or installment payments and are
payable upon death, retirement at age 65, disability or separation from service.
Effective
July 1, 2000, either the Company or the Bank became required to make a 100%
vested cash contribution annually to all participants in the ESOP in the amount
of 3% of “covered compensation.” This contribution was guaranteed through
December 31, 2006 and is discretionary thereafter. This contribution is
automatically transferred to the 401(k) Plan.
BMP.
The BMP
provides eligible employees with benefits that would be due under the Retirement
Plan, ESOP and 401(k) Plan, if such benefits were not limited under the Code.
BMP benefits provided to the Named Executive Officers for the year ended
December 31, 2006 with respect to the 401(k) Plan and ESOP are included in
the
Summary Compensation
21
Table
under the column "All Other Compensation" (See "Compensation of Executive
Officers - Executive Compensation"). Effective April 1, 2000, Retirement Plan
benefit accruals were terminated, thus eliminating related benefit accruals
under the BMP. Effective January 1, 2005, the BMP benefit accruals associated
with the 401(k) Plan and ESOP were terminated.
RRP.
The
Company has adopted the RRP which was approved by shareholders at the annual
meeting held in 1996. Under the RRP, 1,963,912 shares were acquired and
allocated to Outside Directors, officers and employees of the Company or its
subsidiaries on February 1, 1997. All of these shares vested in equal 20%
installments on February 1, 1998, 1999, 2000, 2001 and 2002. On each vesting
date subsequent to February 1, 1998, the RRP re-acquired shares that were sold
by participants in order to satisfy income tax obligations associated with
the
vesting. In addition, during the period February 1, 1997 through February 1,
2002, RRP shares forfeited by participants were retained in the RRP. The shares
re-acquired or retained by the RRP during the period February 1, 1997 through
February 1, 2002, either through the repurchase or forfeiture of previously
allocated shares, totaled 343,797. On May 17, 2002, a grant of 67,500 RRP shares
was made to officers of the Bank. These shares vested 20% each on November
25,
2002, and April 25, 2003, 2004, 2005 and 2006. Upon the vesting of these shares
in November 2002, April 2003, April 2004 and April 2005, the RRP re-acquired
21,817 shares that were sold by participants in order to satisfy income tax
obligations associated with the vesting. No additional shares were allocated
by
the RRP during the year ended December 31, 2006.
1996
Stock Option Plan. The
Company has adopted the 1996 Stock Option Plan, which was approved by the
Company's shareholders at the annual meeting held in 1996. Under the 1996 Stock
Option Plan, 5,525,562
options
have been granted to Outside Directors, officers and employees of the Company
or
its subsidiaries, of which 14,087 were both outstanding and exercisable as
of
the Record Date. The options granted under the 1996 Stock Option Plan were
intended to qualify as “incentive stock options” under Section 422 of the
Code.
2001
Stock Option Plan.
The
Company's Board of Directors has adopted the 2001 Stock Option Plan, which
was
approved by the Company's shareholders at the annual meeting held in 2001.
Under
the 2001 Stock Option Plan, up to 253,125 stock options are eligible for grant
to the Company's Outside Directors and up to 1,771,875 stock options are
eligible for grant to officers and employees of the Company or its subsidiaries.
As of the Record Date, 2,000,862
stock
options were granted to Outside Directors, officers and employees of the Company
or the Bank, of which 1,796,695 were outstanding, all of which were exercisable.
All options currently granted under the 2001 Stock Option Plan are subject
to
earlier expiration in the event of termination of employment. In the case of
termination due to death, disability, retirement, or under a "change of
control," as defined by the 2001 Stock Option Plan, all options become
immediately vested. The options granted under the 2001 Stock Option Plan are
intended to qualify as "incentive stock options" under Section 422 of the Code.
2004
Stock Incentive Plan.
The
Company's Board of Directors has adopted the 2004 Stock Plan, which was approved
by the Company's shareholders at the annual meeting held in 2004. The 2004
Stock
Incentive Plan permits the Company to grant up to a total of 1,496,300
restricted stock awards, incentive or non-qualified stock options or stock
appreciation rights to Outside Directors, officers and other employees of the
Company or its subsidiaries. Of the total shares eligible for grant under the
2004 Stock Incentive Plan, only up to 374,075 shares may be granted as
restricted stock awards. The full amount of 1,496,300 shares may be issued
either fully as stock options or stock appreciation rights, or a combination
thereof. The Compensation Committee of the Board of Directors administers the
2004 Stock Incentive Plan and authorizes all equity grants. On January 31,
2005,
a grant of 8,480 non-qualified stock options was made to each Outside Director
of the Company, for a total grant of 76,320 options. All of these options were
exercisable as of December 31, 2005 and expire on January 31, 2015. On March
17,
2005, a grant of restricted stock awards was made to Named Executive Officers
as
follows: Mr. Palagiano 14,193 shares; Mr. Devine 9,032 shares; Mr. Mahon 4,967
shares; and Mr. King 1,935 shares. All of these restricted stock awards vest
in
equal 25% installments on May 1, 2006, 2007, 2008 and 2009. On May 31, 2005,
a
grant of stock options was made to Named Executive Officers as follows: Mr.
Palagiano 142,580 shares; Mr. Devine 90,537 shares; Mr. Mahon 49,462 shares
and
Mr. King 19,569 shares. All of these stock options were exercisable as of
December 31, 2005 and expire on May 31, 2015. On January 3, 2006, a grant of
10,000 shares of restricted stock awards was made to Mr. Maher, which vests
in
equal 20% installments on February 1, 2007, 2008, 2009, 2010, and 2011. On
March
16, 2006, a grant of 10,000 restricted stock awards was made to Mr. King, which
vests in equal 20% installments on May 1, 2007, 2008, 2009, 2010 and 2011.
All
equity grants under the 2004 Stock Incentive Plan fully vest in the event of
a
change in control.
22
The
following table sets forth information regarding plan-based awards granted
to the Named Executive Officers during the last fiscal year:
GRANTS
OF PLAN-BASED AWARDS
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
|||||||
|
Name
|
Grant
Date
|
Threshold
|
Target
|
Maximum
|
All
Other Stock Awards: Number of Shares of Stock or Units
(1)
|
Closing
Sale Price of the Common Stock on the Grant Date
|
Grant
Date
Fair
Value of Stock Awards
|
|
Christopher
D. Maher
|
1/3/2006
|
-
|
-
|
-
|
10,000
|
$14.61(2)
|
$146,100
|
|
Timothy
B. King
|
3/16/2006
|
-
|
-
|
-
|
10,000
|
14.48
|
144,800
|
(1)
The
reported awards were restricted stock awards granted under the 2004 Stock
Incentive Plan and vest as stated on the previous page.
(2)
For
the grant date of January 3, 2006, the closing price of the Common Stock on
December 30, 2005 was utilized.
Stock
Awards And Stock Option Grants Outstanding
The
following tables set forth information regarding stock awards, stock options
and
similar equity compensation outstanding at December 31, 2006, whether granted
in
2006 or earlier, including awards that have been transferred other than for
value. As of December 31, 2006, there were no unearned or unvested stock awards
granted pursuant to an equity incentive plan.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
|
Option
Awards
|
Stock
Awards
|
|||||||
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Number
of Securities Underlying Unexercised Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration
Date
|
Number
of Shares of Stock That Have Not Vested
(#)
(1)
|
Market
Value of Shares of Stock That Have Not Vested
($)
(2)
|
|
Vincent
F. Palagiano
|
11/21/2001
|
168,750
|
-
|
-
|
$10.91
|
11/21/2011
|
-
|
-
|
|
2/1/2003
|
174,750
|
-
|
-
|
13.16
|
2/1/2013
|
-
|
-
|
|
|
1/27/2004
|
174,750
|
-
|
-
|
19.90
|
1/27/2014
|
-
|
-
|
|
|
5/31/2005
|
142,580
|
-
|
-
|
15.10
|
5/31/2015
|
-
|
-
|
|
|
3/17/2005
|
10,645
|
$149,136
|
||||||
|
Michael
P. Devine
|
11/21/2001
|
105,750
|
-
|
-
|
$10.91
|
11/21/2011
|
-
|
-
|
|
2/1/2003
|
111,000
|
-
|
-
|
13.16
|
2/1/2013
|
-
|
-
|
|
|
1/27/2004
|
111,000
|
-
|
-
|
19.90
|
1/27/2014
|
-
|
-
|
|
|
5/31/2005
|
90,537
|
-
|
-
|
15.10
|
5/31/2015
|
-
|
-
|
|
|
3/17/2005
|
6,774
|
$94,904
|
||||||
|
Kenneth
J. Mahon
|
11/21/2001
|
56,250
|
-
|
-
|
$10.91
|
11/21/2011
|
-
|
-
|
|
2/1/2003
|
60,750
|
-
|
-
|
13.16
|
2/1/2013
|
-
|
-
|
|
|
1/27/2004
|
60,750
|
-
|
-
|
19.90
|
1/27/2014
|
-
|
-
|
|
|
5/31/2005
|
49,462
|
-
|
-
|
15.10
|
5/31/2015
|
-
|
-
|
|
|
3/17/2005
|
3,726
|
$52,201
|
||||||
|
Christopher
D. Maher
|
1/3/2006
|
-
|
-
|
-
|
-
|
-
|
10,000
|
$140,100
|
|
Timothy
B. King
|
11/21/2001
|
7,500
|
-
|
-
|
$10.91
|
11/21/2011
|
||
|
2/1/2003
|
24,000
|
-
|
-
|
13.16
|
2/1/2013
|
|||
|
1/27/2004
|
24,000
|
-
|
-
|
19.90
|
1/27/2014
|
|||
|
5/31/2005
|
19,569
|
-
|
-
|
15.10
|
5/31/2015
|
|||
|
3/17/2005
|
1,452
|
$20,343
|
||||||
|
3/16/2006
|
10,000
|
$140,100
|
||||||
(1)
See
the discussion of the 2001 Stock Option Plan and 2004 Stock Incentive Plan
on
the previous page for information on the grant and vesting of the stock awards.
(2)
Market value is calculated on the basis of $14.01 per share, the closing sales
price of the Common Stock on the Nasdaq Stock Market on December 29, 2006.
23
The
following table sets forth the stock awards that vested and the option awards
that were exercised for the Named Executive Officers during the last fiscal
year.
OPTIONS EXERCISED AND STOCK VESTED
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Number
of Shares Acquired
on
Exercise
|
Value
Realized on Exercise(1)
|
Number
of
Shares
Acquired
on
Vesting
|
Value
Recognized
on
Vesting(1)
|
||
|
Vincent
F. Palagiano
|
50,000
|
$502,697
|
3,548
|
$50,275
|
||
|
Michael
P. Devine
|
-
|
-
|
2,258
|
31,996
|
||
|
Kenneth
J. Mahon
|
-
|
-
|
1,241
|
17,585
|
||
|
Timothy
B. King
|
-
|
-
|
483
|
6,844
|
||
(1)
The figures shown include the amount realized during the fiscal year upon
exercise of vested stock options by the named individual and the vesting of
restricted stock, which is calculated on the basis of $14.17 per share (the
closing sales price for a share of Common Stock on the Nasdaq Stock Market
on
the vesting date). Unexercised stock options and unvested restricted stock
may
not be transferred for value.
Post-Employment
Compensation
Pension
Benefits
The
following table sets forth information regarding pension benefits accrued by
the
Named Executive Officers through the end of the Company's last fiscal
year.
PENSION
BENEFITS
|
Name
|
Plan
Name
|
Number
of Years Credited Service
(#)(1)
|
Present
Value of Accumulated
Benefit($)(1)
|
Payments
During Last Fiscal
Year
|
||||
|
Vincent
F. Palagiano
|
Retirement
Plan
|
29.6
|
$1,022,928
|
—
|
||||
|
BMP
(Defined Benefit Portion)
|
29.6
|
$1,699,092
|
—
|
|||||
|
Michael
P. Devine
|
Retirement
Plan
|
28.7
|
$608,473
|
—
|
||||
|
BMP
(Defined Benefit Portion)
|
28.7
|
$722,491
|
—
|
|||||
|
Kenneth
J. Mahon
|
Retirement
Plan
|
19.7
|
$266,689
|
—
|
||||
|
BMP
(Defined Benefit Portion)
|
19.7
|
$73,305
|
—
|
|||||
|
Timothy
B. King
|
Retirement
Plan
|
16.5
|
$87,905
|
—
|
||||
|
BMP
(Defined Benefit Portion)
|
—
|
—
|
—
|
(1)
The
figures shown are determined as of the plan's measurement date during 2006
under
SFAS 87
as
disclosed in Note 15 to the Company's audited consolidated financial
statements.
The
discount rate and other assumptions used for this purpose are discussed in
Note
15 to the audited consolidated financial statements, included in the Company's
2006 Annual Report on Form 10-K. The assumed mortality rates were as follows:
Mr. Palagiano, 1.76%; Mr. Devine, 0.92%; Mr. Mahon, 0.61% and Mr. King,
0.31%..
24
Non-Qualified
Deferred Compensation
The
following table sets forth information regarding nonqualified deferred
compensation earned by the Named Executive Officers during the last fiscal
year
under non-qualified defined contribution plans.
NON-QUALIFIED
DEFERRED COMPENSATION (1)
|
Name
|
Executive
Contributions in
Last Fiscal Year ($)
|
Company
Contributions in Last Fiscal Year($)
(2)
|
Aggregate
Earnings in Last Fiscal Year($)
(3)
|
Aggregate
Withdrawals/ Distributions($)
|
Aggregate
Balance at Last Fiscal Year($)
|
|||||
|
Vincent
F. Palagiano
|
—
|
—
|
$(170,064)
|
—
|
$5,000,424
|
|||||
|
Michael
P. Devine
|
—
|
—
|
$(114,724)
|
—
|
$3,397,469
|
|||||
|
Kenneth
J. Mahon
|
—
|
—
|
$(62,972)
|
—
|
$1,848,395
|
|||||
|
Timothy
B. King
|
—
|
—
|
$(21,204)
|
—
|
$645,263
|
|
(1)
|
Non-qualified
deferred compensation includes benefits provided under the
BMP.
|
|
(2)
|
Company
contributions are included under the caption "All Other Compensation"
in
the Summary Compensation Table.
|
|
(3)
|
Earnings
did not accrue at above-market or preferential rates and are not
reflected
in the Summary Compensation Table.
|
Termination
and Change in Control Benefits
The
Company provides additional benefits, not included in the previous tables,
to
the Named Executive Officers in the event of retirement or termination of
employment in certain circumstances and in the event of a change in control.
Employment
Agreements
The
Company and the Bank are parties to the Employment Agreements with each of
the
Senior Executives. See "Compensation Discussion and Analysis - Potential
Payments Upon Termination and Change of Control" for a discussion of the
Employment Agreements.
Employee
Retention Agreements
The
Bank
has, jointly with the Company, entered into the Retention Agreements with the
Contract Employees. See "Compensation Discussion and Analysis - Potential
Payments Upon Termination and Change in Control" for a discussion of the
Retention Agreements.
The
table
on the following page provides an estimate of the value of such benefits,
assuming termination of employment or a change in control occurred on December
31, 2006.
25
|
Vincent
F.
Palagiano
|
Michael
P.
Devine
|
Kenneth
J.
Mahon
|
Christopher
D. Maher
|
Timothy
B.
King
|
||||||
|
Death
|
||||||||||
|
Death
Benefit(1)
|
$1,920,000
|
$1,515,000
|
$1,086,000
|
N/A
|
N/A
|
|||||
|
Stock
Option Vesting(8)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Restricted
Stock Vesting(9)
|
198,844
|
126,538
|
69,588
|
$140,100
|
$167,209
|
|||||
|
Disability
|
||||||||||
|
Disability
Benefit(2)
|
$1,920,000
|
$1,515,000
|
$1,086,000
|
N/A
|
N/A
|
|||||
|
Stock
Option Vesting(8)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Restricted
Stock Vesting(9)
|
198,844
|
126,538
|
69,588
|
$140,100
|
$167,209
|
|||||
|
Discharge
without Cause or Resignation with Good Reason - No Change in
Control
|
||||||||||
|
Severance
Pay(3)
|
$1,862,493
|
$1,469,623
|
$1,053,472
|
-
|
-
|
|||||
|
Bonus(3)
|
1,121,268
|
892,185
|
656,087
|
-
|
-
|
|||||
|
ESOP(4)
|
44,864
|
44,864
|
44,864
|
-
|
-
|
|||||
|
Insurance(5)
|
58,252
|
32,015
|
38,441
|
-
|
-
|
|||||
|
401(k)
Payment(6)
|
18,043
|
18,043
|
18,043
|
-
|
-
|
|||||
|
BMP-ESOP
Payout(7)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Stock
Option Vesting(8)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Restricted
Stock Vesting(9)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Discharge
without Cause or Resignation with Good Reason - Change in Control
Related
|
||||||||||
|
Severance
Pay(3)
|
$3,104,154
|
2,449,372
|
$1,755,787
|
$837,595
|
$1,101,442
|
|||||
|
Bonus(3)
|
1,846,803
|
1,469,488
|
1,080,618
|
-
|
644,156
|
|||||
|
ESOP(4)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Insurance(5)
|
58,252
|
32,015
|
38,441
|
$34,672
|
50,278
|
|||||
|
401(k)
Payment(6)
|
28,433
|
28,433
|
28,433
|
$18,043
|
28,433
|
|||||
|
BMP-ESOP
Payout(7)
|
2,592,077
|
1,755,765
|
958,950
|
-
|
328,653
|
|||||
|
Stock
Option Vesting(8)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Restricted
Stock Vesting(9)
|
198,844
|
126,538
|
69,588
|
$140,100
|
167,209
|
|||||
|
Lump
Sum Pension Payment(10)
|
4,035,594
|
4,224,985
|
1,420,596
|
N/A
|
N/A
|
|||||
|
Tax
Indemnity(11)
|
4,361,726
|
4,135,663
|
2,352,047
|
332,914
|
881,103
|
|||||
|
Change
in Control - No Termination of Employment
|
||||||||||
|
Severance
Pay(3)
|
$3,104,154
|
$2,449,372
|
$1,755,787
|
-
|
-
|
|||||
|
Bonus(3)
|
1,846,803
|
1,469,488
|
1,080,618
|
-
|
-
|
|||||
|
ESOP(4)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Insurance(5)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
401(k)
Payment(6)
|
28,433
|
28,433
|
28,433
|
-
|
-
|
|||||
|
BMP-ESOP
Payout(7)
|
2,592,077
|
1,755,765
|
958,950
|
-
|
$328,653
|
|||||
|
Stock
Option Vesting(8)
|
-
|
-
|
-
|
-
|
-
|
|||||
|
Restricted
Stock Vesting(9)
|
198,844
|
126,538
|
69,588
|
$140,100
|
167,209
|
|||||
|
Lump
Sum Pension Payment(10)
|
4,035,594
|
4,224,985
|
1,420,596
|
N/A
|
N/A
|
|||||
|
Tax
Indemnity(11)
|
4,361,726
|
4,135,663
|
2,352,047
|
-
|
-
|
|||||
(1)
The Employment Agreements provide no severance benefits on termination by reason
of death, except for (i) earned but unpaid salary, (ii) benefits such executive
is entitled to as a former employee, and (iii) payment for all unused vacation
days and floating holidays in the year of termination at the highest rate of
annual salary for such year; provided, however, that such executive’s 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 such executive’s then Annual Base Salary. This death benefit
shall be paid within thirty days of death. The Retention Agreements provide
no
severance benefits on termination by reason of death, except for (a) earned
but
unpaid salary, and (b) benefits such executive is entitled to as a former
employee.
(2)
The Employment Agreements provide no severance benefits on termination by reason
of disability, except for (i) earned but unpaid salary, (ii) benefits such
executive is entitled to as a former employee, and (iii) payment for all unused
vacation days and floating holidays in the year of termination at the highest
rate of annual salary for such year; provided, however, that in the event of
the
Senior Executive's disability while in the employment of the Company, the
Company will pay to such Senior Executive a lump sum amount equal to three
times
his then annual base salary, payable within thirty days after such Senior
Executive’s termination due to disability. The Retention Agreements provide no
severance benefits on termination by reason of disability.
(3)
In the event of a termination without cause, a resignation with good reason
and/or a change in control, the Employment Agreements provide for a lump sum
payment in an amount equal to the present value of the salary and bonus that
such Senior Executive would have earned if he had worked for the Company during
the remaining unexpired employment
26
period at the highest annual rate of salary [assuming, if a Change in
Control has occurred, that the annual increases under section 5(c) of the
Employment Agreements would apply] and the highest bonus as a percentage of
he
rate of salary provided for under the Employment 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. In the event of a termination without cause, a resignation
with good reason and/or a change in control, the Retention Agreements provide
for (i) a lump sum payment, in an amount equal to the present value of the
salary that such Contract Employee would have earned if he had continued working
for the Bank during the remaining unexpired Assurance Period at the highest
annual rate of salary achieved during such Contract Employee’s period of actual
employment with the Bank, where such present value is to be determined using
a
discount rate equal to the applicable short-term federal rate prescribed under
section 1274(d) of the Code, compounded using the compounding periods
corresponding to the Bank’s regular payroll periods for its officers; plus (ii)
payments that would have been made to such Contract Employee under any cash
bonus or long-term or short-term cash incentive compensation plan maintained
by,
or covering employees of , the Bank, if he had continued working for the Bank
during the remaining unexpired Assurance Period and had earned the maximum
bonus
or incentive award in each calendar year that ends during the remaining
unexpired Assurance Period, such payments to be equal to the product of: (a)
the
maximum percentage rate at which an award was ever available to such Contract
Employee under such incentive compensation plan, multiplied by (b) the salary
that would have been paid to such Contract Employee during each such calendar
year at the highest annual rate of salary achieved during the remaining
unexpired Assurance Period.
(4)
In the event of a termination without cause or a resignation with good reason
in
the absence of a change in control, the Employment Agreements provide for a
lump
sum payment in an amount approximately equal to the present value of three
years
of participation in the ESOP, where such present value is determined using
a
discount rate of six percent per annum, compounded with the frequency
corresponding to the Company’s regular payroll periods with respect to its
officers. The Retention Agreements provide for no severance benefits in the
event of a termination without cause or a resignation for good reason. Market
value is calculated on the basis of $14.01 per share, which is the closing
sales
price for the Common Stock on the Nasdaq Stock Market on December 29, 2006.
(5)
In the event of a termination without cause, a resignation with good reason
and/or a change in control, the Employment Agreements provide for continued
group life, health (including hospitalization, medical, major medical, and
dental), accident and long-term disability insurance benefits, in addition
to
that provided pursuant to section 9(b)(ii) of the Employment Agreements and
after taking into account the coverage provided by any subsequent employer,
if
and to the extent necessary to provide such Senior Executive 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 such Senior
Executive) if he had continued working for the Company during the remaining
unexpired employment period as defined in the Employment Agreement at the
highest annual rate of compensation [assuming, if a change in control has
occurred, that the annual increases under section 5(c) of the Employment
Agreements would apply] under the Employment Agreement. The figure shown
represents the present value of continued insurance benefits for a fixed period
of three years and assumes no offset for benefits provided by a subsequent
employer, calculated on the basis of the assumptions used by the Company in
measuring its liability for retiree benefits other than pensions for financial
statement purposes under Statement of Financial Accounting Standards No. 106
"Employers’
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106").
For
purposes of valuing these benefits, the
assumed mortality rates were as follows: Mr. Palagiano, 1.76%; Mr. Devine,
0.92%
and Mr. Mahon, 0.61%.
For
more information concerning other major assumptions used for these calculations,
please refer to Note 15 to the audited consolidated financial statements
included in the Company's 2006 Annual Report on Form 10-K. In the event of
a
termination without cause, a resignation with good reason and/or a change in
control, the Retention Agreements provide for continued group life, health
(including hospitalization, medical and major medical), accident and long term
disability insurance benefits, in addition to that provided pursuant to section
8(b)(ii) of the Retention Agreements and after taking into account the coverage
provided by any subsequent employer, if and to the extent necessary to provide
for such Contract Employee, for the remaining unexpired Assurance Period,
coverage equivalent to the coverage to which such Contract Employee 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 of
control, whichever benefits are greater) if the Contract Employee had continued
working for the Bank during the remaining unexpired Assurance Period at the
highest annual rate of compensation achieved during the Contract Employee’s
period of actual employment with the Bank. The figure shown represents the
present value of continued insurance benefits for a fixed period of five years
and assumes no offset for benefits provided by a subsequent employer, calculated
on the basis of the assumptions used by the Company in measuring its liability
for retiree benefits other than pensions for financial statement purposes under
SFAS 106. For purposes of valuing these benefits, the assumed mortality rate
was
0.31%
for Mr. King.
For more
information concerning other major assumptions used for these calculations,
please refer to Note 15 to the audited consolidated financial statements
included in the Company's 2006 Annual Report on Form 10-K.
(6)
In the event of a termination without cause or a resignation with good reason
in
the absence of a change in control, the Employment Agreements provide for a
lump
sum payment in an amount approximately equal to the present value of three
years
of participation in the 401(k) Plan, where such present value is determined
using a discount rate of six percent per annum, compounded with the frequency
corresponding to the Company’s regular payroll periods with respect to its
officers. The Retention Agreements provide for no severance benefits in the
event of a termination without cause or a resignation for good reason. In the
event of a change in control, both the Employment Agreements and the Retention
Agreement in effect for Mr. King provide for a lump sum payment in an amount
approximately equal to the present value of five years of participation in
the
401(k) Plan, where such present value is determined using a discount rate of
six
percent per annum, compounded with the frequency corresponding to the Company’s
regular payroll periods with respect
27
to its officers. The Retention Agreement in effect for Mr. Maher provides for
a
lump sum payment in an amount approximately equal to the present value of three
years of participation in the 401(k) Plan, where such present value is
determined using a discount rate of six percent per annum, compounded with
the
frequency corresponding to the Company’s regular payroll periods with respect to
its officers. Market value is calculated on the basis of $14.01 per share,
which
is the closing sales price for the Common Stock on the Nasdaq Stock Market
on
December 29, 2006.
(7)
The ESOP provides that in the event of a change in control of the Company or
Bank, a portion of the proceeds from the sale of the shares of the Common Stock
held in a suspense account for future allocation to employees would be applied
to repay the outstanding balance on the loan used to purchase the unallocated
shares. The remaining unallocated shares (or the proceeds from their sale)
would
be distributed among the accounts of plan participants in proportion to the
balances credited to such accounts immediately prior to such allocation. The
Company estimates this distribution to be approximately $8.19 per allocated
share, based on 1,983,118 allocated shares, 1,484,937 unallocated shares, an
outstanding loan balance of $4,553,506, and $14.01 per share, which is the
closing sales price for the Common Stock on the Nasdaq Stock Market on December
29, 2006. The BMP provides eligible employees with benefits that would be due
under the ESOP if such benefits were not limited under the Code. The figures
shown represent an estimated earnings credit of $8.19 per stock unit credited
to
Messrs. Palagiano, Devine and Mahon under the BMP.
(8)
All stock options granted under the 2001 Stock Option Plan and 2004 Stock
Incentive Plan provide for full vesting upon death, disability, retirement,
or
change in control. The figures shown reflect the in-the-money value of those
stock options that would accelerate, calculated based on the positive difference
between the option exercise price and $14.01, which was the closing sales price
for a share of Common Stock on December 29, 2006.
(9)
All restricted stock granted under the 2004 Stock Incentive Plan provide for
full vesting upon death, disability, retirement or change in control. The
figures shown reflect the value of those restricted stock awards that would
accelerate, calculated based on a per share value of $14.01, which was the
closing sales price for a share of Common Stock on December 29,
2006.
(10)
In
the event of a change in control of the Company or Bank, the Employment
Agreements provide that (i) the term of employment will be converted to a fixed
two year period beginning on the date of the change in control, and (ii) if
the
Senior Executive signs a release of any further rights under his Employment
Agreement with the Bank, an immediate lump sum payment will be paid (whether
or
not employment has terminated) equal to the present value of three years salary,
bonus and fringe benefits plus an additional lump sum equal to the present
value
x minus y, where x is a specified target pension for each Senior Executive
and y
is the actual pension benefits due to the Senior Executive under the Bank's
and
the Company's qualified and nonqualified defined benefit pension plans. The
target pension is 26-2/3% of highest aggregate salary and bonus for Mr.
Palagiano; 25% of highest aggregate salary and bonus for Mr. Devine; and 16-2/3%
of highest aggregate salary and bonus for Mr. Mahon. Highest aggregate salary
and bonus for this purpose is the highest salary and bonus for the three
consecutive years during the final 10 years of employment for which the
aggregate is the highest. The Retention Agreements do not provide for a similar
additional payment in the event of a change in control of the Company or
Bank.
(11)
Cash
and benefits paid to Messrs. Palagiano, Mahon and Devine under the Employment
Agreements and Messrs. King and Maher under the Retention Agreements, together
with payments under other benefit plans following a change of control of the
Bank or the Company may constitute an "excess parachute" payment under Section
280G of the Code, resulting in the imposition of a 20% excise tax on the
recipient and the denial of the deduction for such excess amounts to the Company
and the Bank. The Employment Agreements include a provision indemnifying the
Senior Executive on an after-tax basis for any "excess parachute" excise taxes.
The Retention Agreements also include a provision indemnifying the Contract
Employee on an after-tax basis for any “excess parachute” excise
taxes.
Transactions
With Certain Related Persons
Federal
Reserve Board Regulation O requires that all Bank or Company loans or extensions
of credit to certain executive officers, as defined in Regulation O,
("Regulation O Officers") and Directors must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time
for comparable transactions with the general public and must not involve more
than the normal risk of repayment or present other unfavorable features. The
Bank has in the past made loans or extended credit to Regulation O Officers
and
also to certain persons related to Regulation O Officers and Directors. All
such
loans were: (i) made by the Bank in the ordinary course of business; (ii) made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
and
(iii) did not involve more than the normal risk of collectability or present
other unfavorable features. Current Bank policy prohibits it from advancing
loans to the Named Executive Officers or Directors. The Bank owned no
outstanding loans to Named Executive Officers, Regulation O Officers, Directors
or their associates as of March 30, 2007. The Company intends that all loan
transactions in the future between the Company and its Regulation O Officers,
Directors or holders of more than 5% of the shares of any class of Common Stock,
and affiliates thereof, similarly will contain terms that are no less favorable
to the Bank than those it could have obtained in arms-length negotiations with
unaffiliated persons. All such loans will further be approved by a majority
of
its independent outside Directors having no interest in the
transaction.
Section
402 of the Sarbanes-Oxley Act of 2003 ("Sarbanes-Oxley") prohibits the extension
of personal loans to Directors and executive officers of issuers (as defined
in
Sarbanes-Oxley). The prohibition, however, does not apply to mortgages advanced
by an insured depository institution, such as the Bank, that is subject to
the
insider lending
28
restrictions
of Section 22(h) of the Federal Reserve Act.
Messrs.
Curtin and Farrell are partners in the law firm of Conway Farrell. The Bank
retains Conway Farrell to conduct loan closings and perform other requested
legal services. The Bank paid fees totaling $10,225 directly to Conway Farrell
during the year ended December 31, 2006 for other legal services provided.
In
addition, Conway Farrell received fees in the amount of approximately $1,129,250
from third parties pursuant to its representation of the Bank in loan closings
and other legal matters for the year ended December 31, 2006.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company's executive officers and
Directors, and persons who own more than 10% of the Common Stock, to file with
the SEC reports of ownership and changes in ownership of Common Stock. Officers,
Directors and greater than 10% shareholders are required by SEC regulation
to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on review of the copies of such forms received by the Company, or written
representations from certain reporting persons, the Company believes that its
executive officers, Directors and greater than 10% beneficial owners complied
with all applicable filing requirements.
__________________________________________________________________
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
__________________________________________________________________
General
The
Audit
Committee of the Board of Directors has appointed the firm of Deloitte &
Touche LLP to act as the Company's independent auditors for the year ending
December 31, 2007, subject to ratification of such appointment by the Company's
shareholders. A representative of Deloitte & Touche LLP is expected to be
present at the Annual Meeting, will be provided an opportunity to make a
statement if he or she so desires and are expected to be available to respond
to
appropriate questions. No determination has been made as to any action the
Audit
Committee would take if the shareholders do not ratify the
appointment.
Audit
Fees
The
following table summarizes the aggregate fees billed to the Company by the
independent auditor:
|
Year
Ended
December
31, 2006
|
Year
Ended
December
31, 2005
|
||
|
Audit
Fees (a)
|
$513,500
|
$402,250
|
|
|
Audit-Related
Fees (b)
|
281,000
|
357,853
|
|
|
Tax
Fees (c)
|
106,200
|
59,000
|
|
|
All
Other Fees
|
-
|
-
|
|
|
Total
|
$900,700
|
$819,103
|
(a)
Fees
for audit services billed in 2006 and 2005 consisted of:
| § |
Audits
of the Company’s annual financial
statements
|
| § |
Reviews
of the Company’s quarterly financial
statements
|
| § |
Comfort
letters, statutory and regulatory audits, consents and other services
related to SEC matters
|
(b)
Fees
for audit-related services billed in 2006 and 2005 consisted of:
| § |
Financial
accounting and reporting
consultations
|
| § |
Internal
control reviews
|
| § |
Employee
benefit plan audits
|
29
(c)
Fees
for tax services billed in 2006 consisted of tax compliance services and tax
planning and advice services and fees billed in 2005 consisted of tax compliance
services.
Fees
for
tax compliance services totaled $59,000 for 2006 and 2005. Tax compliance
services are services rendered based upon facts already in existence or
transactions that have already occurred to document, compute, and obtain
government approval for amounts to be included in tax filings and consisted
of:
i.
Federal, state and local income tax return assistance
ii.
Sales
and use, property and other tax return assistance
iii.
Research & Development tax credit documentation and analysis for purposes of
filing amended returns
iv.
Requests for technical advice from taxing authorities
Tax
planning and advice service fees paid to Deloitte & Touche LLP totaled
$29,200 in 2006. There were no tax planning and advice service fees paid to
Deloitte & Touche LLP in 2005. Tax planning and advice consists of services
rendered with respect to proposed transactions or that alter a transaction
to
obtain a particular tax result.
Pre-Approval
Policy
The
services performed by the independent auditor in 2006 were pre-approved in
accordance with the Audit Committee's pre-approval policy. Pursuant to the
policy, the Audit Committee must pre-approve all audit and permitted non-audit
services to be provided by the independent auditor, including the fees and
terms
thereof.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
__________________________________________________________________
SHAREHOLDER
COMMUNICATIONS WITH THE BOARD
The
Company's Board of Directors provides a process for shareholders to send
communications to the Board. The Company's Policy Regarding Shareholder
Communication with the Board is available on its website at www.dimedirect.com
by
selecting Investor Relations and then Corporate Governance within the Investor
Relations menu.
OTHER
MATTERS
As
of the
date of this Proxy Statement, the Company's Board of Directors is not aware
of
any other matters to be brought before the shareholders at the Annual Meeting.
If, however, any other matters not known are properly brought before the
meeting, the persons named in the accompanying proxy will vote the shares
represented by all properly executed proxies on such matters in such manner
as
shall be determined by a majority of the Board of Directors.
2008
ANNUAL MEETING STOCKHOLDER PROPOSALS
In
order
to be considered for inclusion in the Company's proxy statement and form of
proxy for the annual meeting to be held in 2008, all shareholder proposals
must
be submitted to the Secretary of the Company at its offices at 209 Havemeyer
Street, Brooklyn, New York 11211 on or before December 15, 2007. Under the
Company's Bylaws, shareholder nominations for Director and shareholder proposals
not included in the Company's 2008 proxy statement, in order to be considered
for possible action by the shareholders at the annual meeting to be held in
2008, must be delivered to or received by the Secretary of the Company, at
the
address set forth above: (i) sixty (60) days in advance of such meeting if
such
meeting is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect to
an
annual meeting held at a time other than within the time periods set forth
in
the immediately preceding clause (i), the close of business on the tenth day
following the date on which notice of such meeting is first given to
shareholders. Notice shall be deemed to be first given to shareholders when
disclosure of such date of the meeting of shareholders is first made in a press
release reported to Dow Jones News Services, the Associated Press or a
comparable national news service, or in a document publicly filed by the Company
with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act. A
shareholder's notice to the Secretary shall set forth such information as
required by, and otherwise comply with, the Company's Bylaws. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy card relating to an annual meeting any shareholder proposal
or nomination which does not satisfy all of the requirements for inclusion
established by the SEC in effect at the time such proposal or nomination is
received.
30
The
Board
of Directors will review any shareholder proposals that are filed as required
and will determine whether such proposals satisfy applicable criteria for
consideration at the annual meeting to be held in 2008.
Annual
Report
A
copy of
the Annual Report to shareholders for the period ended December 31, 2006,
including the consolidated financial statements prepared in conformity with
generally accepted accounting principles for the year ended December 31, 2006,
accompanies this Proxy Statement. The consolidated financial statements have
been audited by Deloitte & Touche LLP, whose report appears in the Annual
Report. Shareholders
may obtain, free of charge, a copy of the Annual Report on Form 10-K filed
with
the SEC (without exhibits) by writing to Kenneth A. Ceonzo, Director of
Investor Relations, Dime Community Bancshares, Inc., 209 Havemeyer Street,
Brooklyn, New York 11211, or by calling (718) 782-6200, extension 8279, or
by
accessing our corporate website www.dimedirect.com.
By
Order
of the Board of Directors
Lance
J.
Bennett
Secretary
Brooklyn,
New York
April
10,
2007
TO
ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
31
Appendix
A
Dime
Community Bancshares, Inc. and Subsidiaries
Minimum
Stock Ownership Guidelines for
Executive
Officers and Directors
Purpose
The
Board
of Directors of Dime Community Bancshares, Inc. believes it is in the best
interests of its shareholders, and promotes the Company’s commitment to sound
corporate governance, that every director, executive officer, and other
designated senior officers of the Company and the Bank possess a meaningful
personal financial interest in the Company. In the opinion of the Board,
such an
investment commits the individual to the future of the Company and aligns
his/her interests with those of the Company's shareholders.
Individuals
Subject to the Minimum Ownership Requirements
For
purposes of the minimum stock ownership guidelines, the Company has created
two
classes of directors and executive officers:
| · |
Class
1 Directors and Executive Officers -
Those directors and executive officers who served as either a director
or
officer on June 26, 1996
(the date of the Company's initial public
offering).
|
| · |
Class
2 Directors and Executive Officers -
Those directors and executive officers who joined the Company or
its
subsidiaries after June 26, 1996.
|
For
purposes of the minimum stock ownership guidelines, executive officer shall
mean
the Chief Executive Officer, President, Chief Financial Officer and any other
officer performing a significant policy-making function for the Company or
its
subsidiaries.
Directors
who are also officers of the Company are subject to the minimum stock ownership
guidelines for executive officers.
Minimum
Stock Ownership Requirements
| · |
Class
1 Directors and Executive Officers
-
Class 1 directors and executive officers are required to own a minimum
of
50% of the total number of shares granted
to them under the Company's 1996 Recognition and Retention Plan (as
adjusted for stock dividends).
|
| · |
Class
2 Directors and Executive
Officers
|
| · |
Class
2 Directors - 5,000 shares.
|
| · |
Class
2 Executive Officers - Shares with a value equal to 25% of the officer’s
annual salary on the later of the date of adoption of these guidelines
or
appointment as an executive officer. The minimum shall be recalculated
in
the event of an increase in salary and any new requirement must be
satisfied within six months of the
increase.
|
The
minimum stock ownership level must be satisfied by directors within three
years
of the later of adoption of these guidelines or initial appointment to the
Board, and by executive officers within four years of the later of adoption
of
these guidelines or appointment as an executive officer. Executive officers
must
invest in equal minimum annual increments of 25% of the total required value
throughout the four-year period until the requisite ownership is achieved.
Eligible
Shares
| · |
Shares
owned outright by the director or executive officer or jointly with
his/her immediate family
|
| · |
Shares
purchased through the Bank’s 401(k) Plan
|
| · |
Vested
shares granted through stock benefit plans
|
A-1
Compliance
Directors -
If
a
director fails to satisfy, or, in unique circumstances, demonstrate sustained
progress toward satisfying, a minimum ownership guideline, a portion of his/her
Board retainer sufficient to comply with the deficiency will be paid in Company
stock. If any deficit remains, the director shall have 90 days to acquire
shares
sufficient to cure the breach. If not remedied within 90 days, the director
will
be suspended without pay from the Board. If a breach is not cured within
12-months, the Director shall be required to submit his/her resignation.
Executive
Officers
- An
executive officer who fails
to
satisfy, or,
in
unique circumstances, demonstrate sustained progress toward satisfying,
the
officer ownership requirements, will receive a reduction in future long-term
incentive grants and/or payment of future annual and/or long-term incentive
payouts in the form of Company stock.
Exceptions
The
guidelines may be waived for executives or directors, at the discretion of
the
Nominating and Governance Committee, if compliance would create severe hardship
or prevent an executive or director from complying with a court order, as
in the
case of a divorce settlement. It is expected that these instances will be
rare.
The
Nominating and Governance Committee will make the final decision as to
developing an alternative stock ownership guideline for the director or officer
that reflects the intention of these Guidelines and his or her personal
circumstances.
A-2
REVOCABLE
PROXY
DIME
COMMUNITY BANCSHARES, INC.
209
Havemeyer Street
Brooklyn,
NY 11211
This
Proxy is solicited on behalf of the Board of Directors of Dime Community
Bancshares, Inc. for the Annual Meeting of Shareholders to be held on May
17,
2007.
The
undersigned shareholder of Dime Community Bancshares, Inc. hereby appoints
George L. Clark, Jr., Steven D. Cohn and John J. Flynn, or any of them, with
full powers of substitution, to represent and to vote as proxy, as designated
on
the reverse side all shares of common stock of Dime Community Bancshares,
Inc.
held of record by the undersigned on March 30, 2007, at the Annual Meeting
of
Shareholders (the "Annual Meeting") to be held at 10:00 a.m., Eastern Time,
on
May 17, 2007, or at any adjournment or postponement thereof, upon the matters
described in the accompanying Notice of the Annual Meeting of Shareholders
and
Proxy Statement, both dated April 10, 2007, and upon such other matters as
may
properly come before the Annual Meeting. The undersigned hereby revokes all
prior proxies.
This
Proxy, when properly executed, will be voted in the manner directed herein
by
the undersigned shareholder. If
no
direction is given, this Proxy will be voted FOR the election of all nominees
in
Item 1 and FOR the proposal listed in Item 2.
Continued
and to be signed on the reverse side
|
Comments:
|
|
Proposals
1 and 2 are proposed by Dime Community Bancshares, Inc. The
Board of
Directors
unanimously recommends a vote "FOR" all of the nominees
in
Item
1 and a vote "FOR" the proposal in Item 2.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE x
|
|
1.
Election of three Directors for terms to expire at the
2010 Annual Meeting of Shareholders.
NOMINEES:
o
FOR
ALL
NOMINEES
m
Vincent F. Palagiano
o
WITHHOLD
AUTHORITY m
Patrick E. Curtin
FOR
ALL
NOMINEES
m Donald
E.
Walsh
o
FOR
ALL
EXCEPT
m
Omer S.J. Williams
(See
instructions
below)
INSTRUCTION: To
withhold authority to vote
for any individual nominee(s), mark "FOR ALL EXCEPT" and fill
in the
circle next to each nominee you wish to withhold, as shown
here: l
|
2.
Ratification of the appointment of Deloitte & Touche LLP
as independent auditors
for the year ending December
31, 2007.
3.
The proxies are authorized to vote upon such other business
as may come
before the Annual Meeting or any adjournment or postponement
thereof in
such manner as shall be determined by a majority of the
Board of
Directors.
The undersigned hereby acknowledges receipt of the Notice of
the Annual
Meeting of
Shareholders and the Proxy Statement, both dated April
10, 2007,
for the Annual
Meeting.
|
||
| TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD | |||
|
|
|||
|
I
will attend the Annual
Meeting. o
|
|
||
|
To
change the address on your account, please check the box at
right and
indicate
your new address in the address space above. Please note
that r
changes
to the registered name(s) on the
account may be submitted via
this
method.
|
|||
Signature
of Shareholder ___________________ Date:
_________________
Signature of Shareholder _____________________ Date:
_______________
Note:
Please sign exactly as your name appears on the Proxy. When shares are
held
jointly, each holder should sign. If the signer is a corporation, please
sign full corporate name by a
duly
authorized officer, giving full title as such. If a signer is a
partnership, please sign in partnership name by authorized
person.