Exhibit 10.2

PEAPACK-GLADSTONE FINANCIAL CORPORATION

2002 LONG-TERM STOCK INCENTIVE PLAN

(Adopted by Directors January 10, 2002)

(Adopted by Shareholders April 23, 2002)

(Amended by the Board of Directors December 31, 2005)

 

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

 

 

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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.

(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.

 

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(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.

(aa)         “Retirement” means the retirement from active employment by the
Company of an employee or officer but only if such person meets all of the
following requirements: (i) he has a minimum combined total of years of service
to the Company or any Subsidiary (excluding service to any acquired company) and
age equal to eighty (80), (ii) he is age sixty-two (62) or older, and (iii) he
provides six (6) months prior written notice to the Company of the retirement.

 

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(ab)        “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).

(ac)         “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.

(ad)        “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.

(ae)         “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.

(af)         “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,

 

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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 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.

 

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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 Agreement to the Optionee. Not less
than 100 Shares may be purchased at any time upon the exercise of an Option

 

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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.

(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.

 

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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
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, the Stock Appreciation Right
shall be cancelled to the extent of the number of Shares as to which the Option
is exercised.

(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, the Stock Appreciation Right shall automatically be deemed to be
exercised to the extent of the number of Shares as to which the

 

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Option is exercised. 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 pursuant to the exercise
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 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.

 

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(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 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.

 

 

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(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

 

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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,
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.

 

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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;

(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.

 

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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.

 

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(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 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.

18.          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.

 

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