Exhibit 10 (B)

                     PEAPACK-GLADSTONE FINANCIAL CORPORATION
                             1998 Stock Option Plan

1.    Purpose

      The purpose of the Peapack-Gladstone Financial Corporation's (the
      "Corporation") 1998 Stock Option Plan (the "Plan") is to advance the
      interests of the Company and its shareholders by providing those key
      employees of the Corporation, upon whose judgment, initiative and efforts
      the successful conduct of the business of the Corporation largely depends,
      with additional incentive to perform in superior manner. A purpose of the
      Plan is also to attract people of experience and ability to the service of
      the Corporation.

2.    Definitions

      A.    Board of Directors or Board: means the board of directors of the
            Corporation.

      B.    Change in Control: for purposes of this Plan, a Change in Control of
            the Company 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 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, 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 shall be distributed; or (5) a tender offer is
            made for 25% or more of the voting securities of the Company.

      C.    Committee: means a committee consisting of those members of the
            Compensation Committee of the Board of Directors who are
            non-employee members of the Board of Directors, all of whom are (i)
            "disinterested directors" as such term is defined under Rule 16b-3
            ("Rule 16b-3") under the Securities and Exchange Act of 1934, as
            amended (the "Exchange Act"), as promulgated by the Securities and
            Exchange Commission and (ii) "outside directors" within the meaning
            of Section 162(m) of the Internal Revenue Code, subject to any
            transition rules applicable to the definition of outside director.

      D.    Date of Grant: means the date an Option is granted by the Committee.

      E.    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


                                       15
<PAGE>

            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 Participant's lifetime.

      F.    Fair Market Value: for purposes of the 1998 Stock 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.

      G.    Incentive Stock Option: means an Option granted by the Committee to
            a Participant, which Option is designated as an Incentive Stock
            Option pursuant to Section 8.

      H.    Non-qualified Stock Option: means an Option granted by the Committee
            to a Participant and which is not designated by the Committee as an
            Incentive Stock Option.

      I.    Normal Retirement: means retirement at the normal or early
            retirement date as set forth in any tax-qualified retirement/pension
            plan of the Company.

      J.    Option: means the grant of Incentive Stock Options or Non-qualified
            Stock Options granted under Section 7 or Section 8.

      K.    Participant: means an employee of the Company or its affiliates
            chosen by the Committee to participate in the Plan.

      L.    Plan Year(s): means the part of the year beginning with the date the
            plan is approved by a majority of the shareholders and ending on
            December 31, 1998, and calendar years thereafter.

      M.    Termination for Cause: means the 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.

3.    Administration

      The Plan shall be administered by the Committee. The Committee is
      authorized, subject to the provisions of the Plan, to establish such rules
      and regulations as it sees necessary for the proper administration of the
      Plan and to make determinations and interpretations in connection with the
      Plan it sees as necessary or advisable. All awards to the proxy executives
      shall be approved in writing by the Committee. All determinations and
      interpretations made by the Committee shall be binding and conclusive on
      all Participants in the Plan and on their legal representatives and
      successors in interest.

4.    Types of Awards

      Awards under the Plan may be granted in any one or a combination of:

      (a)   Non-qualified Stock Options;

      (b)   Incentive Stock Options; and

      as defined below in paragraphs 7 and 8 of the Plan.

5.    Stock Subject to the Plan

      Subject to adjustment as provided in Section 14, the maximum number of
      shares reserved for purchase pursuant to the exercise of options granted
      under the Plan shall not exceed 65,000 of the shares of Common Stock of
      the Company, no par value per share, subject to adjustments pursuant to
      this Section 5. These shares of Common Stock may be either authorized but
      unissued shares or shares previously issued and reacquired by the Company.
      No more than 6,500 shares may be granted to any one individual under this
      Plan in any one year, subject to adjustment as provided in Section 14.
      Shares subject to any unexercised portion of a terminated, canceled or


                                       16
<PAGE>

      expired option granted hereunder, and pursuant to which a Participant
      never acquired benefits of ownership, including payment of a stock
      dividend (but excluding voting rights), may again be subjected to grant
      and awards under the Plan.

6.    Eligibility

      Officers and other employees of the Company shall be eligible to receive
      Incentive Stock Options and Non-qualified Stock Options under the Plan.
      Directors who are not employees or officers of the Company shall not be
      eligible to receive Options under the Plan.

7.    Non-qualified Stock Options

      7.1   Grant of Non-qualified Stock Options.

      The Committee may, from time to time, grant Non-qualified Stock Options to
      eligible employees and, upon such terms and conditions as the Committee
      may determine, grant Non-qualified options in exchange for and upon
      surrender of previously granted Options under this Plan. Non-qualified
      Stock Options granted under this Plan are subject to the following terms
      and conditions.

      (a)   Price. The purchase price per share of Common Stock deliverable upon
            the exercise of each Non-qualified Stock Option shall determined by
            the Committee on the date the option is granted. The purchase price
            shall not be less than 100% of the Fair Market Value of the
            Company's Common Stock on the Date of Grant and in no event below
            the par value of the Common Stock on the Date of Grant. Shares may
            be purchased only upon full payment of the purchase price. Payment
            of the purchase price may be made, in whole or in part, through the
            surrender of shares of the Common Stock of the Company at the Fair
            Market Value of such shares on the date of surrender determined in
            the manner described in Section 2(i).

      (b)   Terms of Options. The terms during which each Non-qualified Stock
            Option may be exercised shall be determined by the Committee, but in
            no event shall a Non-qualified Stock Option be exercisable in whole
            or in part more than 10 years from the Date of Grant. The Committee
            shall determine the date on which each Non-qualified Stock Option
            shall become exercisable and may provide that a Non-qualified Stock
            Option shall become exercisable in installments. The shares
            comprising each installment may be purchased in whole or in part at
            any time after such installment becomes purchasable. The Committee
            may, in its sole discretion, accelerate the time at which any
            Non-qualified Stock Option may be exercised in whole or in part.
            Notwithstanding the above, in the event of a Change in Control of
            the Company, all Non-qualified Stock Options shall become
            immediately exercisable.

      (c)   Termination of Employment. Unless otherwise determined by the
            Committee at the time a Stock Option is granted, upon the
            termination of a Participant's service for any reason other than
            Disability, Normal Retirement, Change in Control, death or
            Termination for Cause, the Participant's Non-qualified Stock Options
            shall be exercisable only as to those shares which were immediately
            purchasable by the Participant at the date of termination and only
            for a period of three years following termination. Notwithstanding
            any provision set forth herein or contained in any Agreement
            relating to the award of a Stock Option, in the event of Termination
            for Cause, all rights under the Participant's Non-qualified Stock
            Options shall expire upon termination. Unless otherwise determined
            by the Committee at the time a Stock Option is granted, in the event
            of the death, Disability, termination due to Change in Control or
            Normal Retirement of any Participant, all Non-qualified Stock
            Options held by the Participant, whether or not exercisable at such
            time, shall be exercisable by the Participant or his legal
            representatives or successors in interest of the Participant for
            three years or such longer period as determined by the Committee
            following the date of the Participant's death, Normal Retirement or
            cessation of employment due to Disability or Change in Control,
            provided that in no event shall the period extend beyond the
            expiration of the Non-qualified Stock Option term.


                                       17
<PAGE>

8.    Incentive Stock Options

      8.1   Grant of Incentive Stock Options.

      The Committee may, from time to time, grant Incentive Stock Options to
      eligible employees. Incentive Stock Options granted pursuant to the Plan
      shall be subject to the following terms and conditions:

      (a)   Price. The purchase price per share of Common Stock deliverable upon
            the exercise of each Incentive Stock Option shall not be less than
            100% of the Fair Market Value of the Company's Common Stock on the
            Date of Grant and in no event below the par value of the Common
            Stock on the Date of Grant. However, if a Participant owns stock
            possessing more than 10% of the total combined voting power of all
            classes of Common Stock of the Company, the purchase price per share
            of Common Stock deliverable upon the exercise of each Incentive
            Stock Options shall not be less than 110% of the Fair Market Value
            of the Company's Common Stock on the Date of Grant. Shares may be
            purchased only upon payment of the full purchase price. Payment of
            the purchase price may be made, in whole or in part, through the
            surrender of shares of the Common Stock of the Company at the Fair
            Market Value of such shares on the date of surrender determined in
            the manner described in Section 2(i).

      (b)   Amounts of Options. Incentive Stock Options may be granted to any
            eligible employee in such amounts as determined by the Committee.
            The aggregate Fair Market Value (determined as of the time the
            option is granted) of the Common Stock with respect to which
            Incentive Stock Options granted are exercisable for the first time
            by the Participant during any calendar year (under all plans of the
            Participant's employer corporation and its parent and subsidiary
            corporations, if any) shall not exceed $100,000. The provisions of
            this Section 8.1(b) shall be construed and applied in accordance
            with Section 422(d) of the Code and the regulations, if any,
            promulgated thereunder. To the extent an award under this Section
            8.1 exceeds this $100,000 limit, the portion of the award in excess
            of such limit shall be deemed a Non-qualified Option.

      (c)   Terms of Options. The term during which each Incentive Stock Option
            may be exercised shall be determined by the Committee, but in no
            event shall an Incentive Stock Options be exercisable in whole or in
            part more than 10 years from the Date of Grant. If at the time an
            Incentive Stock is granted to any employee, the employee owns Common
            Stock representing more than 10% of the total combined voting power
            of the Company (or, under Section 425(d) of the Code, is deemed to
            own Common Stock representing more than 10% of the total combined
            voting power of all such classes of Common Stock, by reason of the
            ownership of such classes of Common Stock, directly or indirectly,
            by or for any brother, sister, spouse, ancestor or lineal descendent
            of such employee, or by or for any corporation, partnership, estate
            or trust of which such employee is a shareholder, partner or
            beneficiary), the Incentive Stock Option granted to such employee
            shall not be exercisable after the expiration of five years from the
            Date of Grant. No Incentive Stock Option granted under the Plan is
            transferable except by will or the laws of descent and distribution
            and is exercisable in his lifetime only by the employee to whom it
            is granted.

            The Committee shall determine the date on which each Incentive Stock
            Option shall become exercisable and may provide that an Incentive
            Stock Option shall become exercisable in installments. The shares
            comprising each installment may be purchased in whole or in part at
            any time after such installment becomes purchasable, provided that
            the amount able to be first exercised in a given year is consistent
            with the terms of Section 422 of the Code. The Committee may, in its
            sole discretion, accelerate the time at which any Incentive Stock
            Option may be exercised in whole or in part. In the event of a
            Change in Control of the Company, all Incentive Stock Options shall
            become immediately exercisable.

      (d)   Termination of Employment. Upon the termination of a Participant's
            service for any reason other than Disability, Normal Retirement,
            Change in Control, death or Termination for Cause, the Participant's
            Incentive Stock Options shall be exercisable only as to those shares
            which were immediately purchasable by the Participant at the date of
            termination and only for a period of three


                                       18
<PAGE>

            months following termination. In the event of Termination for Cause
            all rights under the Participant's Incentive Stock Options shall
            expire upon termination.

            In the event of death or Disability of any employee, all Incentive
            Stock Options held by such Participant, whether or not exercisable
            at such time, shall be exercisable by the Participant or the
            Participant's legal representatives or beneficiaries for three years
            following the date of the Participant's death or cessation of
            employment due to Disability. Upon termination of the Participant's
            service due to Normal Retirement, or a Change in Control, all
            Incentive Stock Options held by such Participant, whether or not
            exercisable at such time, shall be exercisable for a period of three
            months following the date of Participant's cessation of employment.
            In no event shall the exercise period extend beyond the expiration
            of the Incentive Stock Option term.

      (e)   Compliance with Code. The options granted under this Section 8 of
            the Plan are intended to qualify as incentive stock options within
            the meaning of Section 4212 of the Code, but the Company makes no
            warranty as to the qualifications of any option as an incentive
            stock options within the meaning of Section 422 of the Code.

9.    Surrender Option

      In the event of a Participant's termination of employment as a result of
      death, disability or Normal Retirement, the Participant (or the
      Participant'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 Participant in exchange for a cash payment from
      the Company of an amount equal to the difference between the Fair Market
      Value of the Common Stock on the date of termination of employment and the
      exercise price per share of the option on the Date of Grant. 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 Participant
      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.

10.   Rights of a Shareholder: Nontransferablility

      No Participant shall have any rights as a shareholder with respect to any
      shares covered by a Non-qualified and/or Incentive Stock Option until the
      date of issuance of a stock certificate for such shares. Nothing in this
      Plan or in any Option granted confers on any person any right to continue
      in the employ of the Company or to continue to perform services for the
      Company or interferes in any way with the right of the Company to
      terminate a Participant's services as an officer or other employee at any
      time.

      No Option under the Plan shall be transferable by the optionee other than
      by will or the laws of descent and distribution and may only be exercised
      during his lifetime by the optionee, or by a guardian or legal
      representative.

11.   Rights of a Shareholder: Transferability.

      No Option under the Plan shall be transferable or assignable, or payable
      to or exercisable by, anyone other than the Participant to whom it was
      granted, except (i) by will or by the laws of descent and distribution,
      (ii) as a result of the disability of a Participant or (iii) that the
      Committee (in the form of an Option Agreement or otherwise) may permit
      transfers of Options by gift or otherwise to a member of a Participant's
      immediate family and/or trusts whose beneficiaries are members of the
      Participant's immediate family, or to such other persons or entities as
      may be approved by the Committee. Notwithstanding the foregoing, in no
      event shall Incentive Stock Options be transferable or assignable other
      than by will or by the laws of descent and distribution.


                                       19
<PAGE>

12.   Agreement with Grantees

      Each grant of Options, will be evidenced by a written agreement, executed
      by the Participant and the Company which describes the conditions for
      receiving the Options including the date of grant, the purchase price if
      any, applicable periods, and any other terms and conditions as may be
      required by the Board of Directors or applicable securities law.

13.   Designation of Beneficiary

      A Participant may, with the consent of the Committee, designate a person
      or persons to receive, in the event of death, any Options to which the
      Participant 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 a Participant fails effectively to designate a beneficiary,
      then the Participant's estate will be deemed to be the beneficiary.

14.   Dilution and other Adjustments

      In the event of any change in the outstanding shares of Common Stock of
      the Company by reason of any stock dividend or split, recapitalization,
      merger, consolidation, spin-off, reorganization, combination or exchange
      of shares, or other similar corporate change, or other increase or
      decrease in such shares without receipt or payment of consideration by the
      Company, the Committee will make such proportionate adjustments to
      previously granted Options, to prevent dilution or enlargement of the
      rights of the Participant, including any or all of the following:

      (a)   proportionate adjustments in the aggregate number of kind of shares
            of Common Stock which may be awarded under the Plan;

      (b)   adjustments in the aggregate number or kind of shares of Common
            Stock covered by Options already granted under the Plan;

      (c)   adjustments in the purchase price of outstanding Incentive and/or
            Non-qualified Stock Options.

      No such adjustments may, however, materially change the value of benefits
      available to a Participant under a previously granted Options.

15.   Tax Withholding

      There shall be deducted from each distribution of cash and/or Common Stock
      under the Plan the amount required by any governmental authority to be
      withheld for income tax purposes.

16.   Amendment of the Plan

      The Board of Directors may at any time, and from time to time, modify or
      amend the Plan in any respect subject to obtaining any shareholder
      approval required by applicable New Jersey and Federal banking law;
      provided further that if it has been determined to continue to qualify the
      Plan under Rule 16b-3, shareholder approval shall be required for any such
      modification or amendment is required in order to qualify under 16B-3,
      including any modifications or amendments which:

      (a)   increases the maximum number of shares for which options may be
            granted under the Plan (subject, however, to the provisions of
            Section 13 hereof);

      (b)   reduces the exercise price at which Options may be granted (subject,
            however, to the provisions of Section 13 hereof):

      (c)   extends the period during which Options may be granted or exercised
            beyond the times originally prescribed; or


                                       20
<PAGE>

      (d)   changes the persons eligible to participate in the Plan.

      Failure to ratify or approve amendments or modifications to subsections
      (a) through (d) of this Section by shareholders shall be effective only as
      to the specific amendment or modification requiring such ratification.
      Other provisions, sections, and subsections of this Plan will remain in
      full force and effect.

      No such termination, modification or amendment may affect the rights of a
      Participant under an outstanding Option.

17.   Effective Date of Plan

      This Plan was approved by the Board of Directors on February 12, 1998 and,
      subject to first obtaining approval at the 1998 Annual Meeting of the
      Shareholders of the Company by the affirmative vote of a majority of the
      shares of Common Stock of the Company entitled to vote at the 1998 Annual
      Meeting.

18.   Termination of the Plan

      The right to grant Options under the Plan will terminate upon the earlier
      of ten (10) years after the Effective Date of the Plan or the issuance of
      Common Stock or the exercise of Options equivalent to the maximum number
      of shares reserved under the Plan as set forth in Section 5. The Board of
      Directors has the right to suspend or terminate the Plan at any time,
      provided that no such action will, without the consent of a Participant,
      adversely affect his rights under a previously granted Option.

19.   Applicable Law

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

20.   Compliance with Section 16

      If this Plan is qualified under Rule 16b-3, with respect to persons
      subject to Section 16 of the Exchange Act, 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 any provisions of the
      Plan or action by the Committee fail to so comply, it shall be deemed null
      and void, to the extent permitted by law and deemed advisable by the
      Committee.


                                       21
<PAGE>

                     PEAPACK-GLADSTONE FINANCIAL CORPORATION
                  1998 Stock Option Plan for Outside Directors,
                  as amended and restated as of January 1, 2001

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

1.    Purpose

      The purpose of the Peapack-Gladstone Corporation (the "Company") 1998
      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.


                                       22
<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 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, a "Change in
            Control" of the Company 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, 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 shall be distributed; 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.


                                       23
<PAGE>

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 Directors' Option Plan shall
      not exceed 35,000 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 February 12, 1998 and,
      subject to first obtaining approval at the 1998 Annual Meeting of
      Shareholders of the Company by the affirmative vote of at least 66 2/3% of
      the shares of Common Stock of the Company entitled to vote at the 1998
      Annual Meeting, when accepted by the New Jersey Department of Banking.
      This Plan is amended and restated effective as of January 1, 2001.

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 35,000 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 Section 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 and
      federal banking law, then subject to the discretion of the Board of
      Directors of the Company, such amendment shall be presented to
      shareholders for ratification, 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.


                                       24