PEAPACK GLADSTONE FINANCIAL CORP
<DOCUMENT>
<TYPE>EX-10.E
<SEQUENCE>4
<FILENAME>ex10-e.txt
<TEXT>

                                                                  Exhibit 10 (E)

                     PEAPACK-GLADSTONE FINANCIAL CORPORATION
                       2002 LONG-TERM STOCK INCENTIVE PLAN
                     (Adopted by Directors January 10, 2002)
                    (Adopted by Shareholders April 23, 2002)

1.    Purpose. The purpose of the Plan is to provide additional incentive to
      those officers and key employees of the Company and its Subsidiaries whose
      substantial contributions are essential to the continued growth and
      success of the Company's business in order to strengthen their commitment
      to the Company and its Subsidiaries, to motivate such officers and
      employees to faithfully and diligently perform their assigned
      responsibilities and to attract and retain competent and dedicated
      individuals whose efforts will result in the long-term growth and
      profitability of the Company. To accomplish such purposes, the Plan
      provides that the Company may grant Incentive Stock Options, Nonqualified
      Stock Options, Restricted Stock Awards and Stock Appreciation Rights.

2.    Definitions. For purposes of this Plan:

(a)   "Agreement" means the written agreement between the Company and an
      Optionee or Grantee evidencing the grant of an Option or Award and setting
      forth the terms and conditions thereof.

(b)   "Award" means a grant of Restricted Stock or Stock Appreciation Rights, or
      either or both of them.

(c)   "Bank" means Peapack-Gladstone Bank, a Subsidiary.

(d)   "Board" means the Board of Directors of the Company.

(e)   "Cause" means termination upon an intentional failure to perform stated
      duties, breach of a fiduciary duty involving personal dishonesty or
      willful violation of any law, rule or regulation (other than traffic
      violations or similar offenses) or final cease-and-desist order.

(f)   "Change in Capitalization" means any increase, reduction, change or
      exchange of Shares for a different number or kind of shares or other
      securities of the Company by reason of a reclassification,
      recapitalization, merger, consolidation, reorganization, issuance of
      warrants or rights, stock dividend, stock split or reverse stock split,
      combination or exchange of shares, repurchase of shares, change in
      corporate structure or otherwise.

(g)   "Change in Control" means an event of a nature that: (1) any "person" (as
      the term is used in Sections 13(d) and 14(d) of the Exchange Act) who is
      not now presently but becomes the "beneficial owner" (as defined in Rule
      13d-3 under the Exchange Act), directly or indirectly, of securities of
      the Company representing 25% or more of the Company's outstanding
      securities except for any securities purchased by any tax-qualified
      employee benefit plan of the Company; or (2) individuals who constitute
      the Board on the date hereof (the "Incumbent Board") cease for any reason
      to constitute at least a majority thereof, provided that any person
      becoming a director subsequent to the date hereof whose election was
      approved by a vote of at least three-quarters of the directors comprising
      the Incumbent Board, or whose nomination for election by the Company's
      stockholders was approved by the same Nominating Committee serving under
      an Incumbent Board, shall be, for purposes of this clause (2), considered
      as though he were a member of the Incumbent Board; or (3) filing is made
      for regulatory approval to implement a plan of reorganization, merger,
      consolidation, sale of all or substantially all the assets of the Company
      or similar transaction in which the Company is not the resulting entity or
      such plan, merger, consolidation, sale or similar transaction occurs; or
      (4) a proxy statement soliciting proxies from shareholders of the Company
      shall be distributed by someone other than the current management of the
      Company, seeking stockholder approval of a plan of reorganization, merger
      or consolidation of the Company or similar transaction with one or more
      corporations as a result of which the outstanding shares of the class of
      securities then subject to the plan or transaction are exchanged for or
      converted into cash or property or securities not issued by the Company;
      or (5) a tender offer is made for 25% or more of the voting securities of
      the Company.

(h)   "Code" means the Internal Revenue Code of 1986, as amended.


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<PAGE>

(i)   "Committee" means a committee consisting solely of two (2) or more
      directors who are Non-Employee Directors (as defined in Rule 16b-3 of the
      Exchange Act as it may be amended from time to time) of the Company and
      outside directors as defined pursuant to Section 162(m) of the Code (as it
      may be amended from time to time) appointed by the Board to administer the
      Plan and to perform the functions set forth herein. Directors appointed by
      the Board to the Committee shall have the authority to act notwithstanding
      the failure to be so qualified.

(j)   "Company" means Peapack-Gladstone Financial Corporation, a New Jersey
      corporation.

(k)   "Disability" means the permanent and total inability by reason of mental
      or physical infirmity, or both, of an employee to perform the work
      customarily assigned to him. Additionally, a medical doctor selected or
      approved by the Board of Directors must advise the Committee that it is
      either not possible to determine when such Disability will terminate or
      that it appears probable that such Disability will be permanent during the
      remainder of the individual's lifetime.

(l)   "Eligible Employee" means any officer or other key employee of the Company
      or a Subsidiary designated by the Committee as eligible to receive Options
      or Awards subject to the conditions set forth herein.

(m)   "Escrow Agent" means the escrow agent under the Escrow Agreement,
      designated by the Committee.

(n)   "Escrow Agreement" means an agreement between the Company, the Escrow
      Agent and a Grantee, in the form specified by the Committee, under which
      shares of Restricted Stock awarded pursuant hereto shall be held by the
      Escrow Agent until either (a) the restrictions relating to such shares
      expire and the shares are delivered to the Grantee or (b) the Company
      reacquires the shares pursuant hereto and the shares are delivered to the
      Company.

(o)   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(p)   "Fair Market Value" means the fair market value of the Shares as
      determined by the Committee in its sole discretion; provided, however,
      that (A) if the Shares are admitted to quotation on the National
      Association of Securities Dealers Automated Quotation System ("NASDAQ") or
      other comparable quotation system and have been designated as a National
      Market System ("NMS") security, Fair Market Value on any date shall be the
      last sale price reported for the Shares on such system on such date or on
      the last day preceding such date on which a sale was reported, (B) if the
      Shares are admitted to quotation on NASDAQ and have not been designated a
      NMS security, Fair Market Value on any date shall be the average of the
      highest bid and lowest asked prices of the Shares on such system on such
      date, or (C) if the Shares are admitted to trading on a national
      securities exchange, Fair Market Value on any date shall be the last sale
      price reported for the Shares on such exchange on such date or on the last
      date preceding such date on which a sale was reported.

(q)   "Grantee" means a person to whom an Award has been granted under the Plan.

(r)   "Incentive Stock Option" means an Option within the meaning of Section 422
      of the Code.

(s)   "Nonqualified Stock Option" means an Option which is not an Incentive
      Stock Option.

(t)   "Option" means an Incentive Stock Option, a Nonqualified Stock Option, or
      either or both of them.

(u)   "Optionee" means a person to whom an Option has been granted under the
      Plan.

(v)   "Parent" means any corporation in an unbroken chain of corporations ending
      with the Company, if each of the corporations other than the Company owns
      stock possessing 50% or more of the total combined voting power of all
      classes of stock of one of the other corporations in such chain.

(w)   "Plan" means the Peapack-Gladstone Financial Corporation 2002 Long-Term
      Stock Incentive Plan as set forth in this instrument and as it may be
      amended from time to time.

(x)   "Restricted Stock" means Shares issued or transferred to an Eligible
      Employee which are subject to restrictions as provided in Section 8
      hereof.


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(y)   "Retirement" means retirement at the normal or early retirement date as
      set forth in the Peapack-Gladstone Bank Retirement Plan.

(z)   "Shares" means the common stock, no par value, of the Company (including
      any new, additional or different stock or securities resulting from a
      Change in Capitalization).

(aa)  "Stock Appreciation Right" means a right to receive all or some portion of
      the increase in the value of shares of Common Stock as provided in Section
      7 hereof.

(bb)  "Subsidiary" means any corporation in an unbroken chain of corporations,
      beginning with the Company, if each of the corporations other than the
      last corporation in the unbroken chain owns stock possessing 50% or more
      of the total combined voting power of all classes of stock in one of the
      other corporations in such chain.

(cc)  "Successor Corporation" means a corporation, or a parent or subsidiary
      thereof, which issues or assumes a stock option in a transaction to which
      Section 425(a) of the Code applies.

(dd)  "Ten-Percent Shareholder" means an eligible Employee, who, at the time an
      Incentive Stock Option is to be granted to him, owns (within the meaning
      of Section 422(b)(6) of the Code) stock possessing more than ten percent
      (10%) of the total combined voting power of all classes of stock of the
      Company, a Parent or a Subsidiary within the meaning of Section 422(b)(6)
      of the Code.

3.    Administration.

(a)   The Plan shall be administered by the Committee which shall hold meetings
      at such times as may be necessary for the proper administration of the
      Plan. The Committee shall keep minutes of its meetings. A majority of the
      Committee shall constitute a quorum and a majority of a quorum may
      authorize any action. Each member of the Committee shall be a Non-Employee
      Director (as defined in Rule 16b-3 of the Exchange Act as it may be
      amended from time to time) and an outside director as defined pursuant to
      Section 162(m) of the Code as it may be amended from time to time. No
      failure to be so qualified shall invalidate any Option or Award or any
      action or inaction under the Plan. No member of the Committee shall be
      personally liable for any action, determination or interpretation made in
      good faith with respect to the Plan, the Options or the Awards, and all
      members of the Committee shall be fully indemnified by the Company with
      respect to any such action, determination or interpretation.

      Subject to the express terms and conditions set forth herein, the
      Committee shall have the power from time to time:

(1)   to determine those Eligible Employees to whom Options shall be granted
      under the Plan and the number of Incentive Stock Options and/or
      Nonqualified Options to be granted to each eligible Employee and to
      prescribe the terms and conditions (which need not be identical) of each
      Option, including the purchase price per share of each Option;

(2)   to select those Eligible Employees to whom Awards shall be granted under
      the Plan and to determine the number of shares of Restricted Stock and/or
      Stock Appreciation Rights to be granted pursuant to each Award, the terms
      and conditions of each Award, including the restrictions or performance
      criteria relating to such shares or rights, the purchase price per share,
      if any, of Restricted Stock and whether Stock Appreciation Rights will be
      granted alone or in conjunction with an Option;

(3)   to construe and interpret the Plan and the Options and Awards granted
      thereunder and to establish, amend and revoke rules and regulations for
      the administration of the Plan, including, but not limited to, correcting
      any defect or supplying any omission, or reconciling any inconsistency in
      the Plan or in any Agreement, in the manner and to the extent it shall
      deem necessary or advisable to make the Plan fully effective, and all
      decisions and determinations by the Committee in the exercise of this
      power shall be final and binding upon the Company or a Subsidiary, the
      Optionees and the Grantees, as the case may be;

(4)   to determine the duration and purposes for leaves of absence which may be
      granted to an Optionee or Grantee without constituting a termination of
      employment or service for purposes of the Plan; and

(5)   generally, to exercise such powers and to perform such acts as are deemed
      necessary or advisable to promote the best interests of the Company with
      respect to the Plan.

4.    Stock Subject to Plan.

(a)   The maximum number of Shares that may be issued or transferred pursuant to
      all Options and Awards under this Plan is 100,000, of which not more than
      25,000 Shares may be issued or transferred pursuant to Options and/or
      Awards to any one


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<PAGE>

      Eligible Employee. Subject to the foregoing aggregate limitations, the
      maximum number of Shares (i) that may be issued or transferred pursuant to
      Options or Awards for Incentive Stock Options, Non-Qualified Stock Options
      and Stock Appreciation Rights shall be 100,000 and (ii) that may be issued
      or transferred pursuant to Awards of Restricted Stock shall be 10,000. In
      each case, upon a Change in Capitalization after the adoption of this Plan
      by the Board on January 11, 2002, the Shares shall be adjusted to the
      number and kind of Shares of stock or other securities existing after such
      Change in Capitalization.

(b)   Whenever any outstanding Option or portion thereof expires, is cancelled
      or is otherwise terminated (other than by exercise of the Option or any
      related Stock Appreciation Right), the shares of Common Stock allocable to
      the unexercised portion of such Option may again be the subject of Options
      and Awards hereunder.

(c)   Whenever any Shares subject to an Award or Option are resold to the
      Company, or are forfeited for any reason pursuant to the terms of the
      Plan, such Shares may again be the subject of Options and Awards
      hereunder.

5.    Eligibility. Subject to the provisions of the Plan, the Committee shall
      have full and final authority to select those Eligible Employees who will
      receive Options and/or Awards, but no person shall receive any Options or
      Awards unless he is an employee of the Company or a Subsidiary at the time
      the Option or Award is granted.

6.    Stock Options. The Committee may grant Options in accordance with the
      Plan, the terms and conditions of which shall be set forth in an
      Agreement. Each Option and Option Agreement shall be subject to the
      following conditions:

(a)   Purchase Price. The purchase price or the manner in which the purchase
      price is to be determined for Shares under each Option shall be set forth
      in the Agreement, provided that the purchase price per Share under each
      Incentive Stock Option shall not be less than 100% of the Fair Market
      Value of a Share at the time the Option is granted (110% in the case of an
      Incentive Stock Option granted to a Ten-Percent Shareholder) and under
      each Nonqualified Stock Option shall not be less than 80% of the Fair
      Market Value of a Share at the time the Option is granted.

(b)   Duration. Options granted hereunder shall be for such term as the
      Committee shall determine, provided that (i) no Incentive Stock Option
      shall be exercisable after the expiration of ten (10) years from the date
      it is granted (five (5) years in the case of an Incentive Stock Option
      granted to a Ten-Percent Shareholder) and (ii) no Nonqualified Stock
      Option shall be exercisable after the expiration of ten (10) years and one
      (1) day from the date it is granted. The Committee may, subsequent to the
      granting of any Option, extend the term thereof, but in no event shall the
      term as so extended exceed the maximum term provided for in the preceding
      sentence.

(c)   Non-Transferability. No Option granted hereunder shall be transferable by
      the Optionee to whom granted otherwise than by will or the laws of descent
      and distribution, and an Option may be exercised during the lifetime of
      such Optionee only by the Optionee or his guardian or legal
      representative. The terms of such Option shall be binding upon the
      beneficiaries, executors, administrators, heirs and successors of the
      Optionee.

(d)   Stock Options; Vesting. Subject to Section 6(h) hereof, each Option shall
      be exercisable in such installments (which need not be equal) and at such
      times as may be designated by the Committee and set forth in the Option
      Agreement. Unless otherwise provided in the Agreement, to the extent not
      exercised, installments shall accumulate and be exercisable, in whole or
      in part, at any time after becoming exercisable, but not later than the
      date the Option expires. Upon the death, Disability or Retirement of an
      Optionee, all Options shall become immediately exercisable.
      Notwithstanding the foregoing, the Committee may accelerate the
      exercisability of any Option or portion thereof at any time.

(e)   Method of Exercise. The exercise of an Option shall be made only by a
      written notice delivered in person or by mail to the Secretary of the
      Company at the Company's principal executive office, specifying the number
      of Shares to be purchased and accompanied by payment therefor and
      otherwise in accordance with the Agreement pursuant to which the Option
      was granted. The purchase price for any shares purchased pursuant to the
      exercise of an Option shall be paid in full upon such exercise in cash, by
      check, or, at the discretion of the Committee and upon such terms and
      conditions as the Committee shall approve, by transferring Shares to the
      Company. Any Shares transferred to the Company as payment of the purchase
      price under an Option shall be valued at their Fair Market Value on the
      day preceding the date of exercise of such Option. If requested by the
      Committee, the Optionee shall deliver the Agreement evidencing the Option
      and the Agreement evidencing any related Stock Appreciation Right to the
      Secretary of the Company who shall endorse thereon a notation of such
      exercise and return such


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<PAGE>

      Agreement to the Optionee. Not less than 100 Shares may be purchased at
      any time upon the exercise of an Option unless the number of Shares so
      purchased constitutes the total number of Shares then purchasable under
      the Option.

(f)   Rights of Optionees. No Optionee shall be deemed for any purpose to be the
      owner of any Shares subject to any Option unless and until (i) the Option
      shall have been exercised pursuant to the terms thereof, (ii) the Company
      shall have issued and delivered the Shares to the Optionee, and (iii) the
      Optionee's name shall have been entered as a shareholder of record on the
      books of the Company. Thereupon, the Optionee shall have full voting,
      dividend and other ownership rights with respect to such Shares.

(g)   Termination of Employment. In the event that an Optionee ceases to be
      employed by the Company or any Subsidiary, any outstanding Options held by
      such Optionee shall, unless the Option Agreement evidencing such Option
      provides otherwise, terminate as follows:

      (1)   If the Optionee's termination of employment is due to his death or
            Disability, the Options shall become fully vested and shall be
            exercisable for a period of three years following such termination
            of employment, and shall thereafter terminate;

      (2)   If the Optionee's termination of employment is by the Company or a
            Subsidiary for Cause or is by the Optionee (other than due to the
            Optionee's Retirement), the Option shall terminate on the date of
            the termination of employment;

      (3)   If the termination of employment is due to the Optionee's
            Retirement, the Option shall become fully vested and shall be
            exercisable for 90 days (three years for an Option designated
            initially as a Nonqualified Stock Option); and

      (4)   If the Optionee's termination of employment is for any other reason,
            the Option (to the extent exercisable at the time of the Optionee's
            termination of employment) shall be exercisable for a period of
            ninety (90) days following such termination of employment, and shall
            thereafter terminate, except that with respect to an Option
            initially designated as a Nonqualified Stock Option, if the
            Optionee's termination of employment occurs within 12 months of a
            Change in Control, the Option shall be exercisable for three years
            following the termination of employment.

      Notwithstanding the foregoing, the Committee may provide, either at the
      time an Option is granted or thereafter, that the Option may be exercised
      after the periods provided for in this Section 6(g), but in no event
      beyond the term of the Option. Notwithstanding anything to the contrary in
      this Section 6(g), no Option shall be exercisable beyond the term of the
      Option.

      In the event of an Optionee's termination of employment as a result of
      death, Disability or Retirement, the Optionee's (or the Optionee's legal
      representative or successor(s) in interest) may, in a form acceptable to
      the Committee make application to surrender all or part of Options held by
      such Optionee in exchange for a cash payment from the Company of an amount
      equal to the difference between the Fair Market Value of the shares on the
      date of termination of employment and the exercise price per share of the
      Option. Whether the Committee accepts such application or determines to
      make payment, in whole or part, is within its absolute and sole
      discretion, it being expressly understood that the Committee is under no
      obligation to any Optionee whatsoever to make such payments. In the event
      that the Committee accepts such application and the Company determines to
      make payment, such payment shall be in lieu of the exercise of the
      underlying Option and such Option shall cease to be exercisable.

(h)   Effect of Change in Control. In the event of a Change in Control, all
      Options outstanding on the date of such Change in Control shall become
      immediately and fully exercisable.

(i)   Substitution and Modification. Subject to the terms of the Plan, the
      Committee may modify outstanding Options or accept the surrender of
      outstanding Options (to the extent not exercised) and grant new Options in
      substitution for them. Notwithstanding the foregoing, no modification of
      an Option shall alter or impair any rights or obligations under the Option
      without the Optionee's consent, except as provided for in this Plan or the
      Agreement.

7.    Stock Appreciation Rights. The Committee may, in its discretion, either
      alone or in connection with the grant of an Option, grant Stock
      Appreciation Rights in accordance with the Plan, the terms and conditions
      of which shall be set forth in an Agreement. If granted in connection with
      an Option, a Stock Appreciation Right shall cover the same shares covered
      by the


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<PAGE>

      Option (or such lesser number of shares as the Committee may determine)
      and shall, except as provided in this Section 7, be subject to the same
      terms and conditions as the related Option.

      (a)   Time of Grant. A Stock Appreciation Right may be granted:

            (i)   at any time if unrelated to an Option; or

            (ii)  if related to an Option, either at the time of grant, or at
                  any time thereafter during the term of the Option.

      (b)   Stock Appreciation Rights Related to an Option.

(1)   Payment. A Stock Appreciation Right granted in connection with an Option
      shall entitle the holder thereof, upon exercise of the Stock Appreciation
      Right or any portion thereof, to receive payment of an amount computed
      pursuant to Section 7(b)(3).

(2)   Exercise. Subject to Section 7(f), a Stock Appreciation Right granted in
      connection with an Option shall be exercisable at such time or times and
      only to the extent that the related Option is exercisable, and will not be
      transferable except to the extent the related Option may be transferable.
      A Stock Appreciation Right granted in connection with an Incentive Stock
      Option shall be exercisable only if the Fair Market Value of a Share on
      the date of exercise exceeds the purchase price specified in the related
      Incentive Stock Option.

(3)   Amount Payable. Except as otherwise provided in Section 7(g), upon the
      exercise of a Stock Appreciation Right related to an Option, the Grantee
      shall be entitled to receive an amount determined by multiplying (A) the
      excess of the Fair Market Value of a Share on the date of exercise of such
      Stock Appreciation Right over the per Share purchase price under the
      related Option, by (B) the number of Shares as to which such Stock
      Appreciation Right is being exercised. Notwithstanding the foregoing, the
      Committee may limit in any manner the amount payable with respect to any
      Stock Appreciation Right by including such a limit in the Agreement
      evidencing the Stock Appreciation Right at the time it is granted.

(4)   Treatment of Related Options and Stock Appreciation Rights Upon Exercise.
      Except as provided in Section 7(b)(v), (A) upon the exercise of a Stock
      Appreciation Right granted in connection with an Option, the Option shall
      be cancelled to the extent of the number of Shares as to which the Stock
      Appreciation Right is exercised and (B) upon the exercise of an Option
      granted in connection with a Stock Appreciation Right or the surrender of
      such Option pursuant to Section 6(h), the Stock Appreciation Right shall
      be cancelled to the extent of the number of Shares as to which the Option
      is exercised or surrendered.

(5)   Simultaneous Exercise of Stock Appreciation Right and Option. The
      Committee may provide, either at the time a Stock Appreciation Right is
      granted in connection with a Nonqualified Stock Option or thereafter
      during the term of the Stock Appreciation Right, that, subject to Section
      7(f), upon exercise of such Option or the surrender of the Option pursuant
      to Section 6(h), the Stock Appreciation Right shall automatically be
      deemed to be exercised to the extent of the number of Shares as to which
      the Option is exercised or surrendered. In such event, the Grantee shall
      be entitled to receive the amount described in Section 7(b)(3) or 7(g)
      hereof, as the case may be (or some percentage of such amount if so
      provided in the Agreement evidencing the Stock Appreciation Right), in
      addition to the Shares acquired or cash received pursuant to the exercise
      or surrender of the Option. If a Stock Appreciation Right Agreement
      contains an automatic exercise provision described in this Section 7(b)(v)
      and the Option or any portion thereof to which it relates is exercised
      within six (6) months from the date the Stock Appreciation Right is
      granted, such automatic exercise provision shall not be effective with
      respect to that exercise of the Option. The inclusion in an Agreement
      evidencing a Stock Appreciation Right of a provision described in this
      Section 7(b)(v) may be in addition to and not in lieu of the right to
      exercise the Stock Appreciation Right as otherwise provided herein and in
      the Agreement.

      (c)   Stock Appreciation Rights Unrelated to an Option. The Committee may
            grant to Eligible Employees Stock Appreciation Rights unrelated to
            Options. Stock Appreciation Rights unrelated to Options shall
            contain such terms and conditions as to exercisability, vesting and
            duration as the Committee shall determine, but in no event shall
            they have a term of greater than ten (10) years. Upon the death,
            Disability or Retirement of a Grantee, all Stock Appreciation Rights
            shall become immediately exercisable. Upon the death or Disability
            of a Grantee, the Stock Appreciation Rights held by that Grantee
            shall be exercisable for a period of one (1) year following such
            termination of employment, and shall thereafter terminate. Upon the
            Retirement of a Grantee, the Stock Appreciation Rights held by that
            Grantee shall be exercisable for a period of ninety (90) days
            following such termination of employment, and shall thereafter
            terminate. Except as otherwise provided in


                                       30
<PAGE>

            Section 7(g), the amount payable upon exercise of such Stock
            Appreciation Rights shall be determined in accordance with Section
            7(b)(3), except that "Fair Market Value of a Share on the date of
            the grant of the Stock Appreciation Right" shall be substituted for
            "purchase price under the related Option."

      (d)   Method of Exercise. Stock Appreciation Rights shall be exercised by
            a Grantee only by a written notice delivered in person or by mail to
            the Secretary of the Company at the Company's principal executive
            office, specifying the number of Shares with respect to which the
            Stock Appreciation Right is being exercised. If requested by the
            Committee, the Grantee shall deliver the Agreement evidencing the
            Stock Appreciation Right being exercised and the Agreement
            evidencing any related Option to the Secretary of the Company who
            shall endorse thereon a notation of such exercise and return such
            Agreements to the Grantee.

      (e)   Form of Payment. Payment of the amount determined under Sections
            7(b)(3) or 7(c), may be made solely in whole shares of Common Stock
            in a number determined at their Fair Market Value on the date of
            exercise of the Stock Appreciation Right or, alternatively, at the
            sole discretion of the Committee, solely in cash, or in a
            combination of cash and Shares as the Committee deems advisable. In
            the event that a Stock Appreciation Right is exercised within the
            sixty-day period following a Change in Control, any amount payable
            shall be solely in cash. If the Committee decides to make full
            payment in Shares, and the amount payable results in a fractional
            Share, payment for the fractional Share will be made in cash.
            Notwithstanding the foregoing, no payment in the form of cash may be
            made upon the exercise of a Stock Appreciation Right pursuant to
            Section 7(b)(3) or 7(c) to an officer of the Company or a Subsidiary
            who is subject to Section 16(b) of the Exchange Act, unless the
            exercise of such Stock Appreciation Right is made during the period
            beginning on the third business day and ending on the twelfth
            business day following the date of release for publication of the
            Company's quarterly or annual statements of earnings.

      (f)   Restrictions. No Stock Appreciation Right may be exercised before
            the date six (6) months after the date it is granted, except in the
            event that the death or Disability of the Grantee occurs before the
            expiration of the six-month period.

      (g)   Effect of Change in Control. In the event of a Change in Control,
            subject to Section 7(f), all Stock Appreciation Rights shall become
            immediately and fully exercisable.

8.    Restricted Stock. The Committee may grant Awards of Restricted Stock which
      shall be evidenced by an Agreement between the Company and the Grantee.
      Each Agreement shall contain such restrictions, terms and conditions as
      the Committee may require and (without limiting the generality of the
      foregoing) such Agreements may require that an appropriate legend be
      placed on Share certificates. Awards of Restricted Stock shall be subject
      to the following terms and provisions:

(a)   Rights of Grantee.

(1)   Shares of Restricted Stock granted pursuant to an Award hereunder shall be
      issued in the name of the Grantee as soon as reasonably practicable after
      the Award is granted and the purchase price, if any, is paid by the
      Grantee; provided, that the Grantee has executed an Agreement evidencing
      the Award, an Escrow Agreement, appropriate blank stock powers and any
      other documents which the Committee, in its absolute discretion, may
      require as a condition to the issuance of such Shares. If a Grantee shall
      fail to execute the Agreement evidencing a Restricted Stock Award, an
      Escrow Agreement or appropriate blank stock powers or shall fail to pay
      the purchase price, if any, for the Restricted Stock, the Award shall be
      null and void. Shares issued in connection with a Restricted Stock Award,
      together with the stock powers, shall be deposited with the Escrow Agent.
      Except as restricted by the terms of the Agreement, upon the delivery of
      the Shares to the Escrow Agent, the Grantee shall have all of the rights
      of a shareholder with respect to such Shares, including the right to vote
      the shares and to receive, subject to Section 8(d), all dividends or other
      distributions paid or made with respect to the Shares.

(2)   If a Grantee receives rights or warrants with respect to any Shares which
      were awarded to him as Restricted Stock, such rights or warrants or any
      Shares or other securities he acquires by the exercise of such rights or
      warrants may be held, exercised, sold or otherwise disposed of by the
      Grantee free and clear of the restrictions and obligations provided by
      this Plan.

(b)   Non-Transferability. Until any restrictions upon the Shares of Restricted
      Stock awarded to a Grantee shall have lapsed in the manner set forth in
      Section 8(c), such Shares shall not be sold, transferred or otherwise
      disposed of and shall not be pledged or otherwise hypothecated, nor shall
      they be delivered to the Grantee. Upon the termination of employment of
      the Grantee, all of such Shares with respect to which restrictions have
      not lapsed shall be resold by the Grantee to the Company at the same


                                       31
<PAGE>

      price paid by the Grantee for such Shares or shall be forfeited and
      automatically transferred to and reacquired by the Company at no cost to
      the Company if no purchase price had been paid for such Shares. The
      Committee may also impose such other restrictions and conditions on the
      Shares as it deems appropriate.

(c)   Lapse of Restrictions.

(1)   Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse
      at such time or times and on such terms, conditions and satisfaction of
      performance criteria as the Committee may determine; provided, however,
      that the restrictions upon such Shares shall lapse only if the Grantee on
      the date of such lapse is then and has continuously been an employee of
      the Company or a Subsidiary from the date the Award was granted, or unless
      the Committee sets a later date for the lapse of such restrictions.

(2)   In the event of a Change in Control, all restrictions upon any Shares of
      Restricted Stock shall lapse immediately and all such Shares shall become
      fully vested in the Grantee thereof.

(3)   In the event of termination of employment as a result of death, Disability
      or Retirement of a Grantee, all restrictions upon Shares of Restricted
      Stock awarded to such Grantee shall thereupon immediately lapse. The
      Committee may also decide at any time in its absolute discretion and on
      such terms and conditions as it deems appropriate, to remove or modify the
      restrictions upon Shares of Restricted Stock awarded hereunder, unless the
      Committee sets a later date for the lapse of such restrictions.

(d)   Treatment of Dividends. At the time of an Award of Shares of Restricted
      Stock, the Committee may, in its discretion, determine that the payment to
      the Grantee of dividends, or a specified portion thereof, declared or paid
      on Shares of Restricted Stock by the Company, shall be deferred until the
      earlier to occur of (i) the lapsing of the restrictions imposed upon such
      Shares, in which case such dividends shall be paid over to the Grantee, or
      (ii) the forfeiture of such Shares under Section 8(b) hereof, in which
      case such dividends shall be forfeited to the Company, and such dividends
      shall be held by the Company for the account of the Grantee until such
      time. In the event of such deferral, interest shall be credited on the
      amount of such dividends held by the Company for the account of the
      Grantee from time to time at such rate per annum as the Committee, in its
      discretion, may determine. Payment of deferred dividends, together with
      interest accrued thereon as aforesaid, shall be made upon the earlier to
      occur of the events specified in (i) and (ii) of the immediately preceding
      sentence, in the manner specified therein.

(e)   Delivery of Shares. When the restrictions imposed hereunder and in the
      Plan expire or have been cancelled with respect to one or more shares of
      Restricted Stock, the Company shall notify the Grantee and the Escrow
      Agent of same. The Escrow Agent shall then return the certificate covering
      the Shares of Restricted Stock to the Company and upon receipt of such
      certificate the Company shall deliver to the Grantee (or such Grantee's
      legal representative, beneficiary or heir) a certificate for a number of
      shares of Common Stock, without any legend or restrictions (except those
      required by any federal or state securities laws), equivalent to the
      number of Shares of Restricted Stock for which restrictions have been
      cancelled or have expired. A new certificate covering Shares of Restricted
      Stock previously awarded to the Grantee which remain restricted shall be
      issued to the Grantee and held by the Escrow Agent and the Agreement, as
      it relates to such shares, shall remain in effect.

9.    Loans.

(a)   The Company or any Subsidiary may make loans to a Grantee or Optionee in
      connection with the purchase of Shares pursuant to an Award or in
      connection with the exercise of an Option, subject to the following terms
      and conditions and such other terms and conditions not inconsistent with
      the Plan, including the rate of interest, if any, as the Committee shall
      impose from time to time.

(b)   No loan made under the Plan shall exceed the sum of (i) the aggregate
      purchase price payable pursuant to the Option or Award with respect to
      which the loan is made, plus (ii) the amount of the reasonably estimated
      income taxes payable by the Optionee or Grantee with respect to the Option
      or Award. In no event may any such loan exceed the Fair Market Value, at
      the date of exercise, of any such Shares.

(c)   No loan shall have an initial term exceeding ten (10) years; provided,
      that loans under the Plan shall be renewable at the discretion of the
      Committee; and provided, further, that the indebtedness under each loan
      shall become due and payable, as the case may be, on a date no later than
      (i) one (1) year after termination of the Optionee's or Grantee's
      employment due to death,


                                       32
<PAGE>

      retirement or Disability, or (ii) the date of termination of the
      Optionee's or Grantee's employment for any reason other than death,
      retirement or Disability.

(d)   Loans under the Plan may be satisfied by an Optionee or Grantee, as
      determined by the Committee, in cash or, with the consent of the
      Committee, in whole or in part by the transfer to the Company of Shares
      whose Fair Market Value on the date of such payment is equal to the cash
      amount for which such Shares are transferred.

(e)   A loan shall be secured by a pledge of Shares with a Fair Market Value of
      not less than the principal amount of the loan. After partial repayment of
      a loan, pledged shares no longer required as security may be released to
      the Optionee or Grantee.

(f)   Every loan shall meet all applicable laws, regulations and rules of the
      Federal Reserve Board and any other governmental agency having
      jurisdiction.

10.   Adjustment Upon Changes in Capitalization.

(a)   In the event of a Change in Capitalization, the Committee shall
      conclusively determine the appropriate adjustments, if any, to the maximum
      number and class of shares of stock with respect to which Options or
      Awards may be granted under the Plan, the number and class of shares as to
      which Options or Awards have been granted under the Plan, and the purchase
      price therefor, if applicable.

(b)   Any such adjustment in the Shares or other securities subject to
      outstanding Incentive Stock Options (including any adjustments in the
      purchase price) shall be made in such manner as not to constitute a
      modification as defined by Section 425(h)(3) of the Code and only to the
      extent otherwise permitted by Sections 422 and 425 of the Code.

(c)   If, by reason of a Change in Capitalization, a Grantee of an Award shall
      be entitled to new, additional or different shares of stock or securities
      (other than rights or warrants to purchase securities), such new
      additional or different shares shall thereupon be subject to all of the
      conditions, restrictions and performance criteria which were applicable to
      the Shares or units pursuant to the Award prior to such Change in
      Capitalization.

11.   Effect of Certain Transactions. In the event of (i) the liquidation or
      dissolution of the Company, (ii) a merger or consolidation in which the
      Company is not the surviving corporation or (iii) the sale or disposition
      of all or substantially all of the Company's assets, provision shall be
      made in connection with such transaction for the assumption of the Plan
      and the Options or Awards theretofore granted under the Plan, or the
      substitution for such Options or Awards of new options or awards of the
      Successor Corporation, with appropriate adjustment as to the number and
      kind of shares and the purchase price for shares thereunder.

12.   Release of Financial Information. A copy of the Company's annual report to
      shareholders shall be delivered to each Optionee and Grantee at the time
      such report is distributed to the Company's shareholders. Upon request the
      Company shall furnish to each Optionee and Grantee a copy of its most
      recent annual report and each quarterly report and current report filed
      under the Exchange Act, since the end of the Company's prior fiscal year.

13.   Termination and Amendment of the Plan. The Plan shall terminate on the day
      preceding the tenth anniversary of its effective date and no Option or
      Award may be granted thereafter. The Board may sooner terminate or amend
      the Plan at any time, and from time to time; provided, however, that,
      except as provided in Sections 10 and 11 hereof, no amendment shall be
      effective unless approved by the shareholders of the Company in accordance
      with applicable law and regulations at an annual or special meeting held
      within twelve months before or after the date of adoption of such
      amendment, where such amendment will:

(a)   increase the number of Shares as to which Options or Awards may be granted
      under the Plan; or

(b)   change the class of persons eligible to participate in the Plan.

      The following amendments shall not require Shareholder approval unless
      required by law or regulation to preserve the intended benefits of the
      Plan to the Company or the participants:

(a)   change the minimum purchase price of Shares pursuant to Options or Awards
      as provided herein;


                                       33
<PAGE>

(b)   extend the maximum period for granting or exercising Options provided
      herein; or

(c)   otherwise materially increase the benefits accruing to Eligible Employees
      under the Plan.

      Except as provided in Sections 10 and 11 hereof, rights and obligations
      under any Option or Award granted before any amendment of the Plan shall
      not be altered or impaired by such amendment, except with the consent of
      the Optionee or Grantee, as the case may be.

14.   Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall
      not be construed as amending, modifying or rescinding any previously
      approved incentive arrangement or as creating any limitations on the power
      of the Board to adopt such other incentive arrangements as it may deem
      desirable, including, without limitation, the granting of stock options
      otherwise than under the Plan, and such arrangements may be either
      applicable generally or only in specific cases.

15.   Limitation of Liability. As illustrative of the limitations of liability
      of the Company, but not intended to be exhaustive thereof, nothing in the
      Plan shall be construed to:

(a)   give any person any right to be granted an Option or Award other than at
      the sole discretion of the Committee;

(b)   give any person any rights whatsoever with respect to Shares except as
      specifically provided in the Plan;

(c)   limit in any way the right of the Company to terminate the employment of
      any person at any time; or

(d)   be evidence of any agreement or understanding, expressed or implied, that
      the Company will employ any person in any particular position at any
      particular rate of compensation or for any particular period of time.

16.   Regulations and Other Approvals; Governing Law.

(a)   This Plan and the rights of all persons claiming hereunder shall be
      construed and determined in accordance with the laws of the State of New
      Jersey without giving effect to the choice of law principles thereof,
      except to the extent that such law is preempted by federal law.

(b)   The obligation of the Company to sell or deliver Shares with respect to
      Options and Awards granted under the Plan shall be subject to all
      applicable laws, rules and regulations, including all applicable federal
      and state securities laws, and the obtaining of all such approvals by
      governmental agencies as may be deemed necessary or appropriate by the
      Committee.

(c)   The Plan is intended to comply with Rule 16b-3 promulgated under the
      Exchange Act and Section 162(m) of the Code (each as amended from time to
      time) and the Committee shall interpret and administer the provisions of
      the Plan or any Agreement in a manner consistent therewith to the extent
      necessary. Any provisions inconsistent with such Rule or Section shall be
      inoperative but shall not affect the validity of the Plan or any grants
      thereunder.

(d)   Except as otherwise provided in Section 13, the Board may make such
      changes as may be necessary or appropriate to comply with the rules and
      regulations of any government authority or to obtain for Eligible
      Employees granted Incentive Stock Options the tax benefits under the
      applicable provisions of the Code and regulations promulgated thereunder.

(e)   Each Option and Award is subject to the requirement that, if at any time
      the Committee determines, in its absolute discretion, that the listing,
      registration or qualification of Shares issuable pursuant to the Plan is
      required by any securities exchange or under any state or federal law, or
      the consent or approval of any governmental regulatory body is necessary
      or desirable as a condition of, or in connection with, the grant of an
      Option or the issuance of Shares, no Options shall be granted or payment
      made or Shares issued, in whole or in part, unless listing, registration,
      qualification, consent or approval has been effected or obtained free of
      any conditions unacceptable to the Committee.

(f)   In the event that the disposition of Shares acquired pursuant to the Plan
      is not covered by a then current registration statement under the
      Securities Act of 1933, as amended, and is not otherwise exempt from such
      registration, such Shares shall be restricted against transfer to the
      extent required by the Securities Act of 1933, as amended, or regulations
      thereunder, and the


                                       34
<PAGE>

      Committee may require any individual receiving Shares pursuant to the
      Plan, as a condition precedent to receipt of such Shares (including upon
      exercise of an Option), to represent to the Company in writing that the
      Shares acquired by such individual are acquired for investment only and
      not with a view to distribution.

17.   Miscellaneous.

(a)   Multiple Agreements. The terms of each Option or Award may differ from
      other Options or Awards granted under the Plan at the same time, or at
      some other time. The Committee may also grant more than one Option or
      Award to a given Eligible Employee during the term of the Plan, either in
      addition to, or in substitution for, one or more Options or Awards
      previously granted to that Eligible Employee. The grant of multiple
      Options and/or Awards may be evidenced by a single Agreement or multiple
      Agreements, as determined by the Committee.

(b)   Withholding of Taxes. The Company shall have the right to deduct from any
      distribution of cash to any Optionee or Grantee an amount equal to the
      federal, state and local income taxes and other amounts required by law to
      be withheld with respect to any Option or Award. Notwithstanding anything
      to the contrary contained herein, if an Optionee or Grantee is entitled to
      receive Shares upon exercise of an Option or pursuant to an Award, the
      Company shall have the right to require such Optionee or Grantee, prior to
      the delivery of such Shares, to pay to the Company the amount of any
      federal, state or local income taxes and other amounts which the Company
      is required by law to withhold. The Agreement evidencing any Incentive
      Stock Options granted under this Plan shall provide that if the Optionee
      makes a disposition, within the meaning of Section 425(c) of the Code and
      regulations promulgated thereunder, of any Share or Shares issued to him
      or her pursuant to his or her exercise of the Incentive Stock Option
      within the two-year period commencing on the day after the date of grant
      of such Option or within the one-year period commencing on the day after
      the date of transfer of the Share or Shares to the Optionee pursuant to
      the exercise of such Option, he or she shall, within ten (10) days of such
      disposition, notify the Company thereof and immediately deliver to the
      Company any amount of federal income tax withholding required by law.

(c)   Designation of Beneficiary. Each Optionee and Grantee may, with the
      consent of the Committee, designate a person or persons to receive in the
      event of his/her death, any Option or Award or any amount payable pursuant
      thereto, to which he/she would then be entitled. Such designation will be
      made upon forms supplied by and delivered to the Company and may be
      revoked in writing. If an Optionee fails effectively to designate a
      beneficiary, then his/her estate will be deemed to be the beneficiary.

      Effective Date. The effective date of the Plan shall be the date of its
      adoption by the Board, subject only to the approval by the affirmative
      vote of a majority of the votes cast at a meeting of shareholders at which
      a quorum is present to be held within twelve (12) months of such adoption.
      No Options or Awards shall vest hereunder unless such Shareholder approval
      is obtained.


                                       35
<PAGE>

                     Peapack-Gladstone Financial Corporation
                  2002 Stock Option Plan for Outside Directors
                     (Adopted by Directors January 10, 2002)
                    (Adopted by Shareholders April 23, 2002)

--------------------------------------------------------------------------------

1.    Purpose

      The purpose of the Peapack-Gladstone Corporation (the "Company") 2002
      Stock Option Plan for Outside Directors (the "Directors' Option Plan" or
      the "Plan") is to promote the growth and profitability of the Company by
      providing outside directors of the Company with an incentive to achieve
      long-term objectives of the Company and to attract and retain non-employee
      directors of outstanding competence by providing such outside directors
      with an opportunity to acquire an equity interest in the Company.

2.    Grant of Options

      (a) The Plan will be administered by the Compensation Committee of the
      Board of Directors (the "Committee"). The Committee shall consist solely
      of two or more Non-Employee Directors, as such term is defined in Rule
      16b-3(b)(3) of the Exchange Act. The Committee may, from time to time,
      recommend the grant of options to the outside directors (for purposes of
      this Directors' Option Plan, the term "outside director" shall mean a
      member of the Board of Directors of the Company not also serving as an
      employee of the Company) under this Plan in such numbers and upon such
      terms as it deems appropriate, but all grants must be approved by the
      Company's Board of Directors.

      (b) Option Price. The purchase price per share of the Common Stock
      deliverable upon exercise of such option shall equal the Fair Market Value
      of the Common Stock on the date of the grant of this option as determined
      under paragraph (d) of this Section 2 and in no event below the par value
      of the Common Stock on the Date of Grant.

      (c) Ineligibility. An option under the Directors' Option Plan shall not be
      granted to any outside director who at any previous time was an employee
      of the Company and in such capacity was eligible to receive any options to
      purchase Common Stock.

      (d) Fair Market Value. For purposes of the Directors' Option Plan, when
      used in connection with Common Stock on a certain date, Fair Market Value
      means the average of the high and low prices of known trades of the Common
      Stock on the relevant date, or if the Common Stock was not traded on such
      date, on the next preceding day on which the Common Stock was traded
      thereon.

3.    Terms and Conditions

      (a) Option Agreement. Each option shall be evidenced by a written option
      agreement between the Company and the recipient specifying the number of
      shares of Common Stock that may be acquired through its exercise and
      containing such other terms and conditions which are not inconsistent with
      the terms of this grant.

      (b) Vesting. Each option granted pursuant to Section 2(a) hereof shall
      become exercisable in five annual installments of twenty percent (20%).
      The first installment of options granted pursuant to Section 2(a) shall
      vest one year from the date of grant and the remaining four annual
      installments will vest on successive anniversary dates, but only if the
      optionee continues to serve as an outside director at such applicable
      vesting date, unless otherwise provided in this Plan.

      (c) Manner of Exercise. The option when exercisable may be exercised from
      time to time in whole or in part, by delivering a written notice of
      exercise to the President of the Company signed by the recipient. Such
      notice is irrevocable and must be accompanied by full payment of the
      exercise price (as determined in Section 2(b) hereof) in cash or shares of
      previously acquired common stock of the Company at the Fair Market Value
      of such shares determined on the exercise date by the manner described in
      Section 2(d) above.


                                       36
<PAGE>

      (d) Transferability. Each option granted hereby may be exercised only by
      the recipient to whom it is issued, or in the event of the outside
      director's death, his or her legal representative or successor(s) in
      interest pursuant to the terms of section 3(e) hereof.

      (e) Termination of Service. Upon the termination of a recipient's service
      for any reason other than disability, Change in Control, death or removal
      for cause, the participant's stock options shall be exercisable only as to
      those shares which were immediately purchasable by the recipient at the
      date of termination. In the event of death or disability of any recipient,
      all stock options held by such recipient, whether or not exercisable at
      such time, shall become immediately exercisable by the recipient or the
      recipient's legal representatives or beneficiaries. Upon termination of
      the recipient's service due to or within 12 months after a Change in
      Control, all stock options held by such recipient, whether or not
      exercisable at such time, shall become immediately exercisable. However,
      shares of Common Stock acquired through the exercise of options granted
      under Section 2 may not be sold or otherwise disposed of for a period of
      one year from the Date of Grant of the option. For purposes of this plan
      the following terms are defined:

            (i) "Change in Control" for purposes of this Plan shall mean an
            event of a nature that: (1) any "person" (as the term is used in
            Sections 13(d) and 14(d) of the Exchange Act) who is not now
            presently but becomes the "beneficial owner" (as defined in Rule
            13d-3 under the Exchange Act), directly or indirectly, of securities
            of the Company representing 25% or more of the Company's outstanding
            securities except for any securities purchased by any tax-qualified
            employee benefit plan of the Company; or (2) individuals who
            constitute the Board on the date hereof (the "Incumbent Board")
            cease for any reason to constitute at least a majority thereof,
            provided that any person becoming a director subsequent to the date
            hereof whose election was approved by a vote of at least
            three-quarters of the directors comprising the Incumbent Board, or
            whose nomination for election by the Company's stockholders was
            approved by the same Nominating Committee serving under an Incumbent
            Board, shall be, for purposes of this clause (2), considered as
            though he were a member of the Incumbent Board; or (3) filing is
            made for regulator approval to implement a plan of reorganization,
            merger, consolidation, sale of all or substantially all the assets
            of the Company or similar transaction occurs in which the Company is
            not the resulting entity or such plan, merger, consolidation, sale
            or similar transaction occurs; or (4) a proxy statement soliciting
            proxies from shareholders of the Company shall be distributed by
            someone other than the current management of the Company, seeking
            stockholder approval of a plan of reorganization, merger or
            consolidation of the Company or similar transaction with one or more
            corporations as a result of which the outstanding shares of the
            class of securities then subject to the plan or transaction are
            exchanged for or converted into cash or property or securities not
            issued by the Company; or (5) a tender offer is made for 25% or more
            of the voting securities of the Company.

            (ii) "Disability" means the permanent and total inability by reason
            of mental or physical infirmity, or both, of an outside director to
            perform the work customarily assigned to him. Additionally, a
            medical doctor selected or approved by the Board of Directors must
            advise the Board that it is either not possible to determine when
            such disability will terminate or that it appears probable that such
            disability will be permanent during the remainder of said
            recipient's lifetime.

      (f) Termination of Option. Each option shall expire upon the earlier of
      (i) one hundred and twenty (120) months following the date of grant, or
      (ii) three (3) years following the date on which the outside director
      ceases to serve in such capacity for any reason other than removal for
      cause. If the outside director dies before fully exercising any portion of
      an option then exercisable, such option may be exercised by such outside
      director's beneficiary, personal representative(s), heir(s) or devisee(s)
      at any time within the three (3) year period following his or her death;
      provided, however, that in no event shall the option be exercisable more
      than one hundred and twenty (120) months after the date of its grant. If
      the outside director is removed for cause, all options awarded to him
      shall expire upon such removal.

4.    Common Stock Subject to the Directors' Option Plan

      The shares which shall be issued and delivered upon exercise of options
      granted under the Directors' Option Plan may be either authorized and
      unissued shares of Common Stock or authorized and issued shares of Common
      Stock held by the Company as treasury stock. The number of shares of
      Common Stock reserved for issuance under the


                                       37
<PAGE>

      Directors' Option Plan shall not exceed 40,000 shares of the Common Stock
      of the Company, no par value per share, subject to adjustments pursuant to
      this Section 4. Any shares of Common Stock subject to an option which for
      any reason either terminates unexercised or expires, shall again be
      available for issuance under the Directors' Option Plan.

      In the event of any change or changes in the outstanding Common Stock of
      the Company by reason of any stock dividend or split, recapitalization,
      reorganization, merger, consolidation, spin-off, combination or any
      similar corporate change, or other increase or decrease in such shares
      effected without receipt or payment of consideration by the Company, the
      number of shares of Common Stock which may be issued under the Directors'
      Option Plan, the number of shares of Common Stock to options granted under
      this Directors' Option Plan, and the option price of such options, shall
      be automatically and proportionately adjusted to prevent dilution or
      enlargement of the rights granted to recipient under the Directors' Option
      Plan.

5.    Effective Date of the Plan; Shareholder Ratification

      This Plan was approved by the Board of Directors on January 10, 2002 and
      shall become effective on such date if it is approved by the Shareholders
      by a majority of the votes cast on such proposal at the 2002 Annual
      Meeting if a quorum is present.

6.    Termination of the Plan

      The right to grant options under the Directors' Option Plan will terminate
      automatically upon the earlier of ten years after the Effective Date of
      the Plan or the issuance of 40,000 shares of Common Stock (the maximum
      number of shares of Common Stock reserved for under this Plan) subject to
      adjustment pursuant to Section 4 hereof.

7.    Amendment of the Plan

      The Directors' Option Plan may be amended from time to time by the Board
      of Directors of the Company provided that Sections 2 and 3 hereof shall
      not be amended more than once every six months other than to comport with
      the Internal Revenue Code of 1986, as amended, or the Employee Retirement
      Income Security Act of 1974, as amended, or the rules thereunder. Except
      as provided in Section 4 hereof, rights and obligations under any option
      granted before an amendment shall not be altered or impaired by such
      amendment without the written consent of the optionee. If the Directors'
      Option Plan is subject to 17 C.F.R. ss.240.16(b)-3 ("Rule 16(b)-3") of the
      rules and regulations promulgated under the Securities Exchange Act of
      1934 and an amendment would require shareholder approval under such Rule
      16(b)-3 or as otherwise may be required under applicable New Jersey law,
      then subject to the discretion of the Board of Directors of the Company,
      such amendment shall be presented to shareholders for approval; provided,
      however, that the failure to obtain shareholder ratification shall not
      affect the validity of this Plan as so amended and the options granted
      thereunder.

8.    Applicable Law

      The Plan will be administered in accordance with the laws of the State of
      New Jersey and applicable federal law.

9.    Compliance with Section 16

      If this Plan is qualified under Rule 16b-3, transactions under this Plan
      are intended to comply with all applicable conditions of Rule 16b-3 or its
      successors under the Exchange Act. To the extent that any provision of the
      Plan fails to so comply, such provision shall be deemed null and void, to
      the extent permitted by law.


                                       38



</TEXT>
</DOCUMENT>
