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                                                                    Exhibit 10.2

                            1ST CONSTITUTION BANCORP

                            DIRECTORS' DEFERRAL PLAN
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                            1ST CONSTITUTION BANCORP
                            DIRECTORS' DEFERRAL PLAN

Section 1. Establishment of the Plan

            Effective as of October 1, 2002, 1st Constitution Bancorp
("Bancorp") hereby establishes a plan whereby certain members of the Boards of
Directors of Bancorp and of 1st Constitution Bank ("Bank"), who are not current
employees of either Bancorp or Bank ("Directors"), may voluntarily defer receipt
of some or all of the directors' fees payable to them by either Bancorp or Bank
(the "Deferred Compensation").

Section 2. Definitions

            In addition to the definitions set forth in Section 1, when used in
the Plan, the following terms shall have the definitions set forth in this
Section 2:

            2.1 Beneficiary: The term "Beneficiary" means the beneficiary or
beneficiaries (including any contingent beneficiary or beneficiaries) designated
by the Participant pursuant to Section 5.3. hereof.

            2.2 Board of Directors: The term "Board of Directors" means the
board of directors of the Company.

            2.3 Change of Control: A Change of Control will be deemed to have
occurred if -

                  (X) any "person" (as such term is used in Sections 13(d) and
            14(d) of the Securities Exchange Act of 1934, as amended (the
            "Exchange Act")), other than a trustee or other fiduciary holding
            securities under an employee benefit plan of Bancorp or a person
            engaging in a transaction of the type described in clause (Z) below
            of this definition but which does not constitute a change in control
            under such clause (Z), hereafter becomes the "beneficial owner" (as
            defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of securities of Bancorp representing more than 50% of
            the combined voting power of Bancorp's then outstanding securities;
            or
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                  (Y) during any period of twenty-four (24) consecutive months
            during the term of this Agreement, individuals who at the beginning
            of such period constitute the Board of Directors, and any new
            director (other than a director designated by a person who has
            entered into an agreement with Bancorp to effect a transaction
            described in clauses (X) or (Z) of this definition) whose election
            by such Board of Directors, or nomination for election by Bancorp's
            shareholders, was approved by a vote of at least two-thirds (2/3) of
            the directors then still in office who either were directors at the
            beginning of the period or whose election or nomination for election
            was previously so approved, cease for any reason to constitute a
            majority thereof; or

                  (Z) Bancorp completes, a merger, consolidation or similar
            transaction with or into any other corporation or entity, or a
            binding share exchange involving Bancorp's securities, other than
            any such transaction which would result in the voting securities of
            Bancorp outstanding immediately prior thereto continuing to
            represent (either by remaining outstanding or by being converted
            into voting securities of the surviving entity) at least 50% of the
            combined voting power of the voting securities of Bancorp or such
            surviving entity outstanding immediately after such transaction, or
            Bancorp completely liquidates, sells or otherwise disposes of all or
            substantially all of its assets.

            2.4 Company: The term "Company" means 1st Constitution Bancorp
and/or 1st Constitution Bank.

            2.5 Company Credit: The term "Company Credit" means an amount
computed and credited to a Participant's Deferred Compensation Account, as
described in Section 4.2.

            2.6 Compensation: The term "Compensation" means the retainer and the
aggregate of all fees for service and attendance at Board of Director and
committee meetings to which a Director is entitled for services rendered to the
Company as a Director.

            2.7 Deferred Amount: The term "Deferred Amount" means the amount of
Compensation that a Participant elects to defer in accordance with Section 3
hereof.

            2.8 Deferred Compensation Account: The term "Deferred Compensation
Account" means the account described in Section 4.1. A Participant's Deferred
Compensation Account shall be fully vested at all times.


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            2.9 Effective Date: The term "Effective Date" has the definition set
forth in Section 10.

            2.10 Participant: The term "Participant" means a Director who has
elected to defer receipt of Compensation pursuant to the terms of the Plan.

            2.11 Plan: The term "Plan" means this 1st Constitution Bancorp
Directors' Deferral Plan, as set forth herein, and as it may be amended from
time to time.

Section 3. Participation

            Prior to the Effective Date, and thereafter prior to the beginning
of any calendar year, any Director who is not an employee of the Company may
defer the receipt of some or all Compensation to be earned by the Director
during such following calendar year and the ensuing calendar years by filing
with the Company (or its delegate) a written election that:

            (i)   defers payment of a designated amount or a percentage of
                  his/her Compensation for services attributable to such
                  calendar years (the "Deferred Amount");

            (ii)  specifies the payment option selected by the Participant
                  pursuant to Section 5.2 hereof for such Deferred Amount.

            The amount deferred may not exceed the Director's Compensation for
the period of deferral. Notwithstanding the foregoing, any individual who is not
an employee of the Company, and who is newly elected or appointed to serve as a
Director, may, not later than thirty (30) days after his/her election or
appointment as a Director becomes effective, elect in accordance with the
preceding provisions of this Section 3, to defer the receipt of Compensation
earned during the portion of the current calendar year that follows his/her
filing of the election with the Company. Any elections made pursuant to this
Section 3 shall be irrevocable when


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made. Notwithstanding the foregoing, the Board of Directors, in its sole
discretion, may make a distribution to a Participant under either Section
5.2(i)(a) or 5.4. If a Participant fails to discontinue an election under
Section 4 with respect to his/her Deferred Amount for a calendar year prior to
the commencement of such year, then the Participant's current election shall
remain in effect; provided, however, that the Participant may thereafter make a
new election with regard to calendar years in the future at any time in
accordance with the first paragraph of this Section 3.

Section 4. Individual Accrual Accounts

            The Company shall maintain a notional individual account for each
Participant, as follows:

            4.1 Deferred Compensation Account: The Company shall maintain a
Deferred Compensation Account in the name of each Participant with respect to
any amounts deferred under the Plan.

            4.2 Accrual of Company Credit: The Company shall credit to each
Participant's Deferred Compensation Account an interest component calculated in
one of two ways. The interest component for a given calendar year (for both
amounts credited as of the first day of such calendar year and for all Deferred
Amounts credited during such calendar year) will be credited at either the prime
rate (compounded monthly) or based upon the performance of Bancorp's common
stock (without regard to dividends) for such calendar year. For the above
purpose, prime rate shall be determined each year as of the first business day
of that calendar year (except with respect to the 2002 year, in which case the
rate shall be determined as of the Effective Date (or the next business day if
the Effective Date is not a business day)), as reported in The Wall Street
Journal. Also for this purpose, the performance of Bancorp's common stock


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shall be calculated by averaging the closing prices of Bancorp's common stock
for each day on which the applicable stock exchange is open for business, or in
the event there is no closing price for such day, the average of closing bid and
asked prices. Notwithstanding the above, the rate of return for a given calendar
year under the Bancorp common stock methodology will be a minimum of four
percent (4%) and a maximum of twelve percent (12%). Any actual rate of return
(positive or negative) that is not taken into account for a given year as a
result of the above minimum or maximum limits, will be carried forward to
succeeding years and will be netted against the next year's return (with
cumulative carryover, if necessary). A Participant must elect which interest
component methodology will apply for a given calendar year prior to the
commencement of such calendar year (or, for the partial year beginning on the
Effective Date, prior to the Effective Date). Unless changed (in a written
notice delivered to Bancorp (or its delegate)) prior to the commencement of a
calendar year, the prior year's methodology will continue to apply. In the
absence of an affirmative election by a Participant, the prime rate methodology
will apply. The Company Credit shall be compounded and credited to each Deferred
Compensation Account as of the last day of each month.

            4.3 Account Statements: Within a reasonable time following each
December 31, the Company shall provide an annual statement of account to each
Participant.

Section 5. Payment Provisions

            5.1 Method of Payment. All payments to a Participant (or to a
Participant's Beneficiary or estate, as the case may be) with respect to the
Participant's Deferred Compensation Account shall be paid in cash only.


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            5.2 Payment Options:

            (i)   At the time each Director first elects to make a deferral, the
                  Participant shall select a payment option with respect to the
                  payment of the Participant's entire Deferred Compensation
                  Account from the following payment options:

                  (a)   a lump sum paid on or about the first day of the
                        calendar year following termination of service as a
                        Director;

                  (b)   payments in substantially equal annual installments over
                        a period of ten (10) years, commencing in January of the
                        calendar year following the calendar year during which
                        the Participant ceases to be a Director.

            (ii)  If the payment option described in paragraph (i)(a) above has
                  been elected, the amount of the lump sum with respect to the
                  Participant's Deferred Compensation Account shall be equal to
                  the amount credited to the Participant's Deferred Compensation
                  Account as of the last business day of the calendar year
                  preceding the date of payment.

            (iii) If the payment option described in paragraph (i)(b) above has
                  been elected, the amount of each installment with respect to
                  the Participant's Deferred Compensation Account shall be paid
                  annually, in installment amounts. In such event, the Company
                  Credit shall continue to be credited until all amounts are
                  distributed.

            (iv)  Notwithstanding the above, a Director may elect to change the
                  form of distribution from installments to lump sum, or vice
                  versa, provided that


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                  such new election may not be made less than nine (9) months
                  prior to such Director's becoming entitled to a distribution
                  hereunder. In addition, a Participant may not change his or
                  her election after installment payments under Section 5(i)(b)
                  have commenced.

            5.3 Payment Upon Death. Notwithstanding any other provision of the
Plan to the contrary, within a reasonable period of time following the death of
a Participant, the amount credited to the Participant's Deferred Compensation
Account shall be paid by the Company in a lump sum to the Participant's
Beneficiary. For purposes of this Section 5.3, the amount credited to the
Participant's Deferred Compensation Account shall be determined as of the date
of payment. A Participant may designate a Beneficiary, in writing, in a form
acceptable to the Board of Directors. A Participant may revoke a prior
designation of a Beneficiary and may also designate a new Beneficiary without
the consent of the previously designated Beneficiary, provided, however, that
such revocation and new designation (if any) are in writing and filed with the
Company before the Participant's death. If the Participant does not designate a
Beneficiary, or if no designated Beneficiary survives the Participant, any
amount not distributed to the Participant during the Participant's lifetime
shall be paid to the Participant's estate in a lump sum in accordance with this
Section 5.3.

            5.4 Payment on Unforeseeable Emergency. The Board of Directors may,
in its sole discretion, direct payment to a Participant of all or of any portion
of the Participant's Deferred Compensation Account, notwithstanding an election
of a payment option under Section 5.2 above, at any time that the Board of
Directors determines that such Participant has an unforeseeable emergency, and
then only to the extent reasonably necessary to meet the emergency. For purposes
of this section, "unforeseeable emergency" means severe financial


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hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant.

            5.5 Notwithstanding anything herein to the contrary, immediately
following the occurrence of a Change of Control, all Deferred Compensation
Accounts will be revalued (adjusting for earnings as of the date of the Change
of Control), and will be distributed in the form of a lump sum to each
Participant and/or Beneficiary, and the Plan will thereafter be terminated.

Section 6. Prohibition Against Transfer

            The right of a Participant to receive payments under the Plan may
not be transferred except by will or applicable laws of descent and
distribution. A Participant may not assign, sell, pledge, or otherwise transfer
amounts to which he/she is entitled hereunder prior to payment thereof to the
Participant.

Section 7. General Provisions

            7.1 Director's Rights Unsecured. The Plan is unfunded. The right of
any Participant to receive payments of cash under the provisions of the Plan
shall be an unsecured claim against the general assets of the Company.

            7.2 Administration. Except as otherwise provided in the Plan, the
Plan shall be administered by the Board of Directors of Bancorp, which shall
have the authority to adopt rules and regulations for carrying out the Plan, and
which shall interpret, construe, and implement the provisions of the Plan. The
Board of Directors, however, shall have the right to delegate some or any of its
administrative functions under the Plan to another person or entity.


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            7.3 Legal Opinions. The Board of Directors may consult with legal
counsel, who may be counsel for the Company, with respect to its obligations and
duties under the Plan, or with respect to any action, proceeding, or any
questions of law, and shall not be liable with respect to any good faith action
taken, or omitted, by it pursuant to the advice of such counsel.

            7.4 Liability. Any decision made or action taken by the Board of
Directors, or any employee of the Company or any of its subsidiaries, arising
out of or in connection with the construction, administration, interpretation or
effect of the Plan, specifically including (but not limited to) the amount of
the Company Credit, shall be absolutely discretionary, and shall be conclusive
and binding on all parties. Neither the Board of Directors nor any employee of
the Company shall be liable for any Deferred Compensation Account or action
hereunder, whether of omission or commission, by any other member or employee or
by any agent to whom duties in connection with the administration of the Plan
have been delegated or, except in circumstances involving bad faith, for
anything done or omitted to be done.

            7.5 Withholding. The Company shall have the right to deduct from all
payments hereunder any taxes required by law to be withheld from such payments.
The recipients of such payments shall bear all taxes on amounts paid under the
Plan to the extent that no taxes are withheld thereon, irrespective of whether
withholding is required.

Section 8. Amendment, Suspension, and Termination

            The Board of Directors of Bancorp shall have the right at any time,
and for any reason, to amend, suspend, or terminate the Plan, provided, however,
that no amendment, suspension, or termination shall reduce the balance in any
Participant's Deferred Compensation Account.

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Section 9. Applicable Law

            The Plan shall be governed by, and construed in accordance with, the
laws of the State of New Jersey, except to the extent that such laws are
preempted by federal law.

Section 10. Effective Date

                  The Effective Date of this Plan is October 1, 2002.

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